Guide to the Management of Real Property

Note to reader

  1. The Policy on Management of Real Property, the Directive on the Sale or Transfer of Surplus Real Property, the Accessibility Standard for Real Property, the Appraisals and Estimates Standard for Real Property, the Reporting Standard on Real Property, and the Fire Protection Standard were rescinded on May 13, 2022. They have been replaced by the Policy on the Planning and Management of Investments and the Directive on the Management of Real Property.
  2. Guides to support the implementation of the Policy on the Planning and Management of Investments and the Directive on the Management of Real Property are under development.
  3. Federal departments and agencies that are custodians of real property can refer to the Treasury Board of Canada Secretariat Acquired Services and Assets Sector Real Property GCpedia page for technical guides (accessible only on the Government of Canada network).
  4. The full technical guides can be obtained by contacting the Investment Management Directorate at

Table of Contents


1.1 Purpose and scope

Federal real property managers and staff require a concise presentation of the various considerations—ranging from principles and logic to practical advice—that are needed to deliver real property services. The purpose of this guide is to meet that requirement.

The Guide is drawn from federal legislation, Treasury Board policies, directives, and standards that apply to the administration and management of real property. While the Guide does not replace any of those authoritative documents, to which access is facilitated by links that appear throughout the text, it can be relied upon to guide decision making and to assess performance at all stages of real property management. It can also serve as a monitoring tool, useful in determining departmental adherence to relevant legislative and policy requirements.

The scope of the Guide ranges from the broad conceptual issues to the day-to-day operations for which the Treasury Board is authorized to act. The guidance is also reflective of good managerial practices that go beyond Treasury Board policies. The Guide should prove useful in assisting public-sector managers in their responsibilities for the management of realty assets, whether subject to Treasury Board policies or not.

Guide organization

The information in this guide is organized with an eye to how it will be used. Some members of the real property community will be particularly interested in broader concepts and principles, either to refresh their memories or to get quickly on track if newly appointed to their positions. Others will refer to the Guide to get precise information and advice relating to the implementation phases of acquisition, use, and disposal.

The links provided throughout the text are important. If particular circumstances require information beyond what is set out in the Guide itself, the links provide a broader basis for decision making. Information provided by this guide and its links can also be supplemented by discussion with other real property officers within a department or in another department, with Department of Justice Canada legal advisors, or with officials at the Treasury Board of Canada Secretariat.

While sections 2 to 4 of the Guide describe basic concepts and overarching principles drawn from legislation and policy, sections 5 to 8 provide specific and detailed guidance on the physical life cycle phases of real property: acquisition, use and occupancy, and disposal. Specifically:

  • Section 2 describes a few key terms, as well as the government structures, roles, and responsibilities that provide the context for real property management.
  • Section 3 discusses management objectives and overarching principles for the effective management of real property.
  • Section 4 describes departmental frameworks for real property management and planning, and addresses the link between strategic considerations, operational planning, and implementation.
  • Section 5 sets out guidelines for the acquisition phase of the real property life cycle and provides an overview of acquisition choices and requirements for analysis.
  • Section 6 provides guidelines for the use and occupancy phase of the real property life cycle, including discussion of the key role of performance assessment.
  • Section 7 lays out guidelines for the disposal phase of the real property life cycle, including information on both routine and strategic disposals.
  • Section 8 highlights and describes general guidelines on transactions that are relevant in all three phases of acquisition, use, and disposal.

Real Property: Description and Context

2.1 Description

According to the Federal Real Property and Federal Immovables Act, real property is lands, including mines and minerals, and buildings, structures, improvements, and other fixtures on, above, or below the surface of the land and includes an interest therein. The Act has application within and outside Canada (e.g., embassy lands and buildings). In the Province of Quebec, real property is referred to as an "immovable."

Real property is often referred to informally as "realty" or as real property "assets." It is clear that mines, minerals, buildings, land, and so on are assets that have value that can be quantified. Proper management of these assets is therefore as important as the proper management of other resources, including financial, that are administered by the federal government in the service of all Canadians.

For the purpose of Treasury Board policy and consequently this guide, consistent with the legislation just described, "real property" refers to any right, interest, or benefit in land, which includes mines, minerals, and improvements on, above, or below the surface of the land.

However, unlike the legal framework, the policy framework and this guide consider that any real property under a minister's administration or real property used by a tenant should be subject to the same management objectives and principles. The legal interest in the land, for policy purposes, is not the determinant factor in its stewardship.

2.2 Federal real property holdings

In Canada, the provincial and federal Crown holds 89 per cent of all land. Land management is primarily a provincial responsibility, with federal responsibility limited to lands required for Government of Canada operations and to public domain lands such as the territories, certain offshore interests, and land held under the Indian Act. Federal and provincial governments are responsible for lands under their respective jurisdictions and are generally not subject to each other's authority. This constitutional exclusion has required the federal Crown to self-regulate lands under its administration and control through a variety of statutes, regulations, and policies.

Canada's federal real property inventory is extremely diverse. It encompasses a variety of real property types, including land, buildings, bridges, marine navigation equipment, wharves, and monuments, among many others.

For more information on the administration of various categories of federal real property, see the guide titled Understanding Federal Real Property Management. This document provides a comprehensive overview of the federal real property management regimes.

In addition, the Directory of Federal Real Property, the central record and only complete listing of real property holdings of the Government of Canada, provides easy access to maps of and information on federal real property.

2.3 Federal government structure

The Treasury Board, the Treasury Board of Canada Secretariat, federal departments, and common service agencies are the key structural components of the management regime for departmental real property.

Departmental real property is the realty assets required by departments to carry out the Government of Canada's day-to-day operations. For the purpose of Treasury Board policy and this guide, a department is defined as in section 2 of the Financial Administration Act and includes agencies.

2.3.1 Treasury Board

The Financial Administration Act (FAA) authorizes the Treasury Board to act on all matters relating to the management and development of lands by departments, other than Canada Lands as defined in the Canada Lands Surveys Act. The president of the Treasury Board is the designated member of Cabinet responsible for departmental real property and as such is the individual who speaks for the federal government on issues of corporate interest that cross departmental lines.

While departments retain authority over real property required for departmental programs, the president is seen as a focal point for the coordination of departmental activities relating to specific real property issues. A key element of the Treasury Board's role is the review and approval of departmental investment plans, including assessment of the performance and cost of assets and acquired services from government-wide, horizontal, portfolio, departmental, and program perspectives.

2.3.2 Treasury Board of Canada Secretariat

The Secretariat is responsible for providing appropriate policies, directives, tools, and guidance necessary to support the government's policy direction and government-wide learning relating to real property and other administrative matters. The Secretariat monitors the implementation of Treasury Board policies in and across departments. It also performs a community leadership role by sharing information and fostering best practices.

The Treasury Board of Canada Secretariat's Assets and Acquired Services Directorate provides leadership for the overall management of departmental assets and acquired services. This involves giving direction, guidance, and advice to departments on investment planning, managing procurements, the management of real property and projects, fire protection, materiel management, and the provision of common services.

Aside from the relevant policy instruments under the Assets and Acquired Services policy framework, managers also have to be aware of and compliant with related Treasury Board policies in the areas of financial management, official languages, and occupational health and safety, to name a few.

The aim of the ensemble of policy instruments related to the management of real property is to ensure that real property supports the economic, effective, and efficient delivery of government programs through ethical, transparent, and sustainable life cycle management.

The Directorate also has responsibility for maintaining two data banks:

  • the Directory of Federal Real Property (DFRP) that holds data on over 26,000 owned and leased federal properties across the country—its purpose is to maintain a contemporary record of basic information concerning the real property holdings of the Government of Canada; the Directory provides useful information to ministers, members of Parliament, and the general public concerning a specific property, or group of properties, within a particular geographic area.
  • The Federal Contaminated Sites Inventory (FCSI) that contains information on all known or suspected contaminated sites, their location, and how they are being managed. Information in the FCSI forms the basis for reporting in the Public Accounts of Canada on the government's liabilities related to the contaminated sites. It also supports reporting on the implementation of the Federal Contaminated Sites Action Plan and government-wide progress in managing known contaminated sites, including remediation.

Both the DFRP and the FCSI provide useful information to parliamentarians, the media, and the general public concerning federal real property, as well as known or suspected contaminated sites for which departments and consolidated Crown corporations assume partial or full responsibility.

2.3.3 Departments

Under the Federal Real Property and Federal Immovables Act, administration of real property is assigned to individual ministers for the use of their departments, which are viewed as custodians.

Deputy heads are accountable to their respective ministers and to the Treasury Board for the management of realty assets and acquired services in their departments.

A department can be a custodian of either Crown-owned property, property in which the Crown has a leasehold (or other legal interest), or property it uses for program purposes by other means, such as a licence.

A department can also be a tenant of another government department with responsibilities for the space it occupies. There are several custodian departments that have other departments as tenants; however, Public Works and Government Services Canada, under its office accommodation program, and Foreign Affairs and International Trade Canada, under its diplomatic and consular programs, administer the vast majority of tenant arrangements.

Whether custodian or tenant, the deputy head of departments using real property are responsible for managing real property in accordance with Treasury Board policy direction. While the Treasury Board of Canada Secretariat oversees government-wide management performance, deputy heads are responsible for tracking and reporting on departmental performance and compliance for the management of real property.

2.3.4 Common service organizations

Common service organizations provide services to departments that support the effective management of real property. These organizations are responsible for contributing to the achievement of value for money for Canadians by providing professional services that are responsive to the needs of client departments in the most cost-effective way possible.

2.4 Parliamentary context

In addition to the oversight provided by the Treasury Board within the government itself, officers of the Parliament of Canada such as the Auditor General of Canada, the Information Commissioner, and the Commissioner of Official Languages provide review functions that are reported upon directly to Parliament.

Committees of Parliament have roles that include oversight but extend as well to a review of the adequacy of government laws, programs, and policies. For example, the House of Commons Standing Committee on Public Accounts focusses on the economy, efficiency, and effectiveness of government administration, as well as the quality of administrative practices in the delivery of federal programs and the government's accountability to Parliament with regard to federal spending.

2.5 Highlights of this section

As a valuable asset that enables the delivery of federal programs and benefits to Canadians, real property must be carefully managed to protect its value.

The management of departmental real property is achieved within a government structure that features the Treasury Board, the Treasury Board of Canada Secretariat, custodian and tenant departments, and common service organizations as key components.

  • Treasury Board ministers, in their role of establishing a government-wide system of management and control for federal assets, have a particular interest in the effective stewardship of real property and are supported by the Treasury Board of Canada Secretariat for this purpose.
  • While ministers have legal administration of real property, how deputy heads of departments manage valuable realty assets is guided by laws and by policies established by the Treasury Board and administered by its Secretariat.
  • In addition to oversight of real property administration and management by the Government of Canada, through ministers of the Treasury Board supported by the Treasury Board of Canada Secretariat, parliamentary oversight is provided by agents of Parliament and by parliamentarians through the committee system of the House of Commons.

3. Objectives and Principles of Real Property Management

It is impossible to fully understand policy direction with respect to the management of real property without reference to the fundamental notion that the government exists to serve the public. Serving the public means addressing the needs and expectations of citizens, clients, and taxpayers in a balanced way.

The concepts in this section build on key objectives and management principles outlined in the Policy Framework for the Management of Assets and Acquired Services. The Framework consists of three major components: the public, the government, and departmental real property.

The public represents Canadians, defined as citizens, clients, and taxpayers, as well as their needs and expectations. Public needs and expectations are extremely diverse and often conflicting; they range from safety and security concerns, preservation of democratic values and our heritage to the amount of time citizens are willing to wait for service.

The needs and expectations of Canadians find their way to the Government of Canada’s overarching goals and priorities. For implementation purposes, these goals and priorities are in turn translated into government programs, as well as management and administrative policies.

In this context, the role of government departments can be seen as delivering programs and services in a manner that respects government policy direction.

In their basic form, the principles and objectives contained in Treasury Board policies fall into one of two broad categories or types:

  • those concerned with how efficiently real property is managed in support of departmental programs—they include such management constructs as for example the value-for-money principle, life cycle costing, a portfolio-based approach, and the integration of real property management and planning with broader departmental management and planning frameworks; and
  • those whose primary focus is on government objectives such as security, health and safety, environmental protection, heritage conservation, accessibility, and Aboriginal matters that relate to public interests that are broader than departmental program objectives.

The management of real property is therefore very much a balancing act. It requires departments to fulfil program objectives while balancing financial and efficiency-related asset considerations with broader public interest considerations. This may and in fact often does create tensions. These tensions are inevitable in that they reflect existing pressures within the public sphere, where the interests of taxpayers do not necessarily align with those of clients and/or citizens.

The current real property policy direction is premised on departments managing real property in support of efficient and effective program and service delivery. While supporting programs and services, real property must be managed in a manner that achieves value for money and demonstrates sound stewardship.

In this context, high-level objectives of federal real property management can be summarized as follows:

  • supporting programs;
  • achieving value for money and demonstrating sound stewardship; and
  • fulfilling other government objectives.

3.1 Supporting programs

Departments hold and use real property only to support their department’s program objectives. This fundamental notion and underlying assumption forms the basis for the real property management regime and applies to every stage of real property life cycle management. Accordingly, departments:

  • acquire or occupy real property only if it is required to support the achievement of departmental objectives;
  • maintain real property in a state that does not jeopardize their capacity to deliver programs and services; and
  • dispose of or vacate real property that no longer fulfils program objectives.

3.2 Value for money and sound stewardship

To achieve best value for Canadians, departments have to exercise due diligence in managing their real property assets, having regard for the principle of value for money. Key elements of sound stewardship and value for money in the management of real property include:

  • a life cycle management approach reflecting the whole life cost of real property;
  • integration of real property investment strategies with department-wide decision making, and strategic management and planning;
  • a portfolio management approach to achieve efficiencies from a program and management perspective;
  • effective governance, involving clear delegations of authority based on need, capacity, and a supporting regime of accountabilities and responsibilities;
  • performance information and reporting; and
  • risk management.
The three main elements of achieving value for money are economy, efficiency, and effectiveness.

