Fifteen Years of Experience from UniverCity and ... - McCarthy Tétrault

What Green Development Means forLawyers: Fifteen Years of Experience fromUniverCity and Dockside GreenElizabeth H. YipAn Article published by CLEBC for the course "Real Estate: Everything's Gone Green"January 29, 2009McCarthy Tétrault LLP1300 - 777 Dunsmuir StreetVancouver, British ColumbiaV7Y 1K2www.mccarthy.ca

What Green Development Means for Lawyers:Fifteen Years of Experiencefrom UniverCity and Dockside GreenI. INTRODUCTIONA. UniverCity1. BackgroundUniverCity is a community developed from lands owned by Simon Fraser University (“SFU”)approximately 65 hectares in size. The community has zoning for up to 4,536 units, to be built outover 25 years. The projected population of UniverCity is approximately 10,000 residents. Thecommunity has its own shopping, recreational amenities, schools and parks.Development at UniverCity commenced in spring 2002. Currently there are approximately 2,000residents living in developments by Polygon, Intergulf, Millennium and Vancity. The residentialdevelopments include mid-rise buildings, townhouses and lowrise buildings. At present, the residentsare serviced by the Cornerstone, a mixed-use building with street level retail space and office space.The upper floors of The Cornerstone contain 115 rental apartments.2. Cornerstones of DevelopmentUniverCity has been developed as a model, sustainable, urban community, internationally recognizedfor its innovations in green building and community design. The community is founded on four‘cornerstones of sustainability’ - Environment, Equity, Economy and Education. These fourcornerstones are summarized as:(1) Education(a)(b)Enhance university life, academic structure and activities.Create a model sustainable community that educates and inspires.(2) Economy(a)(b)Maximize the long-term value of SFU’s Endowment Fund.Encourage opportunities for commercial and community economicdevelopment.Page 1What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

(3) Equity(a)(b)Create a healthy, safe, livable and complete community.Provide an appropriate mix of housing types and tenures.(4) Environment(a)(b)(c)(d)Provide a full range of transportation choices.Preserve and improve the natural heritage of Burnaby Mountain.Design buildings and public spaces that respond to local context.Provide sustainable, cost and resource efficient infrastructure and buildings.B. Dockside Green1. BackgroundDockside Green is a master planned community to be located on approximately 15 acres of land on theouter harbour of Victoria, British Columbia. Dockside Green will consist of a number of differentneighbourhoods, all of which will include environmentally-friendly development features. DocksideGreen is a 1.3 million square foot mixed-use sustainable community development on a 15-acre formerbrownfield site located in Victoria, British Columbia. The project is made up of residential, office,commercial and light industrial uses and is a global showcase in environmental, social and economicresponsibility (the triple bottom line).One development, Synergy, is now occupied by residents. Balance and the Townhomes at DocksideWharf are currently being constructed.2. Goals of DevelopmentIn the Dockside Green 2007 Annual Sustainable Report, the following goals, inter alia, were discussed:(1) LEED platinum target;(2) greenhouse gas commitment;(3) biomass system;(4) water conservation;(5) energy conservation;(6) sustainable sites and urban ecology;Page 2What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

(7) health and well being; and(8) materials and resources.II.OWNERSHIP STRUCTUREA. UniverCity1. LegislationUniversities are governed by the University Act (British Columbia). Section 50(2) of the University Actprovides that:“Subject to the approval of the minister and to the terms of any grant,conveyance, gift or devise of land, a university may(a)mortgage, sell, transfer, lease for not more than 99 years, orotherwise dispose of its land”.Any disposal of the University’s land requires a ministerial order issued by the Minister of AdvancedEducation. Disposals include leasing of land. Therefore, the university must submit the proposedsubdivision plan (creating title to development lots) and proposed transfer instruments, such as aground lease to be used for each development lot, to the Ministry of Advanced Education for priorapproval.When universities develop their surplus lands, it is important to take the long view and preserve theirinterest in one of their most valuable assets, their land. By transferring fee simple interest in theirlands, universities may deprive future generations of revenue from their land base.2. Ground LeasesThe vehicle of 99 year ground leases presents an attractive mechanism for developers to acquireinterest in university lands, and permits universities to unlock present value from their land base.99 year ground leases have been used by municipalities and other government bodies in the LowerMainland and are familiar to developers, lenders and condominium purchasers, who generally treatlong term leases more or less the same as fee simple interests in land. The Strata Property Act (BritishColumbia) permits universities to be leasehold landlords and permits leasehold strata plans to be filedover lands subject to a ground lease 1 .1Section 199 of the Strata Property Act states that “leasehold landlord” means the government of British Columbia, thegovernment of Canada, a municipality, a regional district, a Nisga’a Village or the Nisga’a Nation, or another public authority asdefined by a regulation made under the Act. Section 12.1 of the Strata Property Act Regulation states that “For the purposes ofthe definition of “leasehold landlord” in section 199 of the Act, “public authority” means a university as defined in theUniversity Act”. Section 201(a) of the Act states that: “The registrar must not accept for deposit a leasehold strata plan unless(a) the title to the land included in the leasehold strata plan is registered in the name of a leasehold landlord.”Page 3What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

