Market-Value Rents Delayed Until 2010

When MNR notified land use permit holders for commercial outpost camps earlier this fall about the move to market-value based rents and long term leases, NOTO received a flurry of calls and emails with questions and concerns. The greatest concern was over the very short notice of a change that raised LUP fees considerably. There were also several concerns raised over some specific implementation issues, such as disposition of unwanted LUPs and possible interim arrangements for sites that are currently unused due to economic conditions.

We carried these concerns forward to MNR officials and the minister’s office, and just before Christmas, the minister agreed to delay implementation by one year to January 2010. For 2009, LUP fees will remain at the previous rate. LUP holders will see the new fees come due in 2010 on the anniversary date of their permits.

NOTO received a number of questions relating to the move to market-value based rents and long term leases. It is important to note that these are two separate but interrelated elements.

NOTO did not ask for LUP fees to be tied to market-value and significantly raised. This was an initiative and mandate of government, and NOTO was the last user group to come on board. Since market-value based rents were inevitable, we chose to work with MNR to arrive at a market value that was fair and equitable and a system that was transparent and easy to administer. Using the reports of several appraisal consultants as a starting point, we negotiated a land value of approximately $16,000 that would be used across northern Ontario. It is worth noting that this value is substantially lower than the value negotiated by the small number of operators who had previously arranged leases with MNR.

What NOTO did strongly advocate for was a move from insecure land use permits to secure 30 year renewable leases. This move was strongly supported by the industry and seen as a measure that was long overdue. NOTO’s position was that if we were going to be forced to pay market-value based rents, we should receive the added security of long term leases.

Many operators have urged us to continue to advocate for the option of outright purchase of the land. NOTO agrees with this position since we believe that allowing operators to purchase the sites would greatly encourage investment in upgraded facilities. We have brought this recommendation forward strongly, both to MNR and recently to former finance minister Greg Sorbara who is chairing the Ontario Tourism Competitiveness Review.

Three very significant issues must be resolved before we make the move to market value rents in 2010.

Disposition of unwanted sites

We need to develop a procedure to facilitate the sale of LUP sites and buildings where operators choose not to retain them. We need to do everything we can to make sure that an operator recovers as much of his investment as possible if he decides that a site no longer fits his business model. Some questions we need to address include “How can we avoid having to destroy buildings if a site is relinquished?” and “Should the possibility of conversion of sites that are no longer suitable for tourism use to private recreation camps be considered?”

Temporary withdrawal of sites from use

The economic downturn will result in a number of outpost sites that are unused over the coming season. These sites will likely become viable again when business conditions improve. We need to consider a mechanism to allow operators to temporarily retain these unused sites at a lower rental rate until market conditions improve or they decide to dispose of them.

Low use sites

A number of businesses have sites that are used for only a short period each year. These include camps used only during hunting season, cabins used for cross country skiing and some traditional outposts on low productivity lakes. We need to review whether the market value we have arrived at is appropriate to these special cases, or whether a different mechanism needs to be used in order for these sites to remain profitable under the new rates.

We are very pleased with the decision to grant a one year delay on implementation of market-value based rents, and are urging MNR to immediately get to work with us to use this time to address these and other outstanding concerns. NOTO remains strongly committed to the move to more secure long term tenure, and accepts the need to move to market-value rents to achieve this.

This article was taken from pages 13 & 14 of NOTO's "The Outfitter" publication, Winter 2008 Issue


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