3.2.1 Life cycle management

The inherent feature of real property that distinguishes it from other asset types is its extended lifespan, which can reach a few decades and in some instances, such as in the case of heritage buildings, even a few centuries.

Traditionally, the physical life cycle of real property has been divided into three distinct phases: acquisition; use and operation; and disposal. For management purposes, however, a fourth phase is added: investment planning, which is a continuous process wherein the information outputs from each of the other three phases are used as inputs to planning.

Investment planning processes thus apply during all other phases in the real property management life cycle.

In addition, managing effectively requires that an appropriate level of management oversight and control be maintained through all phases in the property life cycle. Monitoring and reporting, while not associated with an asset's physical life, are key management functions to achieve continuous improvement.

The management phases are summarized in the following diagram:

The Management Control - Monitoring and Reporting
Management Control - Monitoring and Reporting. Text version below:
The Management Control - Monitoring and Reporting - Text version

The Management Control - Monitoring and Reporting Chart illustrates the relationship between the four real property life cycle management phases. The four phases include: investment planning and monitoring, acquisition, use and occupancy, and disposal. Investment planning and monitoring feeds into and incorporates processes from all three of the other phases. While, the final three phases follow a logical approach where acquisition related management processes feed into use and occupancy, while use and occupancy processes feed into disposal.

Life cycle costing

The extended life of real property has important implications for decision makers. For instance, an acquisition decision that is based on the lowest purchase price but that ignores potential operating and maintenance costs may result in a higher overall cost.

Treasury Board policy requires that an economic and program analysis be undertaken that considers the full life cycle costs and benefits of real property options.

By using life cycle costing techniques, the total costs to the Crown of owning or leasing real property can be evaluated prior to acquisition. This is accomplished by taking into account such factors as the present value of future operation, maintenance, and disposal costs, in addition to initial and ongoing capital costs. Estimating life cycle costs also creates standards by which costs can be monitored and controlled after acquisition. By adopting this approach throughout, departments can move towards ensuring that their real property decisions represent the best value to the Crown.

In addition, the principle of best value to the Crown and value for money means, in part, that real property is managed in a financially responsible and prudent manner to maximize the long-term economic advantage to the government.

Maximum economic advantage means that departments seek to maximize the value or benefit of holding real property while minimizing the cost.

At the end of the asset's life cycle, one of the considerations of a disposal decision is how best to maximize the final return to the taxpayer while balancing myriad other interests.

3.2.2 Integration with strategic planning

Decisions about investing in real property cannot be made in isolation; rather they have to be an integral part of the overall departmental decision-making framework and be considered along with strategic planning for other physical assets, as well as for human and financial resources that support program and service delivery. The inclusion of real property investment considerations in a departmental strategic planning process provides an opportunity to examine and improve real property performance, as well as to explore solutions that may not require real property ownership.

Treasury Board policy requires that real property investment strategies inform the development of a long-term capital plan that is an output of the investment planning process, influenced by and supportive of departmental strategic planning.

The full cost of providing, operating, maintaining, and disposing of real property has to be reflected in departmental budgets.

At the strategic planning level, a rule of thumb is emerging in the public and private sectors that ascribes a notional amount that should be invested annually for the proper care of built assets (buildings, facilities, or public works such as roads and sewers). The informal rule of thumb is that a minimum 2 per cent of what it would cost to rebuild an asset is what should be invested annually for its maintenance and repair. Assuming that a built asset will last about 50 years, an additional 2 per cent should be invested in capital projects that renew the life of the asset. The rule of thumb for a minimum level of annual investment to maintain real property in good condition is therefore thought to be 4 per cent of replacement value.

Real property planners can use this informal rule of thumb when estimates of annual resource allocation for the proper care of the department's real property inventory are factored into departmental management and planning frameworks for all of the department's programs and operations.

Whether a department's budget allows for an allocation and expenditure in the order of 4 per cent of replacement cost will depend upon competing departmental and government priorities of various kinds. If an annual investment in this order of magnitude is not available for the care of a department's real property inventory, assets may deteriorate faster than life cycle forecasts would predict.

3.2.3 Portfolio-based approach

Effective management incorporates a horizontal and government-wide perspective when planning investments in real property. In addition, efficiencies are attained by embracing a portfolio approach to managing real property holdings rather than managing the inventory on an asset-by-asset basis. Thinking beyond the singular asset and beyond the department, where feasible, allows a department to maximize the level of utilization, minimize the need for new assets, and share associated costs.

The rule of thumb just described for annual investment in real property, for example, is best suited to a portfolio-based approach. This is because, whereas the 4 per cent target may be the right one over the life cycle of all assets in the portfolio, in any one year, the care of a particular asset, especially if recapitalization or reconstruction is required, may be far greater than the annual investment amount calls for. A portfolio-based approach enables recapitalization amounts to be concentrated where they are most needed.

Another benefit of the portfolio-based approach relates to risk management. Risks such as fire, defective components, damage from weather, or accidents of various kinds will, unfortunately, be realized from time to time. A portfolio-based approach allows for the reallocation of investment funds, within the amount planned for the whole portfolio, to respond to risk events that have actually occurred or to mitigate risks that have unexpectedly become very high (e.g. neighbouring forest fires or weather warnings).

3.2.4 Governance

Given the life cycle of real property, it may be that those responsible for acquisition activities and decisions within a department are not the same ones responsible for operating and use or disposal activities. This fragmentation of management responsibility over the real property life cycle can be problematic. A clear governance regime that communicates who is responsible for what and who is accountable overall is key to sound stewardship.

Responsible delegations of authority are based on need, organizational capability, and capacity and are subject to an effective internal control regime that calls for an understanding and clarity of departmental accountabilities and responsibilities, effective communications, and established competency standards.

The governance structure that supports real property management needs to be such that real property managers and staff have the information and confidence they need to report honestly to senior management on the performance of the assets. Those in senior positions in the structure need to have the authority and influence that ensures real property imperatives will be appreciated, even if those imperatives cannot always be accommodated and trade-offs must be made.

3.2.5 Performance information and reporting

Accurate, complete, timely and, most importantly, relevant information is a critical component of good management. A department that does not have requisite asset and associated financial information cannot hope to make informed, optimal decisions in support of program and service delivery.

Treasury Board policy requires that the management of real property information enables, among other things, the integration of real property and financial information and linkages to program objectives and to the Management, Resources, and Results Structure of the department.

An effective information system is also a key element of management control by enabling asset performance measurement, the accounting for and assignment of administrative and transaction costs associated with a property and the program it supports. A department with sound information management practices is able to collect relevant asset, financial, and program information to inform decision making and is able to report on the usage, maintenance, and overall performance of the real property it uses.

Reporting on the performance of realty assets should take into account what was proposed, what was intended, and what was ultimately achieved.

An effective information system provides the basis for reporting on how planned investment funds may have had to be reallocated to quickly mitigate or respond to risks.

Funds that were planned for a portfolio of assets and that had to be reallocated away from real property investment to other departmental program purposes will need to be recovered at some point in future years to avoid deterioration at a rate faster than life cycle predictions.

Real property practitioners are not required to be experts in financial matters, but because of the financial value of real property assets, good real property management includes a basic knowledge of the financial framework, as well as the accounting practices of the federal government.

Accrual accounting

Prior to April 2001, departments accounted for capital assets, including real property, on what is called a “cash” basis. The costs of land acquisition and building construction were written off, usually through a capital vote, in the year(s) during which related expenditures were made. The fact that the government owned billions of dollars in real property was not evident from the balance sheets of departments. The operating statements of departments reflected no amounts for amortization (also called “depreciation”) of the capital costs of buildings; essentially, the capital cost seemed to be a free good once construction was complete.

As a result, decisions about real property investments were significantly influenced by short-term deficit management requirements of the government. For example, a lease option would be preferred over capital construction because the immediate impact on the deficit (or surplus) is considerably less, despite the fact that proper economic analysis would indicate that construction maximizes the long-term economic advantage to the Crown and provides best value to the Canadian taxpayer.

Since April 2001, departments have been required to account for capital assets, including real property, on an accrual basis. Rather than being written off as they are incurred, capital expenditures are charged to, and accumulated as, capital assets on the balance sheet, and these costs are amortized to the operating statement on a monthly basis over the estimated useful life of the each asset, such as a building.

It is important to note that the costs being amortized are historical costs, so that the amounts charged to operations are not indicative of current values. Nevertheless, the fact that significant assets are owned is reflected on the balance sheet and the need to steward those assets well is evident. In addition, the amortization cost, which is essentially the cost of consuming the capital asset, shows on the operating statement so managers have a more complete understanding of the costs of programs and activities.

Accrual accounting values promote a life cycle view of the costs of capital assets. Given that the federal budget (usually tabled in Parliament in February) reports asset values calculated on an accrual basis, it is now more likely that decisions on investments in real property will reflect sound economic analysis and therefore maximize the long term economic advantage to the Crown.

3.2.6 Risk management

Risk management is a powerful tool that will assist decision makers at every step of real property life cycle management.

Risk analysis involves the stages of assessment, mitigation, monitoring, and reporting. Because risks, by their nature, are certain to occur from time to time (e.g., fire, storm damage) the management framework with regard to risk should provide a capacity to redirect funds within the real property framework or from other departmental programs to undertake urgent mitigation or repairs.

Risk identification should be undertaken in the planning stages, encompass the total expected lifetime of a property, and be integrated with an organization-wide risk management process. An accurate lifetime costing of real property assets will include an estimate of the cost to mitigate potential risk and/or deal with its consequences.

While risk identification and management are activities that must be responsive to particular circumstances, all officers of the federal public service must be attentive to the risk that government objectives may be compromised if real property assets do not perform as well as intended.

Risk in the real property sector should therefore be considered in terms of both departmental program and broader government objectives.

3.3 Fulfilling government objectives

Treasury Board policy and direction on the management of real property incorporate public service values and ethics, and reflect the government's objectives in such areas as security (relating to location, design, and condition), health and safety (relating to condition), protection of the environment, legal obligations (including Aboriginal rights), heritage conservation, and accessibility. Risk identification and risk management, in addition to departmental program risks, should also address these broader government objectives.

3.3.1 Security

The Government of Canada depends on its personnel and assets to deliver services that ensure the security of Canadians. It must manage these resources with due diligence and take appropriate measures to safeguard them from injury that might result from lapses in security.

Threats that can cause injury, in Canada and abroad, include unauthorized access, vandalism, fire, natural disasters, technical failures, and accidental damage. The threat of cyber attack and malicious activity through the Internet is prevalent and can cause severe injury to electronic services and critical infrastructures.

The Treasury Board policy instruments on security prescribe the application of safeguards to reduce the risk of injury. Many elements, some mandatory and some not, apply to the management of real property. Treasury Board policies on fire protection and related health and safety standards also ensure the protection of assets. From the earliest planning phase, departments ensure that real property under consideration or being designed meet the technical requirements of the National Building Code of Canada, the National Fire Code of Canada, and the National Farm Building Code of Canada.

Accordingly, managers must be aware of and understand the policy direction and guidance related to security, and health and safety matters.

3.3.2 Condition

The condition of real property bears directly upon concerns about security, and also upon health and safety. A real property asset that is in good condition is less likely to be one where a person may fall and be hurt, where loose materials may become dislodged, where drinking water may be unsafe because of contaminants in the pipes, and so on.

The condition of an asset will be impacted upon by its location. The location of an asset, of course, is in the full control of departments only at the acquisition stage. As the nature of threats changes over time (including the possible effects of climate change), built assets may require changes in design and construction in order to serve program objectives in ways that are secure and safe.

The key management tools addressing real property condition at the strategic level are the planning and reporting tools that are used in the context of departmental management and planning frameworks. A record of underinvestment, especially in the category of maintenance and repair for built assets, is a sure sign that the risks to health and safety associated with real property condition are on the rise.

At the operational and implementation levels, there are a number of additional tools that can be used to record and report upon the condition of assets.

3.3.3 Environment

The Government of Canada has special stewardship responsibilities in the area of environmental protection. Government policy requires departments to manage their real property in an environmentally responsible manner, consistent with the principle of sustainable development. The proper design, construction (including construction components), and good condition of built assets will help to mitigate risks of negative environmental impacts.

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

The environmental stewardship of real property is largely directed by legislation and regulations covering a wide range of environmental protection and conservation issues such as hazardous waste, Canadian wildlife, fish habitats, species at risk, etc.

In their everyday management of real property, departments strive for sustainable development by avoiding contamination, by promoting the efficient use of energy, improving resource utilization, reducing waste, creating efficient and effective designs, and preserving special natural spaces.

Each department should ensure that the environmental component of their real property management strategy is in line with any related objectives set out in its Sustainable Development Strategy and incorporates mechanisms to address any established environmental targets.

3.3.4 Legal obligations

Managers of real property must be fully knowledgeable about all legal issues that may impact the acquisition, ongoing use, and eventual disposal of the asset. The legislative regime is exhaustive and a list of the most relevant laws and regulations are included in the Policy on the Management of Real Property.

Two legal issues of particular note are title and legal obligations with respect to Aboriginal peoples.

Whether obtained at the time of acquisition or during the phase of use and occupancy, real property managers must ensure that federal title to the assets in their custody is clear or, if restricted in some way, that any cloud on title or legal burdens (such as rights of way) are fully understood. In addition to rights of way, there may be rights of first refusal applicable at the time of disposal. There may be restrictions on type of construction possible on a property being held by the federal Crown such as in the vicinity of airports.

Also of note are legal obligations with respect to Aboriginal groups and the requirement to ensure that the honour of the Crown is upheld where federal-Aboriginal relations are concerned.