Maintaining the registered title in its lands also provides the university with a measure of control overits lands. The ground lease contains covenants and obligations which the developer and its successorsmust comply with for the term of the lease. As the registered owner of the development lot, theUniversity maintains an ongoing relationship with the developer and, after registration of the leaseholdstrata plan, the residents.3. The TrustTo avoid the liability associated with land development, to maximize tax efficiency and to focus ontheir core goal of delivering higher education, the local universities have created a trust vehicle tocarry out the development functions. In the case of SFU, the SFU Community Trust (“UCT”) wasformed with the mandate of developing and marketing SFU’s lands. The Trust is a separate entity andoperates independently from SFU.B. Dockside GreenDockside Green Limited Partnership (“DGLP”) purchased the development lands from the City ofVictoria. As part of the transaction, DGLP was obligated to remediate the lands. The remediationobligations as well as a series of other responsibilities were set out in a master developmentagreement, which was subsequently registered on title to the lands as a section 219 covenant.DGLP subsequently subdivided the development lands into individual neighbourhoods or lots. So farDGLP has three developments which are either completed or under way, as the developer. In eachcase, DGLP filed a disclosure statement with the Superintendent of Real Estate (“Superintendent”) andhas entered into, or will enter into, purchase agreements with individual purchasers.III.COMMUNITY INVOLVEMENTA. SFU Community AssociationThe Trust envisioned that certain amenities and services provided by SFU should be made available toresidents of UniverCity. The SFU Community Association (the “SFU Association”) was formed for thepurposes of providing a mechanism for residents in the UniverCity to liaise and make arrangementswith SFU for the use of certain facilities and services, such as access to libraries, recreational facilitiesand certain programs and services such as SFU childcare (collectively, the “SFU Amenities”), promotingand providing a uniform standard of excellence and quality throughout UniverCity, and enhancing theuse and enjoyment of UniverCity by the residents.The SFU Association may, at its option, provide, or cause to be provided, certain amenities to theresidents. The constitution and the bylaws of the SFU Association provide the mechanism for the SFUAssociation to assess and collect from the residents funds necessary to facilitate any mattersundertaken by the Association on behalf of the residents, without monetary profit to the SFUAssociation or its members. The SFU Association’s members are the Trust, the Developers, and, aftertheir creation, the strata corporations. Each member is responsible for its share of dues payable to theSFU Association. If dues to the SFU Association are payable, each owner of a strata lot is responsiblefor his or her share of such dues based on his or her unit entitlement.Page 4What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

