ARCHIVED - Treasury Board Real Property Transactions, Processes, and Authorities Policy

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1. Effective date

This document contains the policy as revised April 11, 2002. It replaces the version dated July 1, 2001.

2. Policy objective

To define processes and authorities for acquiring, transferring, and disposing of real property.

Note: For interpretation of this policy in the Province of Quebec, "real property" means "immovable" within the meaning of civil law of the Province of Quebec and includes the rights of a lessee in respect of such an immovable.

3. Policy statement

The processes and authorities described in this policy shall be adhered to when acquiring, transferring, and disposing of real property.

4. Application

This policy applies to all departments within the meaning of section 2 of the Financial Administration Act unless specific acts or regulations override it.

Notes:

1. The Federal Real Property and Federal Immovables Act establishes ministers' authority to enter into transactions. This policy sets thresholds above which Treasury Board approval is required before carrying out a transaction.
2. A substantial amendment of a real property transaction, such as a substantial change in the term, payment, or any other term or condition of a lease, is treated as if the minister were entering into a new transaction.

5. Policy requirements

5.1 Ministers must obtain Treasury Board approval for real property transactions above the limits and conditions set out in Appendix A of this policy. The limits set out in this appendix for the Minister of Public Works and Government Services also apply to transactions where the Minister ofPublic Works and Government Services acts on behalf of another minister.

5.2 Treasury Board approval of individual transactions is not required where authority has been granted by the Board in the context of a land management or disposition strategy, for example, a long-term capital plan within the previous five years.

5.3 Ministers must obtain Treasury Board approval for transactions that do not comply with any other Treasury Board real property policy requirement regardless of whether or not the transaction is above or below the limits and conditions set out in Appendix A of this policy. Before entering into a transaction, or a substantial amendment of a transaction, departments should examine all Treasury Board real property policies to ensure compliance. Requirements for lease project approvals are described in the Treasury Board Project Approval Policy.

5.4 Ministers must obtain a Treasury Board recommendation to the Governor in Council for any transaction under subsection 16(1) of the Federal Real Property and Federal Immovables Act. Treasury Board will grant recommendation in only the following two circumstances:

• if the transaction would have been possible under the regulations made pursuant to that Act, but a minister feels that authorization of the Governor in Council is more appropriate; or
• if the transaction is not covered by the regulations under the Act.

5.5 In addition to statutory requirements for the Minister of Justice's involvement in transactions under the Federal Real Property and Federal Immovables Act, the Federal Real Property Regulations, or other applicable legislation or regulations, departments must secure legal advice on acquiring and disposing of real property at an appropriate stage of the transaction. It is also important to consult the Department of Justice Canada when disputes arise with respect to any real property transaction. Appendix B of this policy provides guidelines for settling disputes in real property transactions by arbitration. The Treasury Board Contracting Policy outlines Treasury Board policy with respect to contract disputes.

5.6 In acquisitions of real property, ministers may agree to pay, pursuant to paragraph 7(a) of the Federal Real Property Regulations, expenses traditionally borne by the vendor only where they determine that the circumstances warrant such a payment. For example, a department may determine that the circumstances warrant payment where the purchase price is less than the vendor's reasonable expenses.

5.7 Ministers acquiring real property subject to reservations, encumbrances, or encroachments must determine that the restrictions will not affect the program use of the property.

6. Responsibilities

6.1 The Department of Justice Canada acts as solicitor to departments and advises the government on real property transactions.

6.2 Public Works and Government Services Canada provides some mandatory services and many optional services to departments in acquiring and disposing of real property within Canada.

6.3 The Department of Foreign Affairs and International Trade provides mandatory real property services and custody when they are required to support Canada's consular and diplomatic missions abroad. It also provides optional services and custody for other real property requirements abroad.

6.4 The Treasury Board of Canada Secretariat monitors practices in the acquisition and disposition of real property. It also advises Treasury Board on setting financial, time, and other limits and restrictions on the acquisition and disposition of real property by departments.

7. Monitoring

Departments shall monitor the application and effectiveness of this policy through departmental internal audits.

The Secretariat will determine how effective this policy is, find out how it is applied in departments, and decide whether it needs to be revised. It will do this through ongoing contact with departments, consulting with the Treasury Board Advisory Committee on Real Property, and noting audits and reviews conducted by departments or the Auditor General of Canada. The Treasury Board Guide to Monitoring Real Property Management provides information so that departments can monitor and assess policy implementation.