Past decisions of the Supreme Court of Canada have the combined effect of imposing on the federal government a legal duty to consult and, if appropriate, to accommodate Aboriginal interests when the Crown has knowledge of the potential existence of Aboriginal rights, title, or treaty rights and contemplates conduct that might adversely affect them.

These Supreme Court decisions on Aboriginal rights have major implications for the management of real property. Although, to date, the most high-profile pressure points have been in the context of the sale of surplus strategic properties, the Court's direction potentially impacts all aspects of land management, such as purchase, change of use, licences and permits, as well as sales and transfers.

At its core, federal policy direction is about how to manage real property used for program purposes in accordance with principles of good stewardship. However, it is not divorced from the larger policy environment of government.

Therefore, in the context of Aboriginal issues, when making management decisions, departments need to assess whether or not Aboriginal rights, title, or treaty rights exist and, where they continue to exist, whether they could be negatively impacted. Given the convergence of legal obligations with respect to Aboriginals, real property policy, and treaty negotiation policy, departments should consult with departmental legal advisors, and Indian and Northern Affairs Canada in developing this assessment.

3.3.5 Heritage

The Government of Canada has special stewardship responsibilities with regard to the preservation of Canadian cultural heritage. Heritage buildings: The Minister of the Environment is responsible for approving the heritage designation of federal buildings while individual deputy heads, under Treasury Board policy, are responsible for respecting and conserving the heritage character of federal Crown-owned buildings and for all decisions affecting their heritage character.

To meet their responsibilities with respect to heritage buildings, departments work with the Federal Heritage Buildings Review Office (FHBRO) of Parks Canada to evaluate all Crown-owned buildings 40 years of age or older. This evaluation is done by the Federal Heritage Buildings Committee, which includes representation of the custodian department.

FHBRO Evaluation criteria are based on international conservation principles. Federal buildings are evaluated against the following criteria:

  • historical associations;
  • architecture; and
  • environment.

Any building evaluated by the Committee is designated as either a classified, recognized, or a non-designated federal building. These categories are defined as follows:

  • A classified federal heritage building is any building to which the Minister of the Environment has assigned the highest heritage designation. These buildings are the best examples of built heritage in Canada based on their heritage character and have scored between 75 and 135 points in the evaluation.
  • A recognized federal heritage building is any building to which the Minister of the Environment has assigned the second-highest heritage designation. These buildings represent some of the best buildings in the country that have significant heritage elements that require protection, as defined in the heritage character statement, and have scored from 50 to 74 points in the FHBRO evaluation.
  • A non-designated federal building is any building that has been evaluated by FHBRO and scored below 50 points, and was determined not to have enough heritage significance to rate a heritage designation. There are no special heritage obligations.

It should be noted that departments are not precluded from seeking an evaluation for buildings less than 40 years old. Departments can seek advice from FHBRO on whether or not an earlier evaluation is warranted in a particular instance.

Departments managing heritage buildings can seek advice from conservation specialists and consult with FHBRO, which assists federal departments in the protection of heritage buildings.

While Treasury Board policy is focussed on heritage buildings, real property managers also deal with issues concerning national historic site designation on property they use. Departments should consult with Parks Canada when planning any interventions, including disposals, at national historic sites. Departments are guided by various standards and best practices developed by Parks Canada on the conservation of historic places in Canada, including engineering works, landscapes, heritage buildings, national historic sites, and archaeological resources contained on lands departments administer.

There are other obligations related to the protection and conservation of heritage. The Government of Canada Archaeological Policy Framework establishes the importance of archaeological resources. In addition to outlining departments' responsibilities, the framework engages the federal government to ensure that archaeological resources under its authority are protected and managed and that appropriate instruments are in place to achieve this objective.

For more information about archaeology in Canada, please consult the Parks Canada's Managing Archaeology Web page.

For more information about policies, tools, the permit system or the research center at Parks Canada, please consult the Resources for Professionals page and take advantage of the links provided.

You can also contact the Archaeological Resource Management section by email at

3.3.6 Accessibility

Accessibility to federal real property by persons with disabilities is a legal as well as a policy imperative. Under the Canadian Human Rights Act, it is a discriminatory practice for federal organizations to deny persons with disabilities access to federal real property, customarily available to the general public. The Treasury Board Accessibility Standard for Real Property addresses the basic needs of employees and the public using or receiving services on federal property. It cannot, however, practically address full accessibility for all potential disabled employees. These special needs are addressed in the Policy on the Duty to Accommodate Persons with Disabilities in the Federal Public Service.

It should be noted that the accessibility standard requires the application of most but not all elements of the technical standard found in the publication entitled Accessible Design for the Built Environment (CAN/CSA-B651-04).

3.3.7 Values and ethics

The policy direction on the management of real property reflects the Code of Values and Ethics for the Public Service.

The concepts discussed above are consistent with the democratic, professional, ethical, and people values of the public service.

Among other things, managers of real property exercise due diligence in the discharge of their responsibilities, follow the rule of law, transact openly in a way that provides equitable opportunity and treatment of interested parties. They collaborate, consult, and consider the government's broad agenda while managing the asset base and meeting operational and strategic needs. They are mindful of the security, health, and safety of government employees, clients, and the general public. They manage in a manner consistent with the principle of sustainable development, conscious of their responsibilities toward the environment and cultural heritage.

Their values influence their actions; their ethics guide them to do the right thing.

3.4 Highlights of this section

  • For every real property asset used by a department, it should be possible to describe the ways in which that asset relates to, or directly supports, the departmental programs being delivered.
  • Real property assets are valuable resources and must be managed effectively in order to maintain their value and maximize their performance in support of departmental programs.
  • Effective management of real property entails the key elements of a life cycle and portfolio approach; integration with department-wide strategic management and decision making; strong governance structures appropriately designed for the oversight and delivery of real property services within the department's overall management structures; performance measurement and reporting; and risk identification and management.
  • In addition to effective delivery of departmental programs, real property managers must meet broader government objectives such as security, health and safety, protection of the environment, heritage conservation, and so on. This means that some assets may require a higher standard of maintenance than the operational requirement alone may dictate.
  • Risk assessment, mitigation, monitoring, and reporting must relate not only to the performance of real property in supporting the successful delivery of departmental programs but also to the broader government objectives inherent in the policy direction of managing realty assets.

4. Departmental Planning and Real Property Management

Effective real property management requires decision-making frameworks for investment planning and management that link real property to the delivery of departmental programs.

Achieving the integration of real property management with the management of all other departmental business may lie outside the scope of duties of most real property managers and staff. All real property staff, however, can play a part in informing other departmental officers-at all levels-of what is required in order to provide effective and efficient real property support.

4.1 Real property management framework

A real property management framework is a control structure set up by a department to operationalize Treasury Board policy direction to effectively and efficiently manage its real property inventory and associated responsibilities. In its most basic form, the real property management framework is the departmental master plan for managing real property in an integrated fashion with other departmental resources to meet operational needs, i.e. it is a corporate activity. As a corporate activity, the real property management framework will typically provide a central role to senior managers at the assistant deputy minister level.

Treasury Board policy holds the deputy head responsible for ensuring that an appropriate real property management framework is in place and maintained that supports timely, informed real property management decisions and the strategic outcome of programs.

A good master plan provides a comprehensive, coherent, and cohesive departmental approach to the stewardship of real property. Controls ensure the objectives of effectiveness and efficiency are met. At a minimum, a management framework consists of appropriate accountability and decision-making structures, planning structures and process, clearly communicated authorities, segregation of responsibilities, appropriate policies and practices, and financial and real property information systems that support informed decision making and allow for timely monitoring of performance targets and results.

A real property management framework is premised, in part, on the consideration of the real property as one input to program delivery; the recognition of its financial and service values; life cycle management; sustainability; risk management; performance measurement; and linkages between senior-level and operational planning. The framework will evolve over time to continually reflect the optimal approach to managing real property responsibilities in an integrated fashion as program objectives and external circumstances change.

4.1.1 Accountability and decision making

A clear governance regime that communicates who is responsible for what and who is accountable overall is key to sound stewardship.

Responsible delegations of authority are based on need, organizational capability, and capacity and are subject to an effective internal control regime that calls for an understanding and clarity of departmental accountabilities and responsibilities, effective communications, and established competency standards.

4.1.2 Departmental policies, processes, and procedures

Internal policies, processes, and procedures articulate a department's policy direction and management expectations, how to meet those expectations, and how the department will monitor and assess its management performance. The absence of internal real property direction, or the existence of outdated direction, is generally an indicator that departmental controls are weak and not as effective as they could be.

Departmental policy direction flows from the management principles and expectations of the Treasury Board and must respect applicable legislative and regulatory regimes.

Departmental real property policy direction addresses both strategic and operational issues to ensure cohesion and integration of departmental real property management with the department's business and strategic plans.

Effective policy direction:

  • addresses all aspects of a real property's life cycle;
  • is communicated to all relevant staff;
  • is updated regularly; and
  • is supported by appropriate systems.
Real property information system

An appropriate information system is an important element of any real property management framework, as historical, current, and reliable information is vital to informed decision making and to the forecasting of future trends and needs.

The size and complexity of a department's real property information system will depend on the extent and diversity of the real property used.

To ensure informed decision making, the information system should allow for integrating real property information, including performance information, with information required for financial accounting and any necessary reporting.

In addition to maintaining an internal real property information system, custodian departments support a whole-of-government approach to information by recording and updating information in the Directory of Federal Real Property and the Federal Contaminated Sites Inventory.

Financial system

A financial system that addresses the needs and complexity of a department's real property inventory must also be part of the department's management framework. Effective departmental planning and investment are impossible without a system that incorporates information captured in the real property information system and relates it to the program obligations and funding capacities of the department.

4.2 Investment Planning

4.2.1 Planning framework

A framework for real property planning is required to ensure that departments make balanced real property investments that meet program needs within existing reference levels, while fulfilling other federal policy requirements. In addition, it is critical that departments provide for and monitor implementation and take corrective action as appropriate. Creating and maintaining an investment planning framework for real property is typically led within departments by an official at the director general level.

The Policy on Long-term Capital Plans requires that capital assets be acquired, improved, and retained in support of program goals consistent with broader government objectives; that a responsible investment program be developed on a life cycle basis and within available resources; and that assets be disposed of, as being surplus, when they are no longer required.

Policy direction concerning long-term capital plans dictates requirements for planning investments in all capital asset classes (including materiel, information management/information technology, and real property). This guide elaborates on the requirements for investment planning for real property only. This includes investments being made both as a custodian and as a tenant. Real property has significant strategic, public policy, operational, risk, and financial implications and merits the full attention and diligence of departmental managers. Real property strategies, developed as a result of the performance assessment of the existing asset base, as well as ongoing and new requirements, inform the higher-level departmental investment planning activity.

The following key elements of planning make the link between strategic-level considerations and regional or local ongoing planning:

  • Real property planning strategies - Departments require cost-effective investment strategies that reflect departmental goals and the government's management agenda. In order to do this, there is a need to focus on the following:
    • User requirements and needs: Consideration of these ensures that plans are based on essential needs for departmental programs and activities, and that the emerging real property portfolio is responsive and cost-effective.
    • Demand management: This ensures the judicious use of available assets to meet evolving requirements within existing reference levels and even to achieve savings.
    • Service posture: This addresses cost-effective options for real property ownership, optimal location, levels of service, asset sharing, etc. and helps link demand and supply management.
    • Supply management: This encompasses the range of strategies and options that departmental managers consider and implement in meeting their stewardship obligations, including strategies to address health and safety, and other compliance requirements such as accessibility, heritage, and environment.
    • Life cycle management: This involves the need to continually assess acquisition, use, reinvestment, and disposal strategies and to consider all related costs of continuing involvement of an asset over time.
    • Compliance: This is an essential element and key theme of all plans. Related costs should be identified in the plans.
    • Risk management: This requires departments to define risks and explain how the proposed strategies manage and mitigate these risks.
    • Performance monitoring: This is a key contributor to cost-effective management. By continuously measuring real property performance against established targets, departments have quality information to inform the development of real property strategies.
  • Processes - Investment planning processes should be fully integrated within existing departmental strategic, corporate planning and risk, and resource management functions. Examples of key processes are as follows:
    • Annual planning and budgeting cycle: This enables the annual allocation of resources for real property investments in a systematic, rational, and transparent manner.
    • Priority determination process: This ensures that all proposals under consideration are assigned a priority ranking in a manner that is objective, transparent, and based on sound business cases.
    • In-year resource reallocation process: This enables the annual reallocation of resources for real property investments in a systematic, rational, and transparent manner as the fiscal year evolves.
    • Program creation and expansion process: As new programs are created and as existing programs expand, departments need to ensure all resourcing inputs are taken into account.
  • Information - Effective investment planning requires information that is relevant and timely, complete and accurate, consistent, and readily available. This includes:
    • planning and budgeting information: allocation of funding;
    • capitalization of assets information: consistent with accrual accounting;
    • maintenance planning and repair information: effective maintenance planning is a cornerstone for sustaining real property in a cost-effective manner;
    • in-year accounting and forecasting information; and
    • performance information: the result of the required performance assessments.
  • Governance - A sound governance regime for real property investment planning needs to be integrated into the department's business model and is usually based on senior management engagement, a well-defined regime of roles, responsibilities, and accountabilities for asset and related funding management, and internal delegations of authority for project/proposal approvals and real property transaction approvals that are appropriate to the complexities and risks being addressed.
  • Decision making - Effective decision making will include attention to the following categories:
    • Real property plan: This includes prioritized acquisition, maintenance, re-capitalization, and disposal strategies. It also includes tenant investments in properties under the administration of other federal departments.
    • Project: A project defines the nature and scope of a proposed investment and is linked to expenditure authority. Acquisition of real property is normally only one of numerous activities being managed as part of an overall project and, as such, needs to be fully integrated into the governance, management, and oversight of projects. Project proposals must be supported by an investment analysis based on life cycle costing.
    • Real property transaction: A real property transaction is effected when a decision is made to acquire an interest in real property (e.g., purchase, lease, lease/purchase) or acquire the right to use it (e.g., licence).
    • Directing and monitoring implementation: Departmental managers must provide direction, expertise, tools, and capacity to implement and monitor the implication of real property investment decisions and take corrective action where necessary.