A section 219 Covenant in favour of the City of Burnaby is registered on title to some development lotsand will be registered on title to all of the new development lots going forward. The agreementbetween the Trust, SFU and the SFU Association with respect to the SFU Amenities and the constitutionand bylaws of the SFU Association are attached as schedules to this covenant.The SFU Association has not been charged with a specific mandate to operate the “green” features inUniverCity. However, it provides a vehicle to communicate with the residents if the need arises.B. Dockside Green (Victoria) SocietyThe Dockside Green (Victoria) Society (the “DG Society”) was formed with the mandate of, inter alia,providing a mechanism for the owners within the Dockside Green Community to ensure that themaintenance and operation of the various common amenities and works is carried out in a uniform andintegrated manner and providing common supervision for any mini-transit, car share co-operative orsimilar system designed as a part of motor vehicle traffic demand management strategies within theDockside Green lands. Membership in the DG Society is restricted as follows:1. only the applicants for incorporation and thereafter the registered owners of development lots(other than the DG Society, Dockside Green Power Ltd., or any company controlled by either)may become a member or, in the case of a strata development, only the strata corporation ofsuch strata development;2. the applicants for incorporation or their assignees will be the only voting members of the DGSociety until the date (the “Opening Date”) which is the earlier of:(1) October 1, 2013; and(2) the date Dockside Green Ltd. is no longer the registered owner of any part of the landscomprising Dockside Green;3. the voting members will be entitled, in their sole discretion, to amend the bylaws of the DGSociety at any time to revise the Opening Date;4. on and after the Opening Date, any non-voting member is entitled to apply to the directors tobecome a voting member of the DG Society, and upon receipt of an application, such nonvotingmember will be accepted by the directors as a voting member of the DG Society; and5. the persons who are entitled to apply to the directors to become members of the DG Societyare restricted to:(1) a strata corporation created by the deposit of a strata plan of part of the landscomprising Dockside Green; and(2) the registered owner of any lot within Dockside Green that is not part of a stratadevelopment.Page 5What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

Each member of the DG Society is liable for its portion of the DG Society’s budget based on itsmembership interest, generally based upon the buildable area of the member’s lot and the buildablearea of all of the lands comprising Dockside Green which has been developed.IV.DEVELOPMENT AND MARKETINGA. UniverCity ZoningAt the outset, the Trust worked extensively with the City of Burnaby to amend the Official CommunityPlan as well as to enact a custom-made zoning for UniverCity. The result is the P11e zoning bylaw, acopy of which is attached as Schedule A hereto. The permitted uses in this zone include multiplefamily dwellings, childcare facilities, public parks and public schools.B. Dockside Green ZoningThe City of Victoria created a custom zoning for the Dockside Greenlands, being the CD-9 zone. A copyof the bylaw is attached as Schedule B hereto. The zoning bylaw specifically permits a private powergeneration facility, sewage treatment plant and a sustainability centre, as well as the more traditionaluses such as multiple dwellings, retail, office, sales, recreational facilities and live/work spaces.C. UniverCity Development ProcessThe typical cycle of a development lot at UniverCity is as follows:(1) SFU grants an agreement to lease over the development lands in favour of UCT.(2) UCT applies to subdivide the lands with the City of Burnaby.(3) UCT enters into an offer to lease with a third party developer (the “Developer”).(4) UCT services the lots.(5) The Developer applies to the City for development approval of its development.(6) When the Developer completes the transaction with UCT, UCT causes SFU to grant a99-year ground lease in favour of the Developer.(7) The Developer files a leasehold strata plan when it completes the construction of itsdevelopment.(8) The ground lease is then converted to leases of all of the strata lots created.(9) When the Developer is ready to complete “sale” of the strata lots to its purchasers, theDeveloper assigns its leasehold interest in each strata lot to the purchaser.Page 6What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

After subdividing the lands, the Trust is able to market them to developers. The Trust applied to theSuperintendent and obtained an exemption from the Real Estate Development Marketing Act (BritishColumbia) (“REDMA”) in the form of Individual Regulation No. 125, designated and filed as BritishColumbia Regulation 129/2002, which provides that the offering by the Trust is exempt from Part 2 ofREDMA. Consequently, amongst other things:(1) the Trust is not required to comply with Part 2 of the Act with respect to the offeringand is not liable for any breach or offence under the Act;(2) the Trust is not required to file a Disclosure Statement;(3) deposits paid by Developers are not handled as required under section 18 of REDMA;and(4) prospective Developers will not have the benefit of any right or protection afforded byPart 2 of the Act, including, without limitation, the right of rescission contained insection 21 of the Act.As the master developer, the Trust has an ongoing relationship with the City of Burnaby to ensure thelong-term feasibility and sustainability of the development. The Developer, on the other hand, has asomewhat more limited role in scope and duration. The Developer applies to the City for approval ofthe development on its own development lot. After it constructs the development and completes thesale of the strata lots to its purchasers, the Developer, generally speaking, is no longer activelyinvolved in UniverCity.D. Dockside Green Development ProcessDGLP acts as the master developer, akin to the Trust’s role in planning the entire community. In thatcapacity, it applied to rezone and subdivide the development lots. Unlike the Trust, DGLP markets thedevelopment in each lot as the developer of each development to individual purchasers. In such role,it takes on the tasks required of each developer in applying for development approval, arranging tohave the project constructed by contractors and marketing to purchasers.V. SPECIFIC GREEN FEATURESA. UniverCityMany of the environmentally friendly features in UniverCity reflect the “Environment” aspect ofUniverCity’s four cornerstones of sustainability.1. Preservation of Burnaby MountainSection 219 covenants are granted in favour of the City of Burnaby for the purpose of preserving treesand other plant life in accordance with plans prepared by certified arbourists and approved by theCity. Riparian covenants are also in place to protect natural water features by prohibiting constructionwithin a certain distance from creeks and streams. Developers must work with the City in the approvalPage 7What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