8. References

8.1 Authority

This policy is issued pursuant to the Financial Administration Act, subsections 7(1), 9(1.1), 9(2), and the Federal Real Property and Federal Immovables Act, subsection 16(4).

8.2 Treasury Board publications

Treasury Board Guide to Monitoring Real Property Management

Treasury Board Real Property Glossary

Treasury Board Common Services Policy

Treasury Board Contracting Policy

Treasury Board Project Approval Policy

9. Enquiries

Please direct enquiries about this policy to your departmental headquarters. For interpretation of this policy, departmental headquarters should contact:

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Appendix A - Transaction Approval Levels

Notes:

1. As stated in requirement 5.1 of this policy, the limits set out for the Minister of Public Works and Government Services also apply to transactions where he or she is acting on behalf of another minister.
2. GST should be excluded for the purposes of the approval levels.

1. Acquisitions

1.1 Purchase, gift, or bequest - General rule

A minister may acquire real property by purchase or by accepting a gift or bequest, where the market value of the real property does not exceed $250,000.

1.2 Purchase, gift, or bequest - Special rules

The following acquisition levels apply to the ministers indicated:

• for the Minister of Public Works and Government Services for property within Canada;

• for the Minister of Foreign Affairs for property outside Canada:
  • $1,000,000 per staff quarter;
  • $3,000,000 for an Official Residence;
  • $10,000,000 for a Chancery;
  • $10,000,000 for multiple-unit facilities, provided the portion attributable to each unit does not exceed the previously listed amounts;
• $500,000 for the Minister responsible for the Canadian Security Intelligence Service for acquisitions made to pursue security investigations that the minister determines require a special degree of confidentiality;
• $500,000 for the Minister responsible for the Royal Canadian Mounted Police for acquisitions made to pursue security or criminal investigations that the minister determines require a special degree of confidentiality; and
• $3,000,000 for the Minister responsible for the Parks Canada Agency for acquisitions not otherwise approved by Treasury Board in agreements, project approvals, or business plans.

1.3 Exchange - General rule

"A minister may acquire real property by way of exchange where the market value of the federal real property being disposed of does not exceed $250,000."

Note: See also section 2.3 "Exchange - General rule" under "Dispositions."

1.4 Exchange - Special rules

The level is $750,000 for the Minister of Public Works and Government Services in the case of property within Canada and $750,000 for the Minister of Foreign Affairs in the case of property outside Canada.

1.5 Option to purchase - General rules

A minister may enter into an option to purchase land in the following circumstances:

• where the consideration payable under the option does not exceed $10,000; and
• where the repairs or compensation payable under the option by Her Majesty pursuant to section 10 of the Federal Real Property Regulations are not expected to exceed $10,000.

If the consideration for the option exceeds $1,000, the Minister of Justice must be satisfied that the person granting the option has valid title to the optioned real property.

An option costing $1,000 or more, if registrable, shall be registered in the applicable land registry office as soon as possible after execution.

1.6 Option to acquire an interest in real property - Special rule

The Minister of Public Works and Government Services may enter into an option to acquire an interst in real property in Canada where the consideration payable under the option does not exceed $500,000.

1.7 Her Majesty as tenant or licensee - General rule

A minister may enter into a lease or acquire a licence where the total consideration does not exceed $200,000 and the annual consideration does not exceed $20,000.

1.8 Her Majesty as tenant or licensee - Special rules

The following levels apply:

• Total consideration not exceeding $30,000,000 for the Minister of Public Works and Government Services for property within Canada ;
• for the Minister of Foreign Affairs for property outside Canada:

• total consideration not exceeding $20,000,000 for Chanceries and $3,000,000 for residential accommodation; and
• annual considerations not exceeding $2,000,000 for Chanceries and $300,000 for residential accommodation;

• for the Minister responsible for the Canadian Security Intelligence Service:
  • unlimited for leases and licences made to pursue security investigations that the Minister determines require a special degree of confidentiality;
• for the Minister responsible for the Royal Canadian Mounted Police:
  • unlimited for leases and licences made to pursue security or criminal investigations that the Minister determines require a special degree of confidentiality;
  • for leases and licences with a province, municipality, or local airport authority for the purposes of providing policing services, total consideration not exceeding $3,500,000 and annual consideration not exceeding $350,000; and
  • for all other leases and licences, total consideration not exceeding $1,000,000 and annual consideration not exceeding $100,000;
• for the Minister of National Defence:

• for leases and licences other than single-family residences, total consideration not exceeding $2,000,000 and annual consideration not exceeding $200,000.
• For leases and licences other than single-family residences and in response to an initial authorized operational deployment abroad, total consideration not exceeding $4,500,000 and annual consideration not exceeding $1,500,000.