4.2.2 Investment analysis

All investment decisions must be supported by an investment analysis based on life cycle costing to be able to demonstrate that the option selected, whether for acquisition, ongoing use, or to prepare for disposal, is in the best interests of the department and the Crown. An investment analysis should include:

  • the expected duration and changing needs of the program, including the effects of information technology and security considerations on service delivery and program needs;
  • trade-offs between different investment options, such as construction versus lease, capital investment versus operations and maintenance;
  • opportunity costs and the value of money over time;
  • costs associated with the location of the real property;
  • disinvestments or disposal opportunities;
  • the highest and best use of the property;
  • the maximum program use;
  • broader policy and government objectives and priorities;
  • security considerations; and
  • stakeholders-departments, organizations, and individuals inside and outside the federal government that will be directly or indirectly affected by the proposed investment.

Life cycle costing is a logical, systematic process for estimating the total cost of real property through its whole life, from the initial planning to acquisition, use, and disposal. Life cycle costing considers all known current and future real property costs, to provide a coherent view of the true overall cost of the property to the government.

Often, the option or alternative with the lowest initial cost may not represent the solution that generates value for money. This is because long-term costs over the life of real property are more reliable indicators of value for money than initial acquisition costs, which typically represent only a small percentage of whole life costs. Through the life cycle costing process, trade-offs between different investment options, such as capital versus operations and maintenance, can be evaluated. By spending time and effort at the planning stage to assess all life cycle costs, value can be achieved by generating a higher-quality project at lower life cycle costs.

The final product in life cycle costing should be a summary of all relevant real property costs over the expected life of a given property, put into present value terms.

4.2.3 Payments in lieu of taxes (PILT)

The full cost of an asset to the department includes amounts that are paid to local governments in lieu of taxes.

Under section 125 of the Constitution Act, 1982, the Government of Canada is exempt from taxes of every kind. However, since 1950, the government has chosen to pay its share of taxes to Canadian municipalities and taxing authorities by making payments in lieu of taxes. The minister of Public Works and Government Services, under the authority of the Payments in Lieu of Taxes Act, determines the PILT amounts, makes the payments to municipalities, and is accountable to Parliament for the administration of the Act.

Custodian departments are responsible for funding the payments and assume the risks and rewards associated with PILT budgets and expenditures. As such, departments should be conscious of how real property requirements, uses, and activities impact PILT levels; understand how to potentially realize PILT savings and know how the program is managed by Public Works and Government Services Canada (PWGSC). A memorandum of understanding between PWGSC and custodian departments should be in place to outline the working relationship of the parties involved and to ensure financial and operational accountability while promoting efficient program delivery. Custodians must ensure that PWGSC is making PILT payments only for properties that they own-a complete and accurate real property inventory is essential to achieving this.

The PILT program is based on equity with other property owners and fairness to municipal governments. Departments should receive the same level of services provided to other property taxpayers. If municipalities are unable or unwilling to provide these services, departments can request that the minister of Public Works and Government Services consider reducing the amount of PILT paid. A department cannot demand a higher standard of service than that provided to other taxpayers unless it is prepared to pay for it.

4.3 Highlights

The following highlights summarize the material covered in this section:

  • The departmental management framework for implementing the department's mandate from the government should include elements specific to real property that demonstrate the link between program delivery and the real property that supports those programs.
  • Real property management includes a governance structure within which accountabilities and responsibilities are well defined, commonly understood, and communicated widely.
  • Decision-making structures and processes are in place and functioning well.
  • Roles, responsibilities, and accountabilities have been assigned for all activities associated with real property management, including for the performance of the asset:
    • they are clearly defined and understood throughout the organization;
    • staff members have access to tools to enable them to meet their responsibilities; and
    • managers and staff have had requisite training to meet their accountabilities and responsibilities.
  • There is segregation of responsibilities where a conflict or perceived conflict of interest could arise.
  • Departmental policies, processes, and procedural documentation exist:
    • they provide clear direction that links operational and strategic real property management activities; and
    • they are readily available to staff.
  • Real property management information is maintained on the portfolio and its operating activities:
    • it is readily accessible, is easy to use, and enables informed decision making; and
    • it includes all costs associated with the assets, including PILT.
  • The control structure that ensures performance against targets and plans is regularly measured and reported to those staff with real property management responsibilities, to departmental and portfolio senior management, and to external organizations, as applicable.

5. Acquisition

Tenant responsibilities in the management of real property are primarily addressed under the planning function in the previous section of the Guide and under the “use” phase of the asset's physical life cycle. However, a custodian that habitually has other federal organizations as tenants is reminded of the need to consider tenant requirements when determining the optimal acquisition decision.

5.1 The acquisition decision

The fundamental policy principle underlying any acquisition of real property by the government is that the property is needed to support the delivery of government programs. Departmental investment planning and real property strategies will identify the need for additional real property investment when there is a new requirement or there is a gap between existing supply, and by extension its performance, and the real property required to fulfil ongoing program needs (i.e. demand).

Before bringing new assets into a department's—and therefore into the government's—real property inventory, priority should be given to maintaining and preserving long-term assets and reducing operating expenses unless these are inconsistent with program priorities or not in the best economic interest of the Crown. Other alternatives may include increasing the utilization of existing real property or redesigning program requirements to reduce the demand on real property.

Prior to acquiring real property, departments should consider whether the public or private sector is best equipped to finance, design, build, own, or operate the required asset.

Basic models for real property investments, which are predicated on different levels of risk being transferred or allocated to the private sector, are listed below. As the list goes down, models incorporate increasingly higher degrees of both private-sector involvement and private-sector risk:

  • Traditional procurement: The government buys real property or designs, finances, builds, and operates a real property facility.
  • Design-Build: The government finances a real property project and engages a private-sector partner to design and build the facility; the government owns and operates the facility.
  • Lease: The government leases a real property, using either a capital lease or operating lease.
  • Design-Build-Operate: The government finances a project, sets performance objectives, and engages a private-sector partner to design, build, and operate the facility for a specified period (typically including such services as building maintenance); the government retains ownership.
  • Build-Lease-Operate-Transfer: The government sets performance objectives and engages a private-sector partner to design, finance, build, and operate a new facility (on public land) under a long-term lease; ownership is transferred to the government at the end of the lease.
  • Build-Own-Operate: The government sets objectives and constraints in agreement with the private sector and through ongoing regulatory authority; a private-sector partner finances, builds, owns, and operates the facility in perpetuity.

The above models have a wide range of implications for issues such as risk transfer, real property ownership, operations, accounting, and debt reporting. To aid with decision-making, departments should develop screening criteria through which to identify projects that may be appropriate for public-private partnerships. Seven basic criteria are as follows:

  • Financial: Can the selected model for acquisition accommodate financial terms acceptable to both parties?
  • Technical: Can the selected model for acquisition result in a technical solution to meet project needs?
  • Operational: Could operational hurdles undermine the selected model for acquisition?
  • Public policy: Will the public sector accept private involvement? Is this public policy?
  • Implementation: Could implementation barriers prevent the use of the selected model for acquisition?
  • Timing and schedule: Could time constraints pre-empt the selected model for acquisition?
  • Organizational capacity: Does the organization have the skills, resources, and track record to execute the project?

Once the investment model in support of the acquisition is chosen, departments then have to determine which policies, legislation, and regulations must be followed, given that a project may involve a number of activities. If the option analysis leads to a decision to make a new investment that does not involve acquiring an interest in real property, such as Crown construction on existing federal property, or to seek an alternative service provider (i.e. ASD), guidance on these real property-related issues is available through the Investment, Project Management and Procurement Policy Directorate (IPMPPD) of the Secretariat for project management and procurement advice.

5.2 Crown ownership or other option

Acquisitions must be supported by market analysis. As a first step, departments should determine whether or not there is any available federal property (transfer of administration from another department) that would meet the requirement. Another consideration would be the renewal of an existing lease. However, in considering a lease renewal as a possible option, it needs to be assessed as a new acquisition that meets all current obligations, e.g., accessibility and security. Lease renewals are not grandfathered should policies or standards change during the original lease term.

Whatever option is chosen, if the public sector is involved in fulfilling the real property requirements, open and fair solicitation processes must be used to ensure the public is given a reasonable opportunity to respond to any opportunity to sell or lease property to the government.

The department must be able to demonstrate that the acquisition option that was selected is in the best interests of both the department and the Crown.

Leases versus Crown ownership

In addition to using life cycle costing tools, when deciding whether to lease or “own” real property, departments should consider the following.

In general, a lease is more appropriate:

  • when there are only short- or medium-term requirements or when the term is uncertain, in order to avoid the costs and uncertainties of acquisition and disposal of owned real property; or
  • for very small space requirements that are usually available only as part of a larger facility.

In general, Crown ownership is more appropriate:

  • when extensive fit-up and relocation costs are anticipated;
  • when program requirements demand long-term, secure tenure;
  • when there is a requirement to control the use of the land, particularly when the control is protective in nature and it extends for some time into the future;
  • for uses that may otherwise cause problems when the reversionary interest returns to the lessor on the expiry of the lease;
  • when market conditions such as limited supply preclude other options, e.g., a lease; or
  • when private-sector supply cannot meet federal policy requirements, i.e. fire protection, accessibility, and security.

The cost of borrowing money is typically higher for the private sector than it is for the federal government. Thus, real property costs would be higher for the private sector in this respect. In their decision-making processes, departments should identify the extent to which the purchase price, construction cost, or rental rate reflects this additional cost (the cost of capital).

When considering whether to own or lease, departments should also take the following factors into account:

  • Prices and rental rates fluctuate; thus, departments should take advantage of market conditions.
  • Certain facilities are normally available in the market or become available in response to demand; others can generally be produced only through construction or extensive renovation.
  • The funds for capital projects may not be available.

If a decision is taken to lease, the terms of the lease should be kept to the shortest reasonable period supported by program needs.

5.2.2 Types of lease

Operating leases: In their analysis, departments should take into consideration the fact that the life of operating leases is less than the economic life of real property assets. Nonetheless, since operating leases are generally short term, they provide greater flexibility to adapt to change. Other advantages of operating leases include:

  • a reduced need for large capital outlays; and
  • isolation from short-term fluctuations in market supply and values.

However, significant disadvantages of operating leases include:

  • penalty clauses for early termination of leases;
  • higher implicit interest costs in leases compared to the cost of funds to the government; and
  • dependence on the market to supply real property leading to long-term exposure to market cycles and values.

Operating leases have traditionally been the most common form of lease used by the federal government. However, there is a growing interest in capital leasing.

Capital leases are effectively a vehicle for financing the purchase of an asset. From this viewpoint, the use of a capital lease is not significantly different to Crown ownership. In a capital lease, the risks and benefits of ownership are primarily transferred to the lessee, as opposed to an operating lease, wherein the lessor retains all the risks and benefits associated with real property ownership.

Leases are defined as capital leases when at least one of the following criteria applies:

  • the lease transfers ownership to the lessee by the end of the term of the lease;
  • the lessee can purchase the real property at a price below fair market value when the lease expires;
  • the lease term is 75 per cent or more of the estimated economic life of the real property; or
  • the present value of the lease payments is at least 90 per cent of the fair market value of the real property at the start of the lease.

The principle distinction between outright purchase of real property and a capital lease is that the capital cost involved in the project can be spread out over time. This is typically argued as a benefit of capital leases.

The option of capital leasing also involves Department of Finance Canada consideration involving debt management, fiscal policy, and tax concerns. Departments should ask the following questions: What will be the magnitude of the long-term financial commitments of the department? What impact would the accumulated obligations related to such leases have on Canada's borrowing capacity and the relationship with capital markets? Is the actual cost of financing these projects higher than the implicit cost of sovereign debt? What are the impacts on tax revenues?

Departments should be extremely prudent when deciding on a capital lease. As with all investment decisions, capital leases should be pursued only if they can be justified in terms of best value to the Canadian taxpayer.

5.3 Due diligence and government objectives

Regardless of whether real property is acquired by purchase, lease, or other means, it is the department's responsibility to ensure due diligence is exercised. Due diligence requires that all considerations relative to departmental and government objectives that may apply at the time of the acquisition are taken into account.

In this guide, the focus is on objectives applicable to the government as a whole. Departmental guidelines and instructions focus upon due diligence and risks regarding departmental program delivery.

5.3.1 Security

When contemplating the acquisition of real property, departments need to consider security requirements in accordance with the Treasury Board Operational Security Standard on Physical Security. Security will relate to the location of an asset (e.g. urban or rural setting). Security considerations apply to both the intended use of an asset by the department and to the security of Canadians who live in the vicinity of the acquisition being contemplated.

There will be times when, notwithstanding all other considerations, the security objectives of the government may be better served by Crown ownership—possibly including new construction—than by any kind of lease or licence arrangement. The design and nature of construction of a building or facility, additionally, whether purchased, newly constructed, or leased can have a direct impact upon security.

5.3.2 Condition

If the decision has been made to acquire real property from the private sector, any structural defects in the asset should be corrected prior to the acquisition. Alternatively, the cost of mitigating risks associated with a particular defect should be factored into the cost of acquisition.

Prior to acquisition or construction, departments must ensure that new acquisitions will meet the requirements of the Office of Fire Services at Human Resources and Social Development Canada to ensure that properties under consideration meet the requirements of the National Building Code of Canada, the Fire Code of Canada, the Farm Building Code of Canada, and additional occupational safety and health standards outlined in the Policy on Fire Protection, Investigation and Reporting.

5.3.3 Environment

In acquisition analysis, departments must determine whether the property can be managed in an environmentally responsible manner.

Once a department has ascertained the environmental condition of the property and determined it is or can be made compatible with its intended use, the department should document any deficiencies.

