Canadian Lawyer InHouse

MARCH 2016 22 INHOUSE The Ontario government estimated nearly two years ago that it could generate at least $200 million in revenue from the sale of the LCBO, as part of a broader plan to sell off various assets to raise money for in - frastructure projects. From small land hold- ings for schools that are no longer needed to some of the most valuable real estate in the country, there is a wide range of properties that the public sector has put up for sale or for which it is in the process of seeking bids. While government divesting itself of as - sets, including land holdings, is not a new practice, what has changed is the level of scrutiny and the complexity of these trans- actions, say lawyers in the commercial real estate field. "The Crown is an agent, a representative of the public. It is acting on behalf of taxpay- ers," says Walter Traub, counsel at Goldman Sloan Nash & Haber LLP in Toronto. "You are a trustee. You have to have account- ability and transparency" at every stage of the transaction, says Traub. In contrast to a purely private commercial real estate transaction, the most significant concern for lawyers involved in the sale of government- owned lands is not necessarily litigation. "It is the public at large. The liability comes from the political perspective," says Traub. Jamie Klein, a partner in the Real Prop - erty and Planning Group at McCarthy Tet- rault LLP, says sales of publicly owned lands is likely to continue to be on the rise. "We have seen an uptick in our practice," says the Toronto-based lawyer. To try to avoid any potential political con - troversy from the sale of valuable holdings, it is the front end of the process that is cru- cial, says Klein. For example, if developers are involved in a potential transaction with a school board, the company may want to ad- dress the public officials directly at an early stage. "You can find out how they intend to use the funds, to get the boards on side. You might have a fund set up, to construct something like a community centre, instead of just providing a blank cheque," Klein says. "It is a question of getting the right people to sit at the table and hear them out, so it ben - efits the broader community as a whole," he says. From the developer's perspective, "the more work you can do up front, the more likely you will have success," says Klein. The public agencies that handle these transactions, such as Infrastructure On - tario, have become increasingly skilled and more open with the Request for Proposal process, he suggests. "They are more expe- rienced, more efficient, and can do it on a very large scale," Klein says. Marni Dicker, executive vice president, general counsel and corporate secretary with Infrastructure Ontario, says that before gov - ernment disposes of property, it undertakes many due-diligence steps. These vary de- pending on the characteristics of the prop- erty in question. The measures can include: archaeology, mapping, survey and title re- view, geotechnical, and cultural heritage. In addition, the Crown has a duty to consult First Nations groups on activities that have the potential to impact aboriginal rights or treaty rights, including the poten - tial sale/disposition of property. This responsibility falls onto the Min- istry of Economic Development, Employ- ment and Infrastructure, which will assess whether there are any Crown obligations relating to treaty rights and then undertake the necessary level of consultation of lands within their portfolio. The level or scope of consultation varies depending on the spe - cific circumstances of each property. "The consultation process may involve providing information to the aboriginal community on the proposed sale, gathering information on potentially affected rights, and discussions with the aboriginal com - munity about their concerns, with attempts to minimize the adverse impacts on the ab- original rights or treaty rights," says Dicker. Infrastructure Ontario carries out the consultation based on the MEDEI's deter- mination. "Property can only be sold once it's been determined that there is no government policy or program need for the property. So the property is circulated to other min - istries to determine if they or their agencies are interested. If they aren't, other levels of government and other entities, such as not- for-profit corporations, could be given an opportunity to express interest in acquiring the property," says Dicker. As someone who has practiced com - mercial real estate law for 40 years, Traub says "the process has become more refined, more detailed, and more complex" when it involves sales of government holdings. It also means that sales of government- owned real estate are going to take longer than a purely private transaction. "This process is a lot more involved, from day one," says Traub, because of the additional obligations on governments in these trans - actions. One of the obligations, both Klein and Traub point out, is the requirement for early consultation with any interested par- ty, even before the lawyers managing the transaction are involved. The consultation could be residents' groups, other levels of government, envi- ronmental organizations, and First Nations, where there is a constitutional obligation to consult. If these responsibilities are not followed, it could lead to litigation and mis- trust about the government's intentions. One example where the process has not gone smoothly is the Kapyong Barracks, a 160-acre property in the city of Winnipeg. The federal government announced in 2001 that it was closing the military base, and what will ultimately be done with the land is still unclear 15 years later because of what the courts have found to be a failure to engage in legitimate consultations with First Nations. Agreements were reached in the late 1990s with First Nations in Manitoba to provide funding to purchase certain lands, as a result of broken promises related to Treaty '' '' Once First Nations issues are addressed, there are broader obligations in my opinion. This is not simply a property you sell to close up a gap in the budget. Once it is sold, it is gone forever. DAVID EBY, NDP, Vancouver-Point Grey

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