1.9 Acceptance of transfers of administration - General rule

Where the market value of the property or licence does not exceed $250,000, a minister may accept the following:

• a transfer of administration of federal real property from another minister or an agent corporation; or
• a transfer of administrative responsibility for a licence with respect to private or provincial real property from another minister.

Note: Approval limits do not apply to custody transfers as defined in the Treasury Board Real Property Glossary .

1.10 Acceptance of transfers of administration - Special rule

Where the market value of the property does not exceed $750,000, the Minister of Indian and Northern Affairs may accept the transfer of administration of federal real property from another minister or an agent corporation where that property is to be used for settlements under the Comprehensive Claims Program.

1.11 Acceptance of transfers of administration and control - General rule

For the purpose of the ministerial authority levels, an acceptance of a transfer of administration and control from a province is treated as if it were one of the following:

• a lease (Her Majesty as tenant) where the transfer is for a specified term (see levels in sections 1.6 and 1.7 of this appendix); or
• a purchase where the transfer is not for a specified term (see levels in sections 1.1 and 1.2 of this appendix).

2. Dispositions

2.1 Sale - General rule

A minister with administrative responsibility for federal real property may dispose of the property

2.2 Sale - Special rules

The following disposition levels apply to the ministers indicated:

• $5,000,000 for the Minister of Public Works and Government Services for property within Canada (NB 1);
• $20,000,000 for the Minister of Foreign Affairs for property outside Canada;
• $500,000 for the Minister responsible for the Canadian Security Intelligence Service for dispositions of property acquired to pursue security investigations that the minister determines require a special degree of confidentiality; and
• $500,000 for the Minister responsible for the Royal Canadian Mounted Police for dispositions of property acquired to pursue security or criminal investigations that the minister determines require a special degree of confidentiality.
• $1,000,000 for the Minister responsible for the Parks Canada Agency for dispositions not otherwise approved by Treasury Board in agreements, project approvals, or business plans.
• $1,500,000 for the Minister of Fisheries and Oceans for Fast Track Disposal Flexibilities and Program Transfer Flexibilities approved for Program Review-related divestitures and for the new Divestiture Program initiative.

NB 1: The financial limit for the Minister of Public Works and Government Services is subject to the Treasury Board of Canada Secretariat, the custodian department, or PWGSC identifying the need for Treasury Board approval for reasons other than the financial limit of the transaction.

2.3 Exchange - General rule

A minister may dispose of real property by way of exchange where the market value of the federal real property being disposed of does not exceed $250,000.

Note: See also section 1.3 "Exchange - General rule" under "Acquisitions."

2.4 Exchange - Special rules

The level is $750,000 for the Minister of Public Works and Government Services in the case of property within Canada and $750,000 for the Minister of Foreign Affairs in the case of property outside Canada.

2.5 Option to sell - General rule

A minister may enter into an option agreement to sell federal real property under his or her administration where the market value of the property does not exceed the level for a sale by that minister under sections 2.1 and 2.2 above and the option expires within six months.

2.6 Her Majesty as landlord or licensor - General rule

Where the total consideration does not exceed $1,000,000 and the annual consideration does not exceed $100,000, a minister may lease federal lands under his or her administration or give a licence with respect to federal lands under his or her administration.

2.7 Her Majesty as landlord or licensor - Special rules

The following levels apply:

• for the Minister of Public Works and Government Services:
  • for PWGSC program purposes, total consideration not exceeding $25,000,000;
  • for non-PWGSC program purposes, total consideration not exceeding $5,000,000;
• for the Minister of Transport:
  • for airport-related purposes:
  • unlimited for leases and licences in air terminal buildings where the consideration is based solely on cost recovery rates, as determined under Transport Canada's Terminal Building Rental Rates Policy;
  • annual consideration not exceeding $1,000,000 in all other leases and licences in air terminal buildings (no total consideration limit); and
  • for all other airport-related purposes, total consideration not exceeding $5,000,000 for the first five years of the term (no annual consideration limit).
  • for all other purposes, total consideration not exceeding $1,000,000 and annual consideration not exceeding $100,000;
• for the Minister of Agriculture and Agri-Food:
  • with respect to lands administered by the Director of the Prairie Farm Rehabilitation Administration under the Prairie Farm Rehabilitation Act, where the term of the lease or licence does not exceed 21 years, total consideration for the first five years of the term not exceeding $500,000 (no annual consideration limit).
• for the Minister of the National Research Council:
  • total consideration not exceeding $1,000,000 and annual consideration not exceeding $200,000.