In some cases, it may be that the only property that can meet the requirement is contaminated property. In most instances, however, choices would be available and a key real property environmental objective is to avoid the acquisition of a contaminated site. If there is no option but to acquire a known contaminated site, then the objective must be to limit the government's liability to the extent possible as outlined in the Treasury Board of Canada Secretariat's Best Practices Advisory: Environmental Considerations in Real Property Transactions".

It is also important to determine which party will be responsible for any necessary remediation and associated implications on the purchase price.

For construction projects, departments should address issues related to the government's commitment to sustainable development. Departments should give strong consideration and, when specified by law, must adhere to specific legislation to reduce resource use and waste generation, create efficient and effective design, use energy efficiently, and preserve special natural spaces, as well as any protected or endangered species.

Overall, departments should strive for sustainable, or green, design.

5.3.4 Legal obligations

The Department of Justice Canada assists departments in title reviews to confirm ownership and to determine if there are any restrictions on title. The Justice review also includes a legal risk of whether Aboriginal rights, title, or treaty rights exist. In addition to a legal assessment as to the existence of Aboriginal rights, departments should determine whether there are any Aboriginal groups living in the area who have claims that might impact upon acquisition or use of the property. The acquisition of real property is a “contemplated Crown conduct” of a kind that has legal relevance for the activity of “Crown consultation” with any Aboriginal groups whose rights (existing or credible) may be negatively impacted by the contemplated conduct.

If the real property is subject to reservations, encumbrances, or encroachments, departments should ensure that the restrictions would not affect the program use of the property.

Of particular interest will also be the inclusion or not of resources on or under the property being acquired. If surface and subsurface are not included with the acquisition, there may be a need to include access provisions for commercial or Aboriginal parties as part of the acquisition transaction.

5.3.5 Heritage

When considering purchasing a building that is 40 years old or more, departments should seek the advice of Parks Canada's Federal Heritage Buildings Review Office (FHBRO) to determine potential heritage designations, understand the significance of the potential designation, in particular its impact on the suitability of the property in meeting program requirements within annual investment amounts that are affordable to the department.

Before purchasing an asset that has heritage value, the department must clearly understand what special care will be required to protect the heritage character.

Heritage characteristics of assets newly acquired by a department will be described by Parks Canada in the designated building's Heritage Character Statement. Departments acquiring heritage buildings are encouraged to prepare a conservation plan at the time of designation to ensure that the building's heritage character is fully understood by the property manager and that a whole life maintenance and repair plan is prepared. Costs related to the life cycle conservation of the character elements should be included in investment plans for those assets. It should never be said that Canada's acquisition of a heritage asset caused its heritage value to be diminished or lost.

Because the operation, maintenance, and recapitalization costs of older assets can be higher than those for new assets, departments must fully cost out their options and ensure that the acquisition provides best value to the Crown. When acquiring a heritage building, or one that is likely to be designated as such, departments must ensure that this is the best option available based on the business case, and that it can afford to conserve the heritage value of the building. In the event of a transfer of administration of a heritage property from one federal custodian to another, of course, the net impact upon the federal government as a whole should be neutral but the acquiring department should nevertheless become familiar with its new responsibilities, prepare a conservation plan, and include costs related to acquiring and maintaining the asset in its strategic investment plan.

When departments are constructing a new building or doing extensive renovations such as additions that require digging, advice is available from Parks Canada concerning archaeological considerations.

5.3.6 Accessibility

Prior to acquisition or construction, departments should assess the accessibility of properties under consideration or to be built and ensure that they meet all the requirements of the Treasury Board Accessibility Standard for Real Property. If properties do not meet all accessibility requirements, acquisition analysis should take into account the feasibility and expense of the upgrades that will be required. It should be noted that the Accessibility Standard represents minimum requirements with respect to federal property. Custodians may consider applying more stringent standards to meet unique program needs. These standards may be found in provincial codes and other best practices.

Note that the Accessibility Standard for Real Property does not prescribe full application of the Canadian Standards Association's CSA B651 standard, but only as it relates to the building/fit-up components noted under section 5 of the standard, i.e. the Requirements section. The extent to which the CSA B651 requirements are implemented for other components (e.g. exit stairs, emergency egress, operating controls, visual alarms, detectable warning, way finding, and hazard indicators, etc.) is to be determined by custodian departments through their internal facilities planning or accommodation strategies.

Note: In situations where a tenant department's requirements exceed the requirements of the Accessibility Standard, resulting fit-up costs are normally the responsibility of the tenant department.

In some situations, certain elements may be exempted from the full-accessibility requirements. Custodian departments are solely responsible for establishing internal procedures for identifying and approving any exemption. As part of this procedure, custodian departments should consult with planned tenant departments and other users, as well as experts in addressing accessibility issues. However, all decisions with respect to exemptions remain under the sole authority and responsibility of the deputy minister, or delegate, of the custodian department. Exemption decisions must be supported by a written rationale, signed by the deputy minister or delegate.

When evaluating the factors for exemptions, custodian departments should consider that restrictions for one disability do not automatically apply to all disabilities. Exemptions should be considered on a building-specific basis. A justified exemption from one type of accessibility requirement does not mean that exemption from other accessibility requirements is justified.

Examples of cases where exemptions could be considered include:

  • accessibility to the second storey of a two-storey building if the area of the second storey is less than 600 rentable square metres and there is full access to government services and employment opportunities on the ground floor—the same could be considered for single-storey buildings where the basement is used as an operational second floor;
  • non-renewable new leases and lease options for temporary space having a duration of less than two years;
  • naturally inaccessible facilities in remote locations;
  • unattended monitoring stations; and
  • facilities that are designed and constructed to accommodate able-bodied personnel (i.e. where being able-bodied is a specific job requirement) and facilities to which reasonable access by persons with disabilities is precluded by operational requirements.

In applying the technical standard, departments may allow minor variations from the standard. Such variations must be consistent with the general intent of the standard but must not affect the general accessibility of a specific property.

Examples of possible minor variations are:

  • deferring the installation of accessible urinals (as referenced in the CSA 04 standard) in washrooms recently upgraded to meet the CSA 95 standard (which requires only accessible stalls) until the next major refit of washrooms; and
  • considering the 15 mm variation in the height of a water fountain spout as minor (915 mm height is allowed in the Ontario Building Code while the CSA 04 standard calls for a 900 mm height).

5.4 Review checklist

Acquisition analysis has:

  • linked all real property to be acquired to a program identified in the department's Program Activity Architecture;
  • examined the various types of interest that could meet the requirement, i.e. licence, leasehold, freehold, or other arrangement, including changes in use of assets already in a department's real property inventory;
  • weighed various options for possible private-sector involvement in the delivery of real property;
  • considered the effect of any restrictions, encumbrances, or encroachments and the site characteristics from a program and security perspective;
  • considered the environmental condition of the property, and the department has a plan to manage the property in an environmentally responsible manner;
  • considered present or potential heritage designations and their impacts; and
  • undertaken a stakeholder assessment, both internal and external to government.

If there is a custodian-tenant relationship involved in the new acquisition:

  • the tenant has provided the custodian with all relevant information; and
  • the custodian has factored into the option analysis the tenant planning, operational, and budgeting information.
  • Before acquiring real property, the department has explored all alternatives, including increasing the utilization of existing real property, redesigning program requirements to reduce demand on real property, or using other federal real property.
  • The department has used life cycle costing to evaluate acquisition options and to determine the option with the lowest whole life costs.
  • The option selected is in the best interests of both the department and the Crown.
  • Construction projects reflect the government's commitment to sustainable development.
  • The department has a plan to ensure that all real property to be acquired will comply with the Policy on Fire Protection, Investigation and Reporting.
  • The department is able to maintain the heritage value of an asset if it qualifies for heritage status at the time of acquisition.
  • The department has a plan to ensure that all real property to be acquired will comply with the Treasury Board Accessibility Standard for Real Property.
  • The acquisition meets all requirements for Treasury Board and departmental approvals, as outlined in the section related to transactions.
  • The legal review confirmed clear title. In the event of clouds or restrictions on title (if any), they have no adverse impact on planned program use.
  • If surface or subsurface resources are included with the acquisition, the requirement for access agreements for the purpose of exploitation or extraction, and the impact of these upon departmental use, have been provided for in the acquisition documents.

6. Use and Occupancy


Throughout the use and occupancy phase of the life cycle of a property, the overriding objective is to ensure that a property continues to fully, effectively, and efficiently meet the program requirements of the department whose program it supports.

Departments must maintain complete, accurate, and current information on property they administer and/or occupy. These data form the basis of periodic review that includes confirmation of program purposes continuing to be met and performance assessment in terms of the programs being supported.

6.2 Purpose and performance

To make informed decisions about investments during ongoing use of real property, senior federal executives require information that will allow them to answer such questions as:

  • What properties do we have?
  • What properties are needed to support our programs?
  • Are these properties performing effectively and economically in delivering programs?

The first of these questions will be answered by accessing both the information captured in a department's information system applicable for real property and the data captured in the Directory of Federal Real Property maintained by the Treasury Board of Canada Secretariat. Those information systems between them will also reflect location and value. At the departmental level, the department's information system will be more detailed and should report upon physical condition and serviceability.

A response to the question “what properties are needed” is partly reflected in the functionality and utilization of properties already in a department's inventory. Functionality and utilization are therefore two other aspects of real property that should be captured in a department's information system. If assets already in the inventory cannot meet the requirements of ongoing departmental programs, this will be reflected in poor functionality or underutilization.

Effective asset performance assessment and measurement systems will enable the third question above to be responded to. The reports from performance and measurement systems support informed decision making about the allocation of resources within and by departments. Key components of an effective system include:

  • key performance indicators that can be used to measure how well programs are being managed and how well individual program goals are being met with respect to real property inputs;
  • established baselines against which performance and subsequent program goals can be measured; and
  • accurate, reliable, consistent, and verifiable data.

Performance assessment provides both quantitative and qualitative information on the effectiveness of real property in meeting program requirements, and it forms the basis for management of real property throughout its life cycle. As such, performance assessment is not an end in itself. Rather, it provides an essential tool to inform planning and decision-making processes.

By continuously measuring actual real property performance against established targets based on appropriate benchmarks, departments use the assessment results as inputs to the development of acquisition, use, maintenance, and disposal strategies that in turn inform the strategic planning function in the department to arrive at a long-term investment plan.

6.2.1 Physical performance

Physical performance addresses the tangible aspects of real property that ensure a sustainable asset base throughout its life cycle in support of program delivery. These tangible aspects include the quality and durability of the land base and the improvements to the land, particularly buildings and infrastructure.

For the purposes of Treasury Board policy, physical performance has two components: condition and environmental status.


The physical condition of real property is largely dependent on the extent of operations and maintenance over time. Operations, maintenance, and repair necessitate continual investment. Thus, it is important to continuously monitor the physical condition of real property, through regular inspection and assessment of required maintenance and repair costs. The result of a condition assessment is translated into a detailed real property condition report of the corrective needs and current deficiencies associated with physical systems, as well as related costs.

Accurate condition assessment allows departments to understand the remaining physical life of the assets, as well as policy conformity in areas such as accessibility, heritage, and environmental protection that informs ongoing and future investments.

Possible measures of building condition include:

  • Facilities Condition Index (FCI)—a ratio of the cost of required repairs to the replacement value;
  • Building Condition Index (BCI)—a roll-up of the evaluation of individual building system components (e.g. HUVAC): this index provides an equivalent level of detail to the traditional FCI in that the roll-up BCI is applicable to a single facility or structure; and
  • Engineering Management Systems (EMS)—a family of tools that aids in assessing the condition of facilities and identifying prioiritization of funding needs.
Environmental impact

The impact of real property on the environment is dependent on the extent of operations and covers a wide spectrum of functions and activities. Federal and provincial legislation will direct or influence the management of many operational and maintenance functions, and may influence the type and extent of monitoring required.

A comprehensive review of environmental performance should consider the following areas, as appropriate. Possible indicators are suggested for each of the areas, but this list is not intended to be exhaustive.

  • Contaminated sites
    • Number of sites assessed, remediated, or under risk management
    • Reduction in environmental liability as a result of remediation expenditures
  • Fuel storage tanks
    • Percentage of storage tanks in compliance with Canadian Environmental Protection Act technical guidelines
  • Hazardous material/wastes
    • Number of storage facilities meeting regulations
    • Amount of hazardous waste sent to disposal
  • Ozone-depleting substances
    • Number of facilities with strategic management plans/phase-out plans for ozone-depleting substances
    • Ozone-depleting potential/global warming potential of releases
    • Decrease in releases as a percentage of inventory
  • Greenhouse gas or other emissions
    • Annual percentage reduction in emissions across a department's building inventory
    • Number of emissions-monitoring programs
  • Solid waste management
    • Reduction in kg per person/year/facility (from baseline)
    • Percentage of waste recycled/composted
  • Energy/water use and efficiency
    • Cost per year (per building/occupant/m2 of office space/program)
    • Number of facilities with energy/water conservation plans
    • Percentage of identified reductions and cost savings achieved
  • Waste water
    • Number of monitoring programs (discharge/ambient quality)
    • Number of instances exceeding discharge guidelines
  • Indoor air quality
    • Number of building air quality audits
    • Presence of indoor air contaminants
    • Ventilation rates
  • Environmental emergency planning
    • Existence of environmental emergency response plans
    • Adherence to plans in situations of environmental emergencies

6.2.2 Functionality

Functionality refers to how well real property supports the activities of a department and the degree to which it meets the specific operational requirements of departmental programs. Thus, a report on functionality informs departments about the effectiveness of their real property in allowing program requirements to be fulfilled.

