Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on Planning and Environment

FROM:

General Manager of Engineering Services in Consultation with the Director of Legal Services and the Manager of Real Estate Services

SUBJECT:

Woodward's Redevelopment Encroaching Elements onto Cordova Street, Abbott Street and Hastings Street and Related Fee Matters

 

RECOMMENDATION

COUNCIL POLICY

There is no Council policy directly related to this matter.

The Encroachment By-law establishes fees to be charged for agreements prepared pursuant to the By-law and general conditions, such as a requirement for cancellation provisions, but does not establish criteria for setting aside fees.

PURPOSE

The purpose of this report is to seek Council clarification that annual rentals for encroaching elements from the Woodward's Building are to be charged to the owner of the lands in accordance with the Encroachment By-law. Further, this report seeks formal authorities to set aside annual fees and/or annual rentals for the Tunnel under Cordova Street, the Areaways around the Woodward's Building and the Overpass over Cordova Street, each generally to the date of the purchase of the lands by Fama on December 12, 1995.

SUMMARY

The report is structured so as to discuss each Recommendation in sequence. The principles are however, the same.

Recommendation A deals specifically with the issue of portions of the Woodward's Building, including foundations and exterior cornices that encroach onto Hastings Street, Abbott Street and Cordova Street (see Appendix "A"). Staff seek confirmation from Council that annual fees are to be as per standard practice. That is, annual rentals (fees) are to be as per the Encroachment By-law. This matter is only before Council as a result of a request by the developer of the Woodward's Building (Fama) that they be exempted from paying annual rentals. The report discusses the staff recommendations (this development should be treated the same as everyone else) and Fama's rationale for their requested exemption (that the encroaching elements are a long existing feature that the developer and "Planning" wish to be retained). Fama has agreed to pay document preparation fees as per the Encroachment By-Law.

Recommendations B, C and D deal specifically with the matter of outstanding annual fees for a Tunnel under Cordova Street (see Appendix "B"), Areaways around the Woodward's Building (see Appendix "C") and the Overpass over Cordova Street (see Appendix "D"). Staff are seeking formal Council authority to set aside the fees for the use of the items since the purchase date of the Woodward's Building by Fama, subject to the conditions described in each Recommendation. The principle in regard to the Tunnel and Areaways is marginally different than that regarding the Overpass, however, the theory is that none of the three items have been in use, or created value for the developer, since their purchase of the lands. In each case, the fees had always been paid by the previous owners and were fully current to the date of purchase of the lands by Fama, being December 12, 1995.

Staff believe it reasonable that this project be treated consistently with all others in the City and are concerned that a precedent may be established if this project was exempted from future fees. Staff also note that practice has been that when a developer agrees to eliminatean encroachment, that as long as progress is being made toward that elimination and that no use is being made of the encroachment, that it is reasonable to "suspend" annual fees.

Recommendation E is prepared merely as a housekeeping matter and to ensure Council's direction is consistent with past practice.

BACKGROUND

On November 27th, 1995, the City entered into an agreement with Fama Holdings Limited ("Fama") in regard to lands comprising the Woodward's Building at 101 West Hastings Street.

On December 12th, 1995, Fama became the owner of a number of properties, including Lots 1, 2, 3, the East one-half of Lot 13 and Lots 14, 15 and 16, Plan 5420 and Lots 17, 18, 19 and 20, Plan 19435, all Block 4, Old Granville Townsite, and being nominally described as the site of the Woodward's Building. The City, on this same date, became the owner of certain lands on the north side of Cordova Street which formed the former Woodward's Parkade (the "Parkade"). The various lands are identified in Appendix "E". The site of the Woodward's Building has now been subdivided to form a single parcel being Lot E, Block 4, Old Granville Townsite, Plan LMP 40092.

