What is the Addition to Reserve (ATR) Process?
The Federal government’s Addition to Reserve (ATR) Process allows First Nations communities to apply to expand or create a Reserve as defined under section 2(1) of the Indian Act which arises out of their treaty land entitlement claims or for other reasons to economically or socially benefit their communities. A First Nation will need to consider the advantages and disadvantages of having land added to a Reserve. The drawbacks of holding land in fee simple under provincial land registration systems include being subject to municipal zoning regulations, the potential for expropriation by the province, municipalities or other expropriating authorities, and paying municipal and provincial taxes. Further, at least in Ontario, a First Nation is not considered a person for the purposes of Ontario’s Land Titles Act so it needs to hold land through a separate legal entity. However, once the land is added to a Reserve or a new Reserve is created, the land becomes subject to the controls in the Indian Act which may not align with the First Nation’s ultimate plans for the land. These controls severely restrict the ability of the First Nation to subsequently mortgage, lease, or dispose of the land in comparison to fee simple ownership under provincial land registration systems. The ATR process has also been widely criticized as being time consuming, complicated, and costly.
When a First Nation is considering the ATR process the first question we discuss is whether they already own the land in some capacity or if it is going to be acquired.
Due Diligence in Land Acquisition
If the First Nation is considering a purchase of the land, it gives us the opportunity to explore the possibility of conducting due diligence before they commit, which ultimately gives them more options to consider and may ultimately save them time and money in the ATR process – issues can be discovered and addressed earlier. This can be done during a due diligence conditional period where a purchase agreement is signed, but the First Nation’s obligation to complete the transaction is conditional on the First Nation being satisfied with the result of its due diligence, such as review of environmental reports, title and off title matters. This allows the First Nation to contract to purchase the land, with the possibility of terminating the agreement if something problematic is discovered (that cannot be remedied or accepted) in this conditional period. Alternatively, the First Nation could use the leverage of the due diligence condition and we would assist them in negotiating with the seller in finding a solution, such as the seller fixing the issue or reducing the purchase price. It is important that the language of this condition is carefully drafted, otherwise the seller may argue that the reason the First Nation is not proceeding is not captured by the contractual language.
It is important to consider that there are detailed due diligence requirements involved in the ATR process. Those due diligence requirements are more detailed than what is common or usual in most agreements of purchase and sale. In Ontario, standard forms of agreements of purchase and sale require a buyer to assume certain encumbrances and may require a buyer to accept title insurance with respect to other encumbrances or issues relating to title. If a First Nation was to accept title in those circumstances, it could have difficulty completing the ATR process or it could involve significant time and cost to satisfy the ATR process.
Further, a seller may not know if there are any issues, so we recommend being cautious in relying on assurances alone, particularly those that are to the “best of the seller’s knowledge”. For example, the seller may not know that contamination is migrating from a neighbouring property onto the land or they may not have conducted searches of the municipal building department to know if there is an open work order or building permit that arose before the seller acquired the property. The results of the due diligence could have varying degrees of impact on the First Nation’s plans in the ATR process.
Even if the First Nation already owns the fee simple land, either directly or through some related legal entity, we recommend conducting the due diligence that will be required to support the legal opinion that is required in the ATR process so that there is time to find and implement solutions.
The ATR process is administered under Indigenous and Northen Affairs Canada (“INAC”). INAC makes the decision to approve the addition or creation of a Reserve through a Ministerial Order and title is transferred to the Federal Crown under the Federal Real Property and Federal Immovables Act. Reserve status is ordered by a Federal Order in Council under the Addition of Lands to Reserves and Reserve Creation Act on the recommendation of the Minister. Reserve Creation Proposals initiate the process and are commenced with a request by a Band Council Resolution. The lands are normally within a First Nation Treaty area, a Traditional Territory or affected by another agreement with a First Nation. The land does not have to be contiguous to an existing Reserve. The land can be urban, suburban, or rural. If the land is expected to continue to benefit from municipal services after an ATR, then the ATR process may require the negotiation of municipal services agreements.
Legal Opinion and Title Requirements
In the ATR process, we will prepare a legal opinion regarding title to the property, which is used by INAC to confirm that the Federal Crown will acquire good title free of other interests, such as leases, licenses, permits, easements, and encumbrances. It may be necessary to review title back to the original Crown grant and it is necessary to conduct off-title searches to better confirm that there are no unregistered easements or unregistered statutory liens. An up-to-date survey is reviewed to confirm the extent of the boundaries, whether there are encroachments and to confirm access. In Ontario, an option to address the requirements of the opinion to confirm that there are no other interests in the land includes applying to the Director of Titles for title to be granted the status of Land Titles Absolute Plus, which is a process to remove the several title qualifications. Notice is given to neighbours and potential owners of these other interests and after a set notice period, if there are no objections filed or if they are resolved, the Director of Titles updates title to remove several title qualifiers.
Challenges and Solutions
If issues are discovered, INAC’s policy provides that it will explore the implications of the item in terms of risk and costs and recommends that possible solutions are explored.
We have extensive experience assisting clients with implementing remedies to various title issues, such as negotiating releases of third-party easements or other interests, court applications for vesting orders and other title corrections, and working with the Land Registry Office for corrections.
We work with First Nations communities who explore these issues differently, each through their own particular lens for their communities and ultimate plans. Our approach is to find the right solution for each client while they consider or work through the process of acquiring land and considering the ATR process.