Some indicators of functionality are as follows:

  • Suitability:
    • Location and configuration of property
    • Adequacy of municipal services
    • Proximity of real property to supporting infrastructure, other operational facilities, and clients/customers
    • Internal configuration of the asset to support uses and permit the flow of people and goods
    • Highest and best use (development potential)
  • User satisfaction
    • Tenants/occupants
    • Proximity to employee services
    • Clients
    • User complaints/suggestions
  • Mission (program) criticality
    • The degree to which a specific property is required to meet program requirements
    • Business continuity
  • Property readiness (PR)
    • The PR is used to provide readiness ratings for property where facilities are classified in different categories that could include:
      • fully ready;
      • excess to the program;
      • requires replacement;
      • requirement exceeded; and
      • does not support the program.

6.2.3 Utilization

Utilization refers to how intensively the real property is used. A report on utilization helps departments determine if space needs are being met efficiently.

The most common utilization indicator is Vacancy Rate. Some care is required in calculating and interpreting a vacancy rate indicator. For example, a single aggregate number indicating that x per cent of the total square footage of the facilities portfolio is vacant would not distinguish between real property that supports a mission and property that might be excess to program requirements. Nor would vacancy rate necessarily distinguish between short-term (turnover) vacancies and space that has been vacant for several years or longer.

Another index, the Asset Utilization Index (AUI), is used to measure the asset inventory against program requirements. This index is a ratio of utilized assets to total assets. Utilized assets are determined by annual surveys, and separate measures are developed for facilities versus land holdings. The AUI detects surplus space.

The Space Utilization Index (SUI) is calculated for specific types of spaces by dividing the actual space by authorized space standards. In some applications, an index of 1.15 indicates excess space while an index of less than 0.95 indicates insufficient space to support an activity.

Other possible indicators of utilization include:

  • hours of operation;
  • floor space occupied; and
  • developed land area.

6.2.4 Financial performance

The financial performance of real property is assessed against the actual and estimated life cycle costs related to its administration and use.

Key elements include:

  • acquisition and financing costs;
  • rates of return (five-year and annual return on investment (ROI) and net operating income (NOI);
  • revenue/m2;
  • asset depreciation;
  • asset operations and maintenance costs;
  • disposition costs; and
  • effective age.

Commonly used indicators include:

  • cost of occupant/m2;
  • cost/occupant; and
  • cost/m2.

The Facilities Operating Current Replacement Value Index is another indicator that represents a ratio of annual facility maintenance operating expenditures to the current replacement value. The Facilities Operating Gross Area Index is the ratio of annual facilities maintenance operating expenditures to the total gross square metres of the facilities portfolio.

Departments should track the financial performance of all assets in their inventory. This is particularly important for heritage buildings in order to inform decisions related to conservation expenditures and investment planning. An indicator measuring financial performance could identify for departments the differential between costs of certain types of buildings, e.g. heritage versus non-heritage buildings. Departments are best positioned to determine how best to calculate an indicator of operating costs that would be applicable and cost-effective to generate.

6.2.5 Asset performance measurement models

Several models for developing real property performance measurement systems have been developed and are in use. These include the Malcolm Baldrige National Quality Program, the Balanced Scorecard, and the Strategic Assessment Model (SAM).

6.3 Context of asset performance measurement

Departments make complex short- and long-term allocation decisions based on detailed real property, materiel, HR, and IT input strategies. Real property performance results inform strategic planning and, in turn, asset investment plans.

Context of Asset Performance Measurement
Context of Asset Performance Measurement. Text version below:
Context of Asset Performance Measurement - Text version

The following chart demonstrates the many factors that are incorporated in both short and long-term allocation decision making in asset performance measurement. It demonstrates that Property Performance Results and Issues feed into Real Property Strategies. In turn, Real Property Strategies, along with Materiel and IT Strategies, feed into Capital Asset Investment Plan, that feed into Corporate Resource Planning and Allocation. Other factors that feed into Corporate Resource Planning and Allocation include Human Resources and Other Resource Plans.

6.3.1 Implications of poor asset performance

As indicated in the figure above, performance issues must be addressed and strategies developed to achieve this. Specific considerations could include the following:

  • Poor condition
    • Reallocation of funds to address short- and long-term sustainability of property
    • Deferral of maintenance based on risk assessment
    • Full cost-benefit analysis to address retention versus replacement
    • Selling or demolition of a structure where the land must be retained
  • Poor environmental performance
    • Adoption of an environmental management system to track environmental performance over the longer term
    • Options analysis to examine alternatives for greening operations
    • Cost-benefit analysis to build a case for environmental retrofits (e.g., to reduce energy consumption, water use, etc.)
    • Promotion campaign to increase compliance (e.g., waste diversion mechanisms, reduction of energy consumption)
  • Poor functionality
    • Options analysis to address issues
    • Development of disposal strategies when program requirements are not being met and retention cannot be justified
    • Relocation to realize opportunities for highest and best use
  • Underutilization
    • Consider disposal of vacant portions of property
    • Seek opportunities to use vacant and underutilized space and property inter- and intradepartmentally
    • When the retention of vacant and underutilized property is justified, seek lease-out, licence, or other revenue-generating opportunities to maximize economic return
  • Financial performance issues
    • Investigate possibilities for cost reduction
      • Lower energy consumption
      • Consolidate split operations
      • Confirm appropriateness of PILT payments and seek opportunities for reduced payments
      • Optimize space use
      • Reduce underutilization
      • Analyze the market to see if rates are too high and need to be renegotiated
      • Consider unrealized development potential

The above-mentioned measures are meant as examples of the possible actions that departments could consider—it is by no means an all-inclusive list.

6.4 Adjustments to the custody model

At any point in the operational life of a property, it may make good business sense to lease out all or portions of land, buildings, or infrastructure components. Short- and long-term program requirements may have changed to the point where adjustments to the custody model help make program delivery more affordable. Reductions in departmental requirements may be such that—while the asset(s) in question is (are) still required—there is a growing amount of underutilized space that can be devoted to other uses.

It may also be prudent to provide rights-of-way or easements to accommodate neighbouring municipal jurisdictions or regional economic activity.

In circumstances like this, it is important for departmental custodians to be sure that federal conduct is open and fair, and that it will have minimal impact upon private-sector business or interests in the area where the asset is located. The considerations associated with solicitation of offers by the federal government are of particular relevance.

6.5 Tenant-custodian relationships

Departments must formalize their real property arrangements in writing to ensure a common understanding of respective roles, responsibilities, and financial commitments. In addition, departments must communicate openly, exchange information in a timely manner, and respect their mutual obligations in meeting operational, legal, and policy requirements. A process should be established to resolve disputes between the parties, should they arise.

A tenant department, as the employer, has a responsibility to ensure the health, safety, and security of its employees within their workplace. These responsibilities are outlined in legislation (Canada Labour Code) and in various policy instruments discussed below.

Tenant departments must clearly and formally communicate their specific program requirements to their custodial landlords early in the planning process to ensure that any acquisition of space fully meets their program needs and policy obligations.

6.6 Due diligence and government objectives

6.6.1 Security

The Government Security Policy (GSP) contains the policy objective and lists policy requirements that departments must meet. Of particular interest to real property managers are requirements related to security risk management, control of access, and safeguards.

The Policy document is broken down into two parts; Part One contains the security policy (Chapter 1-1), while Part Two includes the following operational standards:

Technical documentation is produced by the lead agencies responsible for the particular subject. To determine their availability and, where possible, access the technical standards, visit the appropriate subject areas (chapters) listed above.

Advice and guidance regarding the interpretation and implementation of the GSP and operational standards may be obtained by emailing Inquiries about technical documentation should be referred to the appropriate lead agency.

6.6.2 Health and safety

Deputy heads, as employers as defined in Part II of the Canada Labour Code, are accountable for the health and safety of employees in the workplace. Since the condition of real property relates directly to health and safety, real property managers must track conditions very closely and be sure that investment funds to maintain condition, make capital improvements, and deal with risks as they arise (urgent mitigation or repair) are forecast in planning documents and are well explained.

Fire protection

Risk management with regard to health and safety includes complying with Treasury Board fire protection policy instruments and cooperating with the Labour Program within Human Resources and Social Development Canada on matters pertaining to fire protection.

The current Treasury Board policy relating to fire protection prescribes a framework of code and standards compliance requirements. Key elements of this complex set of interrelated requirements include the following:

  • reporting all fires to Fire Protection Services at Human Resources and Social Development Canada;
  • ensuring that fire alarm systems are inspected and tested to ensure that they conform with the National Fire Code of Canada; and
  • arranging for the inspection, testing, and maintenance of all fire protection equipment and systems in properties under a department's administration and control in accordance with the requirements of the National Building Code of Canada (NBC), the National Fire Code of Canada (NFC), and Treasury Board fire protection standards, including but not necessarily limited to, the following:
    • building design and construction;
    • building exposures;
    • building services;
    • hazardous materials, processes, and operations;
    • materials storage and handling;
    • fire detection and alarm systems;
    • water supply and fire suppression systems;
    • portable fire extinguishers;
    • special extinguishing systems;
    • fire emergency systems;
    • fire emergency procedures, organizations, and evacuation plans;
    • fire department response and equipment; and
    • measures to minimize loss or damage subsequent to fire.

Tenant departments are responsible for arranging for the inspection, testing, and maintenance of additional or specialized fire protection equipment and systems protecting contents, processes, and operations under their administration and control in accordance with the requirements of the NBC, the NFC, and Treasury Board Policy on Fire Protection, Investigation and Reporting. Where fire protection systems are installed to meet tenant department operational requirements, the tenant department is responsible for their effective interface with the buildings' existing fire protection systems

Any additions and alterations to existing buildings and structures, as well as changes of occupancy and use, must conform with the Policy and be reviewed to ensure compliance with the Policy, NBC, and NFC. Note that lease renewals are considered acquisitions and are subject to full review as outlined in Acquisition Section – fire protection.

With respect to the local community, departments should ensure that local fire suppression services are free to inspect (without prejudice) federal property to meet their obligations for fire fighting. In addition, they should provide, where required, copies of emergency evacuation plans to local fire departments.

Smoking on federal property

Smoking considerations must be addressed in the context of the workplace and areas outside the workplace. This issue is highlighted here because of how directly the management of smoking relates to satisfaction and tensions in the workplace.

6.6.3 Environment

The primary environmental responsibility for custodians involves ensuring that federal real property is protected from environmental damage throughout its useful life, in a manner consistent with the principle of sustainable development. Ideally, the approach should be one of pollution prevention, rather than remediation after the fact. However, it is inevitable that some properties will become contaminated as a result of routine operations or accidental events.

The contamination of real property or negative impacts on the environment through the use or permitted third-party use of real property is to be avoided. In the event of contamination, immediate and reasonable action must be taken to protect the health and safety of persons and the environment, prior to assessing a future course of action.

Custodians are responsible for the remediation of negative environmental effects resulting from their management of real property. Remediation should be undertaken in line with the requirements for the property's current or intended federal use, unless it can be demonstrated that more stringent remediation is economically beneficial to the federal government.

In developing remediation objectives, custodians should consider the most applicable of the three methods developed by the Canadian Council of Ministers of the Environment (CCME):

  • Method 1: Follow CCME Environmental Quality Guidelines, as amended from time to time, and, where applicable, the Canada-wide Standard for Petroleum Hydrocarbons in Soil. To the extent that such guidelines do not exist for a particular type of contamination, or are technically or economically inappropriate in a particular situation, departments and agencies should follow equivalent guidelines or standards (e.g., provincial).
  • Method 2: Follow modified CCME Environmental Quality Guidelines where site conditions, land use, receptors, or exposure pathways differ only slightly from the protocols used in the development of the Guidelines.
  • Method 3: Follow modified CCME Environmental Quality Guidelines based on a site-specific risk assessment, as outlined by the CCME, or equivalent, where site conditions are unique or particularly sensitive.

Best efforts should be undertaken to ensure that departmental operations do not adversely impact adjacent properties.

In cases where contamination exists, consider coordinating environmental remediation activities with other parties when similar types of contamination exist on adjacent properties to achieve economies of scale.

When managing contaminated sites in other countries, departments should comply with any applicable local or host country's environmental legislation or regulations, and where none may exist, adopt best practices to minimize harmful effects.

6.6.4 Legal obligations

Local plans and priorities

Although the Constitution Act, 1982 establishes in law the immunity of federal real property from the property use controls and statutes of other levels of government, departments manage real property as responsible corporate citizens. They should be aware of and sensitive to the local plans and priorities of the community in which they are located. They need to understand the impact their activities may have on their immediate environment.

Clarity of title

It is prudent management to reaffirm the legal status of all real property in a department's inventory from time to time. This ensures that any clouds or restrictions on title are recalled for the staff that may be administering a department's assets at any one time. The record shows that fundamental legal duties or limitations associated with title are often “forgotten” until it is almost too late with regard to a construction or re-use project and are too often considered in detail only at the time of disposal action.

Aboriginal rights

The identity of Aboriginal groups living in the vicinity of real property should be known. Prudent management of real property includes maintaining contact with the leadership of those Aboriginal groups, in support of the federal government's special relationship with Aboriginal peoples pursuant to the Constitution Act, 1982 and to the long history of federal programs and initiatives directed towards Aboriginal groups and individuals.

Of particular note should be Aboriginal rights, proven or claimed, that may include the real property of a department or may be impacted by how that property is used. Department of Justice Canada legal advisors can be called upon to advise at which point the engagement of Aboriginal groups or individuals may become a matter of legal obligation. The maintenance of good relations throughout the time a real property asset is in the inventory of a department, however, will often avoid the possibility of Aboriginal interests becoming a matter of legal dispute and tension.

Surface or subsurface rights

If use of the property includes provision of access to public, private, or Aboriginal individuals, businesses, or groups for the purpose of resource exploitation (e.g., hunting, fishing) or resource extraction (e.g., forestry, the extraction of minerals or hydrocarbons), the appropriate controls (i.e., legal, environmental) will have to be coordinated with ongoing program requirements. The legal regime regarding access may already be specified in the original lease, licence, or purchase documents; it may also be a matter that requires negotiation on a phased or ongoing basis.