2.8 Transfer of administration - General rules

Where the market value of the property does not exceed $250,000, a minister with administrative responsibility for federal real property may transfer the administration to another minister or an agent corporation.

Where the market value of the licence does not exceed $250,000, a minister having the administrative responsibility for a licence with respect to private or provincial real property may transfer the administrative responsibility to another minister.

Note: Approval limits do not apply to custody transfers as defined in the Treasury Board Real Property Glossary.

2.9 Transfer of administration - Special rule

Where the market value of the property does not exceed $750,000, a minister with administrative responsibility for federal real property may transfer the administration to the Minister of Indian and Northern Affairs where that property is to be used for settlements under the Comprehensive Claims Program.

2.10 Transfer of administration and control - General rule

For the purpose of the ministerial authority levels, a transfer of administration and control to a province is treated as if it were one of the following:

• a lease (Her Majesty as landlord) where the transfer is for a specified term (see levels set out in sections 2.6 and 2.7 of this appendix); or
• a sale where the transfer is not for a specified term (see levels set out in sections 2.1 and 2.2 of this appendix).

3. Surrenders

3.1 Surrender of lease - General rules

A minister with administrative responsibility for a lease in which Her Majesty is the tenant (lessee) of the real property may surrender the lease where either the consideration payable under the entire lease, or the market value of the Crown's interest in the unexpired term of the lease, does not exceed the levels for total consideration given in section s  1.6 and 1.7 of this appendix.

A minister with administrative responsibility for federal real property may accept a surrender of a lease of the property within the limits given in section s 2.6 and 2.7 of this appendix.

Note:

These rules apply to surrenders regardless of whether the lease was entered into under the authority of this appendix.

4. Relinquishments

4.1 Relinquishment of licences - General rules

A minister having administrative responsibility for a licence with respect to private or provincial (i.e. non-federal) real property may relinquish the licence where either the consideration payable under the entire licence, or the market value of the Crown's interest in the unexpired term of the licence, does not exceed the levels for total consideration given in sections 1.6and 1.7 of this appendix.

A minister having administrative responsibility of federal real property may accept a relinquishment of a licence with respect to the property within the limits given in sections 2.6 and 2.7 of this appendix.

Note:

These rules apply to relinquishments regardless of whether the licence was entered into under the authority of this appendix.

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Appendix B - Guidelines for Settling Disputes in Real Property Transactions by Arbitration

1. Background

Section 12.8.8 of the Treasury Board Contracting Policyauthorizes the use of arbitration in matters relating to contracts. That policy states that: "Additional guidelines with respect to greater use of arbitration in real property transactions are being developed and will be issued separately..." These guidelines set out a framework for the use of arbitration in real property matters to ensure disputes are resolved in the best interest of Her Majesty.

Arbitration has gained international acceptance as a means of resolving disputes in many types of commercial arrangements. It is just one of the non-judicial methods of resolving disputes referred to by the phrase "alternative disputes resolution" (ADR). ADR refers to processes such as negotiation, mediation, conciliation, and arbitration. The latter, which is normally binding, is the subject of these guidelines.

Arbitration may have the following advantages:

• the process is designed by the parties and therefore can be speedier, less formal, and less costly;
• the dispute is conducted in private, avoiding public scrutiny or exposure of trade secrets or internal practices;
• the award is final and binding on the parties to the arbitration agreement.

It may, on the other hand, have the following disadvantages:

• it can be expensive, slow, and formal if the parties cannot come to an agreement over the disputed matter;
• there is no appeal (except in very limited circumstances).

Although most real property transactions are essentially contractual in nature, real property law has developed differently than the law dealing with other types of commercial contracts. Specific statutes govern the interpretation, content, and enforcement of real property transactions. There is also a body of case law upon which real property practitioners consistently rely to govern the conduct of their practice. Thus, in real property disputes, there may sometimes be an advantage in using the courts rather than arbitration. The courts can award remedies such as specific performance in real estate matters, whereas this is not always possible under arbitration. Therefore, demand for the use of arbitration in real property transactions has not increased as much as it has in other commercial matters. Furthermore, summary processes exist to resolve real property disputes. For instance:

• questions about the interpretation of an agreement of purchase and sale may be determined by way of a summary procedure under the rules of civil procedure in many provinces;
• questions of title, such as those between a vendor and a purchaser, may be determined by a summary procedure under vendor and purchaser legislation in most provinces.