process so that the site design for each development lot takes into account the protection of trees andwater bodies.2. Sustainable InfrastructuresVerdant, one of the developments in UniverCity developed by VanCity, has a thermal energy systemwhich provides heat and hot water to that building. That subject is covered by another paper.The Trust has developed storm water management guidelines which aim to reduce surface runoff. Toassist with the administration of such guidelines, section 219 covenants are granted in favour of theCity of Burnaby to ensure that an onsite storm water infiltration and detention facility is installed ineach development lot. For the first three years following the installation of such facility, the facility isto be tested annually by a qualified engineer to ensure that the facility is functioning as designed andrequired.3. Transportation(1) UniverCity features a pedestrian and bike trail network, registered as statutory rightsof way on title to various development lots, which enable residents as well as thepublic to access these pathways on foot and by bicycle.(2) To reduce the parking ratio in some of the developments, Developers have grantedsection 219 covenants in favour of the City of Burnaby. In these covenants, Developersagree to designate certain of the parking stalls in the development’s common propertyfor exclusive use by co-op vehicles and members of the car share network.(3) The Trust has negotiated with TransLink so that residents may purchase transit passesat reduced rates.B. Dockside Green1. Sewage Treatment SystemsDGLP has constructed on-site sewage treatment systems (the “Sewage Treatment Systems”) to providesewage service to Dockside Green. The Sewage Treatment Systems will be transferred to the DGSociety. The DG Society presently intends to enter into an agreement with Corix Utilities Inc., awastewater operator, to operate the Sewage Treatment Systems and provide sanitary sewage servicesto Dockside Green. The Sewage Treatment Systems will be expanded incrementally as required toservice those portions of Dockside Green then being developed. Ownership of the Sewage TreatmentSystems may be transferable by the DG Society to a third party provided the third party providesappropriate assurances pertaining to maintaining the level of service, acceptable charges andcompliance with regulatory authorities as determined by DGLP.Page 8What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

2. Waste Wood Biomass FacilitySpace heating and domestic hot water heating in Dockside Green will be provided through a districtenergy system operated by Dockside Green Energy LLP (“DG Energy”), a public utility regulated by theBritish Columbia Utilities Commission (“BCUC”). The district energy system will include a waste woodbiomass facility. The rates charged by DG Energy will be regulated by and subject to periodic reviewby the BCUC. The energy service provided by DG Energy will be billed to the strata corporations. Theenergy costs billed by DG Energy to the strata corporations will be recovered from members of thestrata corporations based on meter readings on the meters installed in the suites.3. Transportation InitiativesDGLP has agreed to implement certain strategies to minimize the demand for street parking inDockside Green. These include providing a mini transit bus for the establishment of a mini transitservice offering regular shuttle service from Dockside Green to various downtown locations, and a carshare program offering owners in Dockside Green the use of a number of electric and high fuel-efficientvehicles to be provided by the Developer. The Developer will also install bicycle racks throughoutDockside Green. The mini transit service and car share program may be owned and may be operatedby the Community Society or alternatively, by providers of such service. Currently, DGLP and the DGSociety have entered into an agreement with Victoria Car Share Co-Operative to operate the car shareprogram.VI.MECHANISMS TO CREATE SUSTAINABLE DEVELOPMENTA. Local GovernmentParticipation by the local government is critical to the long term success of green communities.Custom-made zoning bylaws for UniverCity and Dockside Green were enacted in both Burnaby andVictoria respectively. With a zoning bylaw in place which sets out green design guidelines, buildingpractices and energy efficient infrastructures, a framework is established for the sustainable mastercommunity.Like any conventional development, developers have to meet certain conditions of the localgovernment to obtain development approvals. If these are not one-time conditions needed only at thetime of initial construction but requirements which have to be complied with over the long term, localgovernment may require section 219 covenants, statutory rights of way and other instruments to beregistered on title to the lands as conditions of development. Registered instruments providedevelopers and ultimately the residents with notice of the requirements and obligations that have tobe fulfilled on an ongoing basis.Looking ahead, the City of Burnaby is working with the Trust to develop a zoning bylaw that will rewarddevelopers with increases in height and density in their development provided that they follow greenbuilding, storm water and landscaped requirements.Page 9What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