The approach for dealing with revenues that may be realized from the exploitation or extraction of resources on or under federal property will require close attention and regular review. As a general rule, revenues from access to resources by other parties are credited to the government's Consolidated Revenue Fund and cannot be used to offset program costs.

6.6.5 Heritage

Custodian departments should have a plan in place to have all Crown-owned buildings in their custody that are 40 years of age or older evaluated as to their heritage character. This plan would be developed in concert with departments' acquisition, operation, maintenance, and disposal strategies that will invariably identify buildings in use that either require evaluation or have been evaluated and must be managed in a manner that respects and conserves the heritage character.

  • Classified Heritage Buildings. Departments must seek FHBRO's guidance before making any interventions and changes of use, including any operations and maintenance that could affect the heritage character-defining elements, as identified in the Heritage Character Statement. Standards and guidelines for the conservation of historic places in Canada are available to provide practical advice to departments.
  • Recognized Heritage Building. For alterations, changes of use, or other interventions that could affect heritage character, departments must obtain appropriate conservation advice. This advice can be obtained from a private- or public-sector conservation expert, including FHBRO.

Advice is available from Parks Canada on how to maintain the potential heritage character of “legacy buildings,” which are buildings that are expected to become heritage from the day they were built, based on criteria such as historic associations, architectural qualities, and environmental factors. A good example of a legacy building is the Canadian War Museum in Ottawa.

The Parks Canada Agency Act states that "the Agency is responsible for the implementation of policies of the Government of Canada that relate to national parks, national historic sites... other protected heritage areas and heritage protection programs." Parks Canada's archeological experts can provide advice, tools, and information to other federal land managers on archaeology and environmental assessment.

6.6.6 Accessibility

Departments should consider the appropriateness of applying standards and codes that are enacted after initial approvals and occupancy to address emerging requirements of and technologies used by the disabled community. It should be noted that the standard represents the minimum requirements for all properties.

In addition, exemptions and variations should be reviewed on a regular basis to ensure that they are still justifiable based on the use and occupancy of the property.

It should be noted that lease renewals are considered as acquisitions and require full application of the Accessibility Standard.

6.7 Review checklist

  • Have performance indicators and targets been identified and have results of shortcomings been addressed in strategic plans?
  • Is there a current and ongoing program requirement for each property in the portfolio?
  • Are security requirements and provisions updated regularly, including instructions to users of the real property?
  • Have emergency evacuation plans been prepared and reviewed with local fire departments and HRSDC?
  • Are requirements for accessibility being met, especially with regard to emergencies such as fire?
  • Have buildings over 40 years old been submitted to FHBRO for review? Are designated buildings being managed in a manner that protects their heritage character, informed by the Heritage Character Statement?
  • Have conservation plans been developed for designated buildings?
  • Has an environmental audit been carried out on the property? Is there an action or remediation plan in place to address any environmental issues?
  • Are steps taken from time to time to maintain good relations with neighbours to a property and, in particular, with Aboriginal groups that may have an interest in how a property is being managed?
  • Is the legal document with regard to title and other matters being regularly reviewed and updated, and are changing legal requirements being incorporated into the ongoing use of an asset?
  • If there is a custodian-tenant relationship involved, has the tenant provided the custodian with all relevant information related to their current and future operational requirements, including long-term accommodation needs, security, and accessibility requirements?

7. Disposal

This section refers to the last phase of the physical life cycle of real property, i.e., the disposal by sale or transfer of the asset. In this context, disposal does not include leases, licences, or easements, which are covered in sections 6 and 8. In addition, although demolition often marks the last phase in an asset's life cycle, this topic is not covered within this section. Departments may wish to consult the Treasury Board Contracting Policy prior to engaging contractors for the demolition of assets on federal real property.

7.1 Introduction to the disposal process

Departments should take a proactive planning approach, rather than a transaction-by-transaction approach to disposal. Departments should develop processes to identify surplus real property and, as part of broader investment planning strategies, future surplus real property. Disposal decisions should be well planned and informed by analysis of performance indicators and present or anticipated future program requirements. It is important to plan for renewal or disposal before a given real property reaches obsolescence and its ability to meet the service requirements of departmental programs is compromised.

As soon as a department recognizes that a property is no longer required in support of its program or operational needs, it identifies the property as surplus. The department remains responsible for the custody and control of its surplus property, including its operating costs, until such time as the sale or transfer is complete. The department then follows the disposal process illustrated in the chart below, followed by a more detailed description.

Introduction to the disposal process
Real Property Disposal Process. A full description of the process can be found in the text immediately following this image. Text version below:

7.2 Stages of the disposal process

7.2.1 Identifying the type of disposal

Surplus "routine" real properties are generally properties or a portfolio of properties with lesser value that can be sold easily without any substantial investment. These properties are normally sold “as is” on the open market by the custodian, its agent (Public Works and Government Services Canada), or a private-sector firm. “As is” transactions imply that there is limited potential for increasing the value of the property prior to sale or transfer and that there are no strategic interests in the property.

Surplus "strategic" real properties are properties or portfolios of properties with potential for significantly enhanced value, those that are highly sensitive, or a combination of these factors. Because of the complexity associated with these properties, they may require innovative efforts and a comprehensive management approach to move them into the market. Canada Lands Company CLC Limited (CLC), as the government's disposal corporation, disposes of these selected surplus properties through a managed process.

A surplus property should be considered for sale to CLC if one or more of the following conditions apply:

  • the size or value of the property, or of a portfolio of properties, is significant enough to affect local markets negatively should its integration into the market not be managed;
  • the value of the property, or properties within a portfolio, can be increased significantly (e.g., through subdivision, rezoning, or investment or pre-sale development), producing the best return for Canadians;
  • a partnership with another level of government, the private sector, or other party may offer the best mechanism to realize either the inherent value of a particular property or portfolio of properties, or the greatest benefits to the government beyond the financial return; or
  • there are sensitive policy issues, including the potential for a substantial gain by a third party instead of the government.

If none of the above conditions applies to the property in question, by default, the property should be treated as routine.

7.2.2 Interests in surplus properties

Routine process

All routine surplus real property is first offered simultaneously to other federal departments, agent Crown corporations, and provincial and municipal governments. These organizations are permitted to acquire, at market value, such real property for public purposes, in the above-noted order of priority. However, where there is potential for the priority purchaser to rezone and resell the real property for profit, the conveyance or transfer documents should include appropriate covenants to ensure that the original intent of the sale or transfer is respected.

Timelines for confirmation of public purpose interest as detailed in the Directive on the Sale or Transfer of Surplus Real Property must be respected. When real property is transferred for public purposes, the final transfer or sale should be completed as soon as possible after the timelines have expired.

Should the above organizations waive their opportunity to acquire routine surplus real property, the property is then viewed as surplus to government requirements and disposed of in a fair and open manner that recognizes the need for the public to be given a reasonable opportunity to acquire it from the government through a solicitation of offers. Certain transactions may be excluded from the requirement for a solicitation of offers, in cases where it is inappropriate or not in the public interest to do so.

For further guidance on soliciting offers, departments should refer to Section 8 of this guide, which includes examples of transactions that may be excluded from the requirement to solicit offers.

Selection of offers must be financially prudent to ensure best value to the Canadian taxpayer.

Strategic process

The handling of strategic disposals is a sensitive matter. The disposal strategy for a strategic surplus property is focussed on achieving best value for the Crown with due regard to relevant policy considerations and to community sensitivities, including the needs of official languages minority communities.

Unlike routine properties, strategic properties are not offered for sale or transfer on a priority basis. Rather, program departments, agent Crown corporations, and other levels of government are canvassed to identify issues or program interests in the specific property. This information is taken into consideration during the stakeholder assessment phase of the process.

The interests of government agencies should be identified as soon as possible in the process. Written confirmation of the nature and scope of the interest must be provided within the same 120- and 240-day timelines as for routine disposals.

Given the sensitive nature of properties under strategic disposal, prudence should be exercised when notifying non-federal stakeholders of the intention to dispose. Non-federal stakeholders must be informed that the surplus property is not being offered for sale on the open market, but that the property qualifies for sale to Canada Lands Company CLC Limited (CLC), the government's mandated disposal corporation, to manage its reintegration into the community.

The goal of the stakeholder assessment is to provide a set of baseline facts or assumptions that allow the strategic disposal process to move forward with some certainty about risk. Cross-program issues such as heritage, federal legacy, environmental and Aboriginal interests, and official languages need to be identified by the responsible federal organizations. Restrictions on land for custodian or other government departments' operational use should also be confirmed (e.g., museums, affordable housing initiatives, continued program use).

Ideally, the stakeholder assessment yields conclusions and agreement among federal stakeholders about restrictions on use of the land (e.g., phased-out or continuing program use by the custodian) before the valuation of the property is undertaken and CLC business planning proceeds. It is suggested that the custodian establish an interdepartmental team, or at minimum a network of contacts, from among federal stakeholders to assist in identifying and assessing program interests throughout the process.

It is prudent for the custodian to carry out other activities at this point in the strategic disposal process:

  • Determine the departmental spokesperson designated for high-profile projects, if necessary.
  • Develop a communications plan or strategy to respond to questions and concerns as the process moves forward.

7.2.3 Due diligence and government objectives

In both routine and strategic disposal, it is the responsibility of the custodian department to complete all due diligence work for these properties.

The disposal phase should not be a surprise to custodian departments but be a well-planned final round for which ample time has been allowed within the department's planning framework. All that needs to be known about a property should be fully known prior to the initiation of disposal actions. This is a time when information in regard to the issues below is reviewed and reaffirmed. This would not normally be a time when it is necessary for new information to be sought or when unexpected facts are uncovered.


Occasionally, disposals of certain types of surplus properties may present danger to public safety or security concerns should they be offered for sale to the public or other levels of government. Real property that may fall into this category includes, but is not limited to, former National Defence bunkers, specialized laboratories, former prisons or detention centres, and special purpose reinforced structures. Custodian departments should ensure that public safety or security concerns are identified as part of the process for declaring a federal real property surplus to requirements and they are responsible for any costs incurred in modifying the real property to eliminate the concern.

Answers to the following questions may be useful in determining if certain features of surplus real property present a potential public safety or security concern. The guidelines are indicators and should be used in conjunction with common sense. In all probability, a surplus property would have to meet two or more of the indicators before qualifying as a public safety and security concern. When carrying out a security assessment, federal organizations may wish to consult the police force in whose jurisdiction the real property is located to obtain their views and advice.

Questions to ask when determining whether a property may present a potential public safety or security concern are as follows:

  • Is the real property in any way fortified, i.e., reinforced walls and/or entrances, barred or no windows, limited number of entrances, or security features such as guard towers and perimeter walls?
  • Is the real property wholly underground or is a significant part of it underground?
  • Is the real property in whole or in part self-contained with independent life support systems such as air filtration systems, generators, and water supply?
  • Is the physical structure of the real property such that forced entry by police would be extremely difficult?
  • Does the real property include equipment that could be easily adapted by terrorist or criminal organizations for the hydroponic growing of drugs, the creation of clandestine laboratories, the manufacture of nuclear, biological, or chemical weapons or other significant criminal activity?

Depending on the outcome of the security assessment, one of the following may be applicable:

  • No public safety or security concerns exist and the sale of the real property in its present state is appropriate.
  • Public safety or security concerns exist but modifications are implemented by the custodian before sale, thereby allowing the sale of the real property to proceed.
  • Public safety or security concerns exist and significant modifications by the custodian are required before the real property can be offered for sale.
  • The real property must be demolished to satisfy public safety and security concerns.
  • The custodian should reconsider whether to declare the real property surplus to requirements.

If an asset has been well maintained on the basis of long-term investment plans, then that asset, at the time of disposal, should be in a condition that befits its age and type of use. A deteriorated condition that has been observed and permitted in a department's planning and reporting systems would not reflect the desired standard of prudent ownership, even if disposal of an asset has been planned for some time.

While the ongoing maintenance of assets planned for disposal constitutes a burden on departmental budgets, deteriorating conditions equate to health, safety, and environmental risk. The obligations associated with real property custody end only when an asset fully leaves a department's inventory.

Legal obligation

The custodian coordinates with the Department of Justice Canada to confirm documents on the department's records regarding title to the property in question.

Under the Federal Real Property and Federal Immovables Act, there are many requirements for determination of which minister has administration of property. This information would ordinarily be reconfirmed from time to time prior to departments' initiating disposals, licences, or transfers of administration.

The minister of Justice, or his or her departmental delegate, must be satisfied the disposing minister has administration of the property in question. In some cases, the result of the title search can be inconclusive, so the legislation includes a provision to deem a minister to have administration when the minister is “satisfied” that the real property in question is under his or her administration. The criteria that must be met in order for a minister to be satisfied are found in Appendix C to this guide.

It is essential to work with the Department of Justice Canada as early as possible to address all title and any legal risk issues. Depending on the results of this analysis, the custodian decides whether or not to proceed with the disposal.

Aboriginal issues

Departments need to reconfirm whether or not Aboriginal rights, title, or treaty rights exist and, where they may continue to exist, could potentially be impacted negatively when making disposal decisions. This assessment should be made in consultation with Department of Justice Canada counsel, and Indian and Northern Affairs Canada. When making disposal decisions that could affect Aboriginal rights, title, or treaty rights or potential rights, departments must respect the fiduciary relationship between the Crown and Aboriginal peoples, and fulfil any federal obligations as they relate to the interests of Aboriginal peoples in the property, including a legal obligation to consult with Aboriginal groups and accommodate their rights or a credible claim, as the Department of Justice Canada may advise.

Surface and subsurface rights

The disposal of a property requires attention to what will happen to surface and subsurface rights. Especially in areas where Aboriginal groups may have a credible claim or be seeking economic development opportunities, the disposal of surface or subsurface rights may impact upon those Aboriginal groups. Disposing departments need to review this matter with Indian and Northern Affairs Canada and/or the Department of Justice Canada prior to initiating disposal activities.