Even so, arbitration may be a useful dispute resolution process in some instances.

The Commercial Arbitration Act

The Commercial Arbitration Act, (the Act) S.C. 1986, c. 22, and the Commercial Arbitration Code (the Code), which is incorporated into the Act by reference, apply to the following:

• matters where at least one of the parties to the arbitration is Her Majesty the Queen in right of Canada, a departmental corporation, or a Crown corporation;
• maritime or admiralty matters; and
• arbitral awards and arbitration agreements whether made before or after the coming into force of the Act.

Currently, there are no regulations under the Act. For further information regarding the Code, please refer to the annex at the end of this appendix.

2. Definitions

The following are definitions of terms used in this Appendix.

Arbitration (arbitrage) - means the submission for determination of a disputed matter to an arbitral tribunal selected in a manner provided by the law or by agreement whether or not the arbitration is administered by a permanent arbitral institution.

Arbitral tribunal (tribunal d'arbitrage) - means a sole arbitrator or a panel of arbitrators.

Arbitration agreement (convention d'arbitrage) - is an agreement by the parties to submit to arbitration all or certain disputes that have arisen or may arise between them with respect to a defined legal relationship, whether contractual or not.

Real property transaction (op�ration immobili�re) - means an acquisition or disposition as defined in the Treasury Board Real Property Glossary.

Questions of valuation (�valuation) - means questions concerning the following:

• the determination of rent or other amounts payable under a lease;
• market value of real property that is the subject of an option clause in a lease that is based on a determination of the market value; or
• the determination of fees or other amounts payable under a licence.

3. Guidelines

3.1 Through discussion, good faith negotiations, mediation, or conciliation, departments will make all reasonable efforts to resolve any real property dispute in the best interest of Her Majesty. Departments may also, in consultation with their respective Department of Justice Canada legal services units or Department of Justice Canada regional offices, enter into an arbitration agreement for the resolution of disputes involving the following:

• questions of valuation; or
• questions concerning obligations of maintenance, repair, and condition of premises as set out in a lease or licence.

3.2 An arbitration agreement may be included in the principal document of the real property transaction or it may be a separate document. In either case, it should reflect clearly the scope of, and the process for proceeding with, arbitration as a method for resolving disputes.

3.3 In addition to the above, departments may enter into an arbitration agreement to resolve disputes related to any other real property matter if they have the prior concurrence of one of the following:

• the Associate Deputy Minister of Justice, Civil Law and Legislative Services, in the case of real property in the Province of Quebec; or
• the Senior Assistant Deputy Minister of Justice, Legal Services, Commercial and Property Law, if the real property is outside the Province of Quebec.

3.4 Departments must consult with their respective Department of Justice Canada legal services units or Department of Justice Canada regional offices before negotiating any arbitration agreement. They should also consult these legal advisors before proceeding with an arbitration thereunder.

3.5 Departments should ensure that the parties with whom they negotiate an arbitration agreement are familiar with the provisions of the Commercial Arbitration Act and the Commercial Arbitration Code, as these parties may not otherwise be aware of the limitations in the Code concerning access to the courts.

3.6 Departments should have access to sufficient funds to pay any arbitral award. They should also have enough money to pay all incidental costs. If this is impossible, they should discuss the circumstances with the Treasury Board of Canada Secretariat before proceeding.

4. Remarks

The Department of Justice Canada will provide its legal services units and regional offices with additional guidelines to help departments implement this policy.

These guidelines are effective immediately and apply to all departments engaged in the conduct of real property transactions.

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Annex - The Commercial Arbitration Code

The Code is a set of rules governing the conduct of an arbitration. Many of the provisions of the Code, however, are prefaced by such phrases as "subject to any contrary agreement of the parties..." and "the parties are free to agree..." These allow the parties to set out their own terms in their arbitration agreement.

Under the Code, where a party brings an action before a court and that action relates to a matter that is the subject of an arbitration agreement, the court shall refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed.

The Code provides that a party may have recourse to a court in relation to an arbitral award only by an application for setting aside made within three months from the date on which the applicant has received an award or the arbitral tribunal has disposed of a request to correct an award, and only if

• the party making the application furnishes proof that
• a party to the arbitration agreement was under some incapacity;
• the agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the laws of Canada;
• that party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present its case;
• the award contains decisions on matters beyond the terms or scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award that contains decisions on matters not submitted to arbitration may be set aside; or
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
• or the court finds that
• the subject matter of the dispute cannot be settled by arbitration under the laws of Canada; or
• the award is in conflict with the public policy of Canada.

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