The purpose of this memo is to provide brief legal answers to four questions that have been received from various Councillors in order to assist Council on June 23, 2010 when it resumes the Special Council Meeting pertaining to the Lansdowne Partnership Plan ("LPP") and Implementation Report (ACS2010-CMR-REP-0034). It also seeks to provide further guidance on one procedural matter that arose last week during Council’s questions to staff on this report.

Question 1: The LPP Legal Agreement includes a clause to declare 12 acres of Lansdowne Park as surplus which means it is saleable?

Answer: This is partially correct. The proposal to declare the above parcel of land "surplus to the City’s needs" (as contemplated by the City’s By-law for the disposal of real property), is for the purpose of allowing the City to enter into long-term leases (i.e. 50 years with an option for two further extensions of ten years each) with the Ottawa Sports and Entertainment Group (OSEG) for the proposed mixed-use development component (i.e. retail, commercial and office) of the LPP. Thus, in this instance the declaration is not for the sale of the property, legally known as the freehold interest.

There is distinction in law between a leasehold interest and a freehold interest. In short, the former interest is time-limited (i.e. a 50 year lease) while the latter is not. Thus, the City will always own the freehold interest in the above parcel of land even though it will be subject to long-term leases, in favour of OSEG. At the expiration of the leases, the parcel of land (subject to the air rights disposition for proposed residential development), will continue to be owned by the City. Conversely, OSEG will have no legal right to purchase or sell the freehold interest of the City. That decision could only be made by City Council.

Question 2: In addition, the retail tenant (the Ottawa Sports and Entertainment Group: Greenberg, Shenkman, Ruddy and Hunt) will have the right of first opportunity to buy the land, which means that competitive bidding for the surplus land will not be permitted?

Answer: This is correct. However OSEG would be required to pay the fair market value of the land at the time of purchase. Briefly, the right of first opportunity (being the opportunity to buy the land) in favour of OSEG will mean that there won’t be competitive bidding for the surplus land. That being said, there will be the requirement under the Retail Lease for OSEG to pay the then-fair market value of the property in order to purchase it from the City. This is contemplated to be the same monetary value as what competitive bidding would yield for the City if this right in favour of OSEG did not exist. The right of 1^st refusal/opportunity was negotiated by OSEG but, as with all of the other provisions outlined in the Project Agreements described in the LPP report, it is subject to Council approval. It is customary in a commercial setting to give a long-term tenant the first opportunity to buy the land that is the subject matter of the lease should the owner decide to sell.   Generally speaking, developers prefer to own land rather than hold a leasehold interest. OSEG accepts a leasehold interest in this instance because the option to own was not made available. Thus, it is considered equitable, and common practice that if the owner decides to sell the land during the term of the lease, the tenant should have a first opportunity to acquire the land, if the tenant is prepared to pay the fair market value for the land.

Question 3: Pursuant to the Urban Park Project Management Agreement, OSEG will act as a project manager for the construction of the urban park, which includes the front lawn and Sylvia Holden Community Park?

Answer: This is correct, subject to Council’s decision to include Sylvia Holden as part of the Urban Park. Should Council decide not to include the park then the park would remain in its current location and be unaffected by the Urban Park construction. As mentioned by the City Manager on June 17^th, 2010, staff is recommending that OSEG manage the construction of the Urban Park so OSEG can use various portions of the Lansdowne Park site for appropriate staging of the construction and can make efficient use of the entire site as needed. Although not mentioned at Council last week, there is also an important legal consideration that led to this recommendation of there being only one contractor on site while construction is ongoing.

It is suggested that this approach will help mitigate the legal risk of the City being considered the "constructor" under the Occupational Health and Safety Act. Therefore, the City should not be exposed to any charges under the Act should there be any health and safety violations. Under that Act, when there are multiple construction activities taking place at one site or in close proximity to one another involving multiple contractors, the owner (i.e. in this case, the City) will be considered to be the "constructor" and therefore will be solely responsible for ensuring health and safety compliance under the statute.

Fines under the Act can be significant (i.e. the maximum fine that the City could be exposed to is $500,000) and the City routinely reviews the proposed staging and sequencing of its construction projects on sites that are in close proximity to each other to ensure that it does not take on the role of the "constructor". This approach is permissible and appropriate and is carried by other owners as well so that they don’t inadvertently assume a legal responsibility that is better handled by construction experts.

Question 4: Pursuant to the Urban Park Project Management Agreement, OSEG will manage the Urban Park, Aberdeen Pavilion and Horticultural Building?

Answer: This is correct, subject to Council accepting OSEG as the manager for all these areas. It should be noted that although not expressly mentioned in the LPP Project Agreement Framework, management of the Urban Park, the Aberdeen Pavilion and the Horticultural Building by OSEG is at the sole option of the City. Further, either of the management agreements may be terminated by either the City or OSEG without penalty on 90 days prior notice to the other party.

Finally, I want to clarify and provide additional information on one procedural matter that arose last week at Council during questions to staff on the LPP. This pertained to the City’ current by-law on the sale of real property owned by it, being By-law No. 2002-38, as amended.

With the enactment of the Municipal Act, 2001 on January 1^st, 2003, Section 268 mandated every municipal council to "pass a by-law establishing procedures, including the giving of notice to the public, governing the sale of land" (this clause was largely a re-statement of the requirement found in Section 193 of the former Municipal Act). Furthermore, this provision defined the word "sale" to include "a lease of 21 years or longer." The statutory requirement for a by-law to establish the procedures for the disposal or sale of real property was met when Council enacted By-law No 2002-38.

On January 1^st, 2007, the Municipal Act. 2001 was substantially revised with the passage of Bill 130. With respect to the detailed requirements for a by-law regarding the sale of surplus land (including the statutory definition of a 21 year lease deemed to be a sale) Section 268 was repealed and replaced with the following broader requirement in Subsection 270 (1):

A municipality shall adopt and maintain policies with respect to the following matters:

Therefore, the revised Municipal Act, 2001 no longer specifically mandates the requirement that a municipality’s policy or by-law regarding the "sale and other disposition of land" include a lease of 21 years or longer." However, in subsequent amendments to By-law No. 2002-38, staff have not recommended changes to the definition of the term "disposal", as the inclusion of a lease in excess of 21 years is viewed as a best practice.

Therefore, staff erred last week when, in response to a series of questions posed by Councillor Leadman on the distinction between the Act versus the by-law requirements, staff advised that Council "could not waive the by-law altogether." To be clear, as the statutory requirement to include a lease longer than 21 years in a sale of municipal land is no longer obligatory. As such, Council retains the discretion to waive this requirement which continues to exist in By-law No. 2002-38.

I trust the above comments will be of assistance and regret any earlier confusion that may have arisen at last week’s Council meeting regarding same.

"Original signed by"

M. Rick O'Connor
City Clerk and Solicitor