On a provincial level, the Local Government (Green Community) Statues Amendment Act (2008)requires local governments to include green house gas reduction targets and strategies in communityplans and regional growth strategies by 2010. Further, the amendments to various statutes enablelocal governments to encourage green developments through reduced development cost chargespayable by developers.B. Contractual RelationshipsAt all levels and stages of the development, green practices and behaviours may be incorporated inprivate contracts like any other contractual term.When the Trust enters into offers to lease with Developers, the Developers agree to follow, amongstother things, the development and construction guidelines set out by the Trust. The Developer’s plansand specifications must be approved by the Trust. In this manner, the Trust maintains control overdevelopments being carried out by third party developers in UniverCity.The ground lease is registered on title to the development lot on closing. This document also containscovenants by the Developer to observe the construction and design guidelines set out by the Trust.Like any ground lease, the lease also contains obligations by the Developer (and upon the stratificationof the development lot, the strata corporation) to repair and maintain the development so that certainstandards are kept up throughout the term of the lease.Since the Trust does not have a direct contractual relationship with purchasers, the offers to leasecontain requirements by developers to have certain content in their disclosure statement so that theresidents of UniverCity will be aware of certain sustainable practices in the community.When DGLP purchased the lands which will become the Dockside Green community from the City ofVictoria, the City made the master development agreement a schedule to the purchase contract withDGLP. The master development agreement serves as a blueprint for the sustainable community whichDGLP is required to build.In Dockside Green, since DGLP is the master developer as well as the developer, there is a directcontractual relationship between DGLP and the residents of Dockside Green. Under REDMA, adeveloper must plainly disclose all material facts with respect to the development. A material factincludes any fact that affects or could reasonably expected to affect the value, price or use of thedevelopment unit. Therefore, it is important to set out not only the green features in the developmentor the community as a whole, but also how the cost of these facilities may be passed on to thepurchasers and how their use of the development may be affected. If there are any particular matterswhich the purchaser must comply with, these could be incorporated in the contract. As the developerof each development lot, DGLP can also ensure that the bylaws are structured to promote or prohibitcertain behaviour.Page 10What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

C. Community AssociationsThe intent of community associations is to establish a vehicle by which certain responsibilities withrespect to the maintenance of facilities and promotion of the well being of the community can bemonitored. The DG Society has certain obligations with respect to the operation and maintenance ofsome of the programs and facilities. The SFU Association has fewer substantive obligations. Themechanism is set up for both societies to collect from its members a proportionate share in thesociety’s budget.VII.FILE AND OFFICE MANAGEMENTWith large developments such as UniverCity and Dockside Green, lawyers must put in place effectivefile and office management systems to track all the covenants and agreements put in place. Certaindates may also be important to diarize and to remind the client to diarize (i.e. expiration of 99 yearlease). Timelines for each “mini-development” within the larger UniverCity/Dockside Green-typeproject may be helpful - in each timeline, the dates for obtaining any necessary approvals or permits,the types of covenants and agreements to be drafted, and any other key documents or actions to betaken can be clearly outlined in a few pages for easy reference.VIII.CONCLUSIONA master developer, in concert with the local government and other third parties, endeavours to set upthe structures and vehicles by which sustainable building practices, energy efficient infrastructures andother amenities are constructed and maintained. That initial structuring may be the easy part inbuilding a sustainable community. Awareness that a sustainable community is a good place to live anda willingness to participate is an important message that must be delivered and understood by theresidents to ensure the long term success of these communities.Page 11What Green Development Means for Lawyers:Fifteen Years of Experience from UniverCity and Dockside Green

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