On October 20th, 1997, the Development Permit Board approved Development Application DE 217797. The application permits significant renovations and additions to the former Woodward's Building at 101 West Hastings Street. The new development will contain retail/commercial uses and 417 market dwelling units and two sleeping units. A number of conditions have been placed on the development approval. These include:

"A.2.2. Arrangements shall be made, to the satisfaction of the General Manager of Engineering Services for:

A.2.3 Arrangements shall be made, to the satisfaction of the General Manager of Engineering Services and the Director of Legal Services, for:

Staff have been working with Fama on resolution of the above items for a number of months. This report focuses on:

1. Condition A.2.3 (c), the matter of encroachments;

2. Condition A.2.2 (c), being the filling of the Tunnel and Areaways; and

3. Condition A.2.2 (b), being the removal of the existing Overpass.

Specifically, this report focuses on fees and annual rentals related to encroachments, the Tunnel, Areaways and the Overpass. (We will forward a separate report that deals with the legal arrangements for the new bridge).

The report will focus on each Recommendation in sequence. We have received a request from Fama asking that they be exempted from any annual rentals relating to "all existing and proposed encroachments" and further, that annual rentals/fees related to the Tunnel, Areaways and the Overpass be forgiven to the date of purchase (December 12th, 1995) of the Woodward's Building by Fama.

DISCUSSION

Recommendation A

Recommendation A focuses on fees for use (annual rentals) of the areas being encroached upon.

The Encroachment By-law (No.4243) has since May 1st, 1966, established a procedure, including fees, for dealing with portions of buildings, including appurtenances which encroach onto City street and/or lane. Section 5 establishes the general provisions under which building encroachments will be dealt with. Annual fees are charged as per the provisions of the By-law, with very few exceptions. (One exception had the developer pay an advance fee for the life of the structure, because the encroachment resulted due to a construction error and they felt it unreasonable to burden future owners, due to their error.)

There are many buildings throughout the City that actually encroach onto City street or lane, but are not under agreement. This is only because the City does not have specific knowledge of these locations. As they come to our attention, whether through an inquiry due to a transfer of ownership, an application for development, subdivision or rezoning, or even on re-financing by the owner, we act to place the encroachment under agreement.

The most important provision of the process is that each owner of any encroachment is required to "indemnify the City against any and every claim, loss, expense or damage, and any suit or demands which may be occasioned by or incidental to the construction, existence, use or maintenance of an encroachment, and the amount of any loss or damage occasioned to the City thereby, except as otherwise herein provided, shall be a lien or charge on all real property to which such encroachment is appurtenant".

The agreements also "include provision for:

In 1993, the Registrar of the Land Title Office took the position that if the owner of an encroaching building wished to strata title that building, they must secure an easement to contain the encroaching portions of the building. This easement must be registered against the title of the land encroached onto (i.e. the street or lane). The Registrar believed this was required by the Condominium Act.

Many streets and lanes in the City have no "title", because they were created by dedication, and it is therefore necessary to raise title to a portion of road before an easement can be registered. The easement is prepared to conform, as nearly as practicable, to the shape of the building encroachment. Furthermore, as the easement has the effect of denying public access to the portion of road covered by the easement, technically, Council must stop-up and close the road.

In all but one case, annual fees have been set as per the fees charged for in an agreement pursuant to the Encroachment By-law.

The one exception was a February 1998 example, where the encroachment was constructed in error. The particular developer did not want to burden future owners with the annual costs because of an error they made. An agreement was reached for a pre-paid fee, plus an additional community amenity valued at approximately $70,000.

In January of 1996, in response to a concern over the number and complexity of these volumetric easements, Council established a $3000.00 administrative fee for these easements. This fee is now part of the Encroachment By-law Fee Schedule. Fama has agreed to pay the document administration fee and is requesting exemption from only the annual fees.

Fama has indicated that portions of the Woodward's Building will be the subject of a strata title conversion. Fama does not, at this point, know how many strata corporations will be created. It is however, probable that the City will be asked to approve an Air Space subdivision to create between two and four air space parcels, and then a strata title conversion application to create two or three strata corporations.

It is likely that there will be a strata corporation for the commercial component of the development, and one or more strata corporations for the residential component.

If there were only one strata corporation proposed, we could tell Council the fees that we are being requested to forego. This however, is not the case and determining the magnitude of exemption sought is difficult.

We know that the total area encroached upon by the drip line of the building, is approximately 191 square metres. If there were only one strata corporation, it would result in a fee of approximately $5830 per year (See Appendix "A").

If it is assumed that there will be three entities (two strata corporations and a Remainder) from which there are encroachments, it would be reasonable to assume that annual fees would be in the $15,000 range.

We note that there are at least 12 different layers of encroachments from the building, including existing cornices, proposed (new) cornices, proposed sign bands, existing sign bands, main building walls and other minor architectural features.

Fama asks to be exempted from these fees on the basis of the encroachments being long-existing and items that the developer and "Planning" wish to retain.

Engineering Services, Real Estate Services and Legal Services staff all believe that this development should be treated the same as all others. That is, fees should be charged as per the Encroachment By-law.

Adopting any other position will probably result in numerous other owners, now subject to fees, seeking similar exemptions.

We will report back to Council with details of the final volumetric easements, once the Woodward's Building is ready for re-occupation.

Recommendation B

Fama has asked to be forgiven for the annual fees that are applicable for the existing Tunnel (See Appendix "B"), from the time that they acquired the Woodward's Building.

This would include the years of 1996, 1997, 1998 and 1999, and would total approximately $16,846.00.

On January 15, 1974, Registered Charge B 2872 was entered into.

It pertains to a tunnel under and across Cordova Street, west of Abbott Street, occupying a total of 1518 square feet. The original annual fees were charged at $759 per year, were due each December 1st and have been modified in accordance with the Encroachment By-law.

In 1998, those fees were $4219 (per year).

Condition A.2.2.(c) - of the Development Permit approved, requires that the Tunnel be abandoned and filled, to the satisfaction of the General Manager of Engineering Services.
At the preliminary stage, it was still a possibility that the Tunnel would remain in use with loading provided from the Parkade. (This is no longer required.) As such, registered easements (referred to as the Loading Easements) and "The Loading Area Agreement" were entered into. These are no longer required. We note that the Tunnel has not been in use since the purchase of the Woodward's Building by Fama, or the Parkade by the City.

Staff believe that if the Tunnel is filled and sealed in a manner satisfactory to the General Manager of Engineering Services in a reasonable time frame (we are suggesting by November 30th, 2000), with Fama paying all costs and the City being released from all obligations under the Loading Easements and the Loading Area Agreement, that it is reasonable to forgive the annual fees now overdue.

Recommendation C

Fama has asked to be forgiven for the annual fees for the existing areaways (see Appendix "C"), from the time they acquired the Woodward's Building.

This would include the years of 1996, 1997, 1998 and 1999, and would total approximately $78,961.00.

On April 14, 1972, Registered Charge 552716M was entered into.

It pertains to cavities under the sidewalk and lane being situated on the south side of Cordova Street, the west side of Abbott Street, the north side of Hastings Street and in the lane running south from Cordova Street, having a total of 6693 square feet.

In 1998, those fees were $19,744.

Condition A.2.2.(c) - of the Development Permit approval requires that the areaways be abandoned and filled to the satisfaction of the General Manager of Engineering Services.

On April 18, 1996, staff informed the solicitor for Fama, by letter, that the annual rent (then $19,729) would not be charged for on July 1st, 1996.

This letter was prepared on the assumption that the areaways would be filled (very) soon. At this time, Fama is still discussing the method of filling with the City.

Staff believe that if the areaways are filled, to the satisfaction of the General Manager of Engineering Services, prior to November 30th, 2000, with Fama paying all costs, that it is reasonable to honour the April 18, 1996 commitment to forgive the annual fees, now overdue. The filling is to include the standard practice of excavating the areaway walls to a depth of 4 feet below grade, which may require the sidewalks to be removed and replaced at Fama's cost.

Recommendation D

Fama has asked to be forgiven for the annual fees that are applicable for the former overhead bridge (see Appendix "D"), from the time that they acquired the Woodward's Building.

This would include the years of 1996, 1997 and 1998 and would total $84,094.

On September 6, 1972, Registered Charge 564873M was entered into.

It was a Short Forms of Lease Act Agreement that relates to an overhead bridge, covering approximately 9640 square feet. Rather than fees being charged as per the Encroachment By-law, an annual rental was agreed upon based on the market use of the space. The rental was reviewed each five years and in 1995, was $31,500.00.

During the negotiations with Fama for the acquisition by the City, of the Parkade, there was discussion of converting the "market rental" for the bridge to fees, as per the Encroachment By-law.

Fama and staff were both surprised to learn that the annual fee on the basis of the Encroachment By-law, was over $28,000.

During many discussions with Fama, staff have acknowledged support for waiving the rent, if the bridge were removed in a timely fashion, and in accordance with Prior-to Condition A.2.2(b). Most recently, this was agreed to by the Projects Engineer, in an April 9th, 1997 letter.

The bridge has now been removed, however, the charge remains on title (granting a right for the bridge) and there are issues around the repairs to the Parkade.

At the end of the day, staff believe that a major goal has been achieved, being the removal of the bridge and that if the matter of repairs to the Parkade can be resolved, that it is reasonable to forgive the rents that are now overdue. The charge on title will remain until completion of the repairs to the Parkade, or payment in lieu is arranged.

Recommendation E

Recommendation "E" is a housekeeping matter that relates only to the release of the existing charges, once certain conditions are met.

CONCLUSION

Fama is seeking both exemption from future fees and relief from outstanding, now overdue fees.

Fama argues that future fees should not be applicable because the encroachments are long-existing and the City desires their retention.

While much of the encroaching structure is long-existing and there are many reasons to retain it, the City has long operated within the spirit of the Encroachment By-law.

That is, we will validate the existence of the encroachments and allow them to remain, as long as any liability the City may have by the presence of structures on City roads and lanes, is eliminated, and there is a cost recovery for administration of the agreements, the fees are paid as per the Encroachment By-law, and the Encroachment is documented in the City's form.

The Encroachment By-law sets fees on the basis of $115 per year for the first 150 square feet of encroachment and then $3 per square foot thereafter.

In regard to the existing and proposed encroachments, staff believe this market development must be treated the same as all others. At 417 market units, the annual cost, even if as much as $15,000 for strata corporations, would still be less than $40 per year, per unit.

Any reduction in this fee will result in a precedent being created, whereby all owners now paying a fee in relation to a heritage (style) encroachment, will want their fees eliminated and all future developers will seek exemptions.

Staff acknowledge that the Tunnel, Overhead Bridge and Areaways, have not been in use since Fama acquired the Woodward's Building. As such, staff believe it is appropriate to forgive the outstanding fees.

The General Manager of Engineering Services and the Manager of Real Estate Services support Recommendations "A" to "E", as presented.

* * * *

pe990107.htm

APPENDIX "E"
Page 1 of 2

List of Properties that were formerly the:

Woodward's Building

1. Parcel Identifier: 003-139-956

2. Parcel Identifer: 003-140-644

3. Parcel Identifier: 003-141-802

4. Parcel Identifer: 003-141-390

5. Parcel Identifer: 003-135-187

6. Parcel Identifier: 003-135-977

7. Parcel Identifier: 003-136-001

8. Parcel Identifier: 003-135-497

9. Parcel Identifier: 003-135-934

10. Parcel Identifier: 003-136-060

11. Parcel Identifier: 002-879-956

12. And a 224 square foot portion of:

APPENDIX "E"
Page 2 of 2

List of Properties that form the:

Parkade

1. Parcel Identifier: 003-144-224

2. Parcel Identifier: 003-144-305

3. Parcel Identifier: 003-144-330

4. Parcel Identifier: 003-135-667

5. Parcel Identifier: 003-144-429

6. Parcel Identifier: 003-144-712

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