If surface or subsurface rights were not included along with federal ownership of a property, the status of those rights in the course of the disposal will need to be confirmed with the Department of Justice Canada and with the owners of the rights.

Under the Department of Natural Resources Act, Natural Resources Canada has jurisdiction over subsurface rights, including minerals. As such, it issues, manages, transfers, and registers federally owned mineral rights in the provinces, and oil and gas rights for frontier land areas not covered by regional boards.

In the context of real property disposal, where mineral or oil and gas rights exist, departments should consult with Natural Resources Canada early in the process to ensure they understand the respective authorities, roles, and responsibilities with respect to mineral rights. It should be remembered that disposals are made at market value and when oil, gas, and mineral rights form part of the real property interests of the Crown, there can be substantial added value to the property because of these rights.

As a rule, mineral or oil and gas rights, when held as part of the ownership interest, must not be conveyed unless authorized by Natural Resources Canada. Additionally, all retained rights must be transferred to Natural Resources Canada without charge.


The process of disposal must be carried out in an environmentally responsible manner. This is the time to reconfirm that all potential legal obligations, i.e., those relating to the Species at Risk Act and the Canadian Environmental Assessment Act, or liabilities and any resultant costs have been addressed during the use and occupancy phase of the asset.

Departments must ascertain the environmental condition of the property prior to disposing of it. Environmental site assessments during the use and occupancy phase will have identified contaminants and their sources, so that responsibility for managing them can be assigned, and any additional remediation can be carried out if required. This determination should be made in consultation with legal and environmental advisors.

In disposing of property that requires remediation, it may be advantageous to have the party acquiring the property carry out the remediation. It is important to clearly delineate whether the Crown or the acquiring party will be responsible for paying remediation costs and to negotiate this in the context of the final sale or transfer price.

Details on methods of remediation for federal property are provided in Section 7 of this guide.


Departments should consult with the Federal Heritage Buildings Review Office (FHBRO) on heritage conservation measures as early as possible in the disposal process to allow for due consideration of FHBRO's advice and recommendations.

With respect to arranging for alternative uses of underutilized or excess classified and recognized heritage buildings, "best efforts" means, at a minimum:

  • in the case of a classified heritage building, taking steps to protect the building's heritage character and specifying the nature and level of protection in any sale agreement—this could include attaching a heritage covenant, easement, or servitude registered on title that specifies the conservation requirements; or
  • in the case of a recognized heritage building, deciding whether to continue to protect its heritage character, and specifying the nature and level of any heritage protection in any sale agreement.

If looking to organizations outside the federal government to arrange for alternative uses, departments should first look to the provincial government, to the municipal government, and to heritage groups.

When a heritage building leaves the federal inventory, the custodian department should notify FHBRO so that the organization's database of federal heritage buildings remains accurate and relevant.

Departments should also consult Parks Canada when selling a property containing a national historic site or part thereof, make a record of the property if it leaves the federal inventory, and notify Parks Canada at the end of the disposal process.


Other technical studies may be required when conducting due diligence. It is the custodian's responsibility to coordinate the completion of all necessary studies.

7.2.4 Valuation and preparation for sale or transfer

In both routine and strategic disposal, departments must obtain a determination of value prior to the sale or transfer of real property.

For further information on valuation and appraisals, departments should refer to Section 8 of this guide.

Routine disposal

At this stage in routine disposal, the department summarizes all the findings from the priority interests, due diligence, and valuation and prepares for the transfer or sale to a priority purchaser or a solicitation of offers from potential private-sector purchasers. All offers must include conditions related to the due diligence findings as appropriate.

Strategic disposal

In addition to the requirement for a third-party, independent appraisal of the property in question, the Canada Lands Company CLC Limited (CLC) is required to provide a business plan that demonstrates the corporation's ability to enhance the value significantly or to respond to other social or economic policy requirements and provide related benefits to Canadians. This plan should include the following:

  • a description of the business environment (the macroenvironment, opportunities, and threats);
  • a statement of CLC's ability to seize the opportunity and the compelling reasons to proceed with it;
  • a description of the proposed investment (e.g., zoning change(s), environmental remediation, provision of infrastructure, or the subdivision of lots) and an estimate of enhanced value;
  • an account of the impact of the government's strategy in the disposal not addressed in the independent appraisal; and
  • risk or contingency plans.

At this stage in strategic disposal, departments should have the information necessary to complete a strategic analysis report. This document should:

  • report on the results of legal studies (including Aboriginal rights and title), results of any consultation that was held with Aboriginal groups, and technical analysis, such as environmental studies;
  • identify and briefly assess all federal and non-federal stakeholder interests;
  • identify federal government policy and other strategic considerations (e.g., comprehensive or specific land claims and environmental or heritage issues);
  • include an assessment of the risk to the integrity of the program that the property supported;
  • provide a plan for the department's phased removal from the site and interim use until final transfer or sale;
  • describe the interests, if any, of the provincial and municipal governments with respect to the property and its future use; and
  • identify potential financial return on disposal, based on the independent third-party appraisal as a baseline value and the costs of preparing for disposition, and outline strategies for managing cases where the cost is expected to exceed the return.

7.2.5 Final steps in strategic disposal

A comprehensive analysis of considerations should be undertaken and final options developed.

Departments should prepare a disposal strategy and a recommendation, seeking approval of the disposal strategy from the appropriate authority. This document should also identify principles for future development, as appropriate, and state the conditions or limitations to be imposed on the proposed redevelopment plan, if necessary.

Once approved, custodial departments implement strategies for withdrawal or interim use and arrange for the Department of Justice Canada to close the transaction in a timely fashion.

Then, CLC begins the formal process of obtaining the required approvals for the execution of the business plan related to the property or portfolio of properties.

7.3 Share of proceeds

All proceeds from the sale or transfer of real property must be credited to the Consolidated Revenue Fund, in accordance with the Financial Administration Act. In the case of a sale to CLC, the corporation issues a project-specific, non-interest-bearing promissory note to the Receiver General for Canada, in lieu of payment in cash at the time of sale. This note is recorded as accounts receivable in the government's book in accordance with established financial policy and practices. Note repayments are also credited to the Consolidated Revenue Fund.

The Treasury Board has authorized the sharing of 100 per cent of net proceeds from the sale or transfer of surplus real property. Departments can seek access to their share of net proceeds from the sale or transfer of surplus properties through the established estimates process. To have access to the proceeds, departments must:

  • have a Treasury Board-approved capital asset investment plan that includes a strategy to reinvest the proceeds in real property; and
  • satisfy the Treasury Board of Canada Secretariat's reporting requirements on real property.

Requests can be made to reapportion the proceeds, and consideration of such requests will be based on affordability constraints.

7.4 Evaluation

At the final stage of the real property life cycle, it is important to assess the past performance of the property in relation to previous analysis, to assist with future planning. At minimum, departments should compare the performance of the asset against standards that were established at the acquisition phase. Significant variations from planned-for standards should be accounted for.

7.5 Review checklist

  • If regular reporting on the performance of a real property asset indicates underutilization or underinvestment (reflective of poor fit with program requirements), it is time to consider disposal of the asset.
  • Disposal of an asset requires determination of whether the disposal track to be followed will be routine or strategic.
  • Preparation for disposal requires full information on the asset being considered for disposal, including impacts of the disposal upon security; condition of the asset and environmental degradation of the land; legal issues, including clarity of title and correct disposition of resource rights; impact of disposal on Aboriginal groups; and heritage considerations.
  • The disposal of an asset requires that maximum value of the disposal be realized for the Crown. Sale amounts are credited to the government and can be shared with disposing departments on the basis of agreement between the department and the Treasury Board.

8. General Transaction Guidelines

General transaction guidelines applicable in all three of real property's physical life cycle phases of acquisition, use, and disposal are:

  • solicitation of offers;
  • valuation;
  • policy conformity;
  • arbitration; and
  • custody transfers.

8.1 Solicitation of offers

As a general rule, the principle of best value to the Crown must always guide decision making as it relates to real property transactions. This is true whether the transaction occurs at the time of acquisition, if space becomes available for leasing to private-sector interests, or if the transactions relate to the disposal of assets no longer needed to support program delivery.

All real property transactions must be conducted in an open and fair manner that recognizes the need for the public to be given a reasonable opportunity to acquire property from, and dispose of property to, the government.

Departments should begin the process of soliciting offers promptly, leaving time to consider all viable options. The principle of best value should determine which offer is selected, and the factors and criteria that determine the best value should be identified prior to the solicitation of offers. These criteria should remain constant during the solicitation and selection process.

When soliciting offers, departments must give a reasonable and representative number of persons or firms an opportunity to make offers. Departments can meet that policy requirement by using one of the methods listed below:

  • public advertising, including an open bidding system;
  • public notice that is consistent with generally accepted trade practices;
  • selection from an open source list (i.e., a document that lists representative suppliers of the real property required);
  • for acquisitions by purchase, selection from a representative list of available properties accompanied by an options analysis that demonstrates a fair comparison of the properties on the list; or
  • use of a system that, in the minister's opinion, given the subject and nature of the acquisition or disposition:
    • provides a reasonable likelihood that potentially interested persons or firms will become aware of the proposed acquisition or disposition; and
    • promotes a fair and equitable consideration of offers.

As outlined in the Policy on Management of Real Property, offers must be solicited unless the minister is satisfied that the nature or subject matter of the transaction would make it inappropriate or not in the public interest to solicit offers. Examples of such transactions include:

  • pressing emergencies in which delay would be injurious to the public interest;
  • a purchase, lease, licence, or other acquisition in which the property to be acquired can reasonably be acquired from only one source, such as:
    • the acquisition by the Crown of an easement;
    • the acceptance of a surrender of a lease of federal lands;
    • the acceptance of the relinquishment of a licence in respect of federal real property;
    • a real property exchange involving particular properties; or
    • a lease by the minister responsible for the Royal Canadian Mounted Police with a province or municipality for the purpose of providing policing services;
  • a sale, lease, licence, or other disposition in which the property can reasonably be disposed of to only one person, such as:
    • the issuance of an easement on federal lands;
    • a surrender of a lease by the Crown;
    • the relinquishment of a licence held by the Crown; or
    • a real property exchange involving particular properties;
  • a transfer of administration and control to a province, or a sale to a municipality, where the property is to be used for public purposes; or
  • a sale of property to the Canada Lands Company CLC Limited.

In addition, there will be transactions that will have characteristics that might also make the solicitation of offers inappropriate or otherwise not in the public interest. One example would be a new lease for presently occupied real property, where an options analysis indicates the total cost of continued occupancy to be clearly less costly than the total estimated cost of new occupancy, based on complete and reliable market data, than would be expected to result from a solicitation of offers. However, this options analysis must be undertaken early enough so a solicitation of offers for the needed property will not be precluded if the options analysis is inconclusive.

Another situation that may arise is that where a department with a particular real property requirement receives an unsolicited proposal from a public entity (e.g., a province or municipality) or private entity (e.g., a real estate agent or property owner) about how to meet that requirement. As a general rule, departments should advise the proponent that the proposal can be studied to confirm its appeal but that, if its appeal is confirmed, the department expects to return to the market to give other parties a chance to consider and match the unsolicited proposal. Any exceptions to this approach will require applicable ministerial approval.

In all cases when an exception is made to preclude the solicitation of offers, the full circumstances and data used to substantiate the decision must be documented in the relevant files.

8.2 Valuation

Real property has value. When conducting transactions, departments determine the likely value of the interests, rights, and benefits in the property by means of an appraisal or estimate as set out in the Appraisals and Estimates Standard for Real Property. The exception to this rule relates to custody transfers, which are conducted at a nominal sum given that all associated resources, including assets, are transferred from one department to another due to a government reorganization or realignment of program responsibilities.

Valuation is part of most decisions during the life cycle management of real property. It is necessary for informed decision making, benchmarking performance, and demonstrating that the value-for-money principle has been achieved. For transactions, the focus of the valuation is on market value and market rental value.

Public Works and Government Services Canada is responsible for appraisals for land conveyances under the Common Services Policy. Natural Resources Canada is responsible for the subsurface rights and is responsible for dealing with those rights during a transaction. If a transaction involves mineral rights, e.g., if the property is known to have coal deposits, the valuation of the property would take into account the surface and subsurface values.

Departments need to be sure that the process used for valuation results in a reliable, defensible approximation of value with appropriate quality assurance and quality control, and that their valuation staff meets the requirement in the Appraisals and Estimates Standard for Real Property. This includes the requirement for written documents, as at a specified date, that evaluates the real property right, interests, or benefits involved and provides sufficient information and analysis to support the conclusion. The processes and procedures should reflect the level of due diligence appropriate to the potential value and risk involved.

8.2.1 Appraisals versus estimates

Both appraisals and estimates are written documents providing an opinion of market value. The difference is generally the level of due diligence reflected in the use of established appraisal procedures.

As Public Works and Government Services Canada (PWGSC) is the mandatory service provider for appraisals for land conveyance, the department has Appraisal Guidelines that are available at As estimates can be carried out by departments, they develop their own internal processes and procedures. Departments often consult with the Office of the Chief Appraiser at PWGSC for guidance in this area.

Estimates are intended to reflect the relatively low level of risk associated with transactions based either on an open solicitation of offers in a competitive market or transactions between federal departments that are routine and/or of nominal value.

8.2.2 Thresholds

The transactional thresholds outlined in the Treasury Board Appraisals and Estimates Standard for Real Property for the use of appraisals or estimates are intended as guidelines addressing the minimum requirements. Departments should also consider complexity and risk in each case.

In sensitive circumstances, or for complex valuations or potentially risky situations, it is recommended that departments obtain an appraisal instead of the minimum estimate and/or obtain more than the minimum single appraisal for transactions in excess of the $350,000 limit. The appraisal experts at PWGSC are well positioned to provide guidance in such circumstances.

8.2.3 Market rent

Market value is defined in the Standard and is normally based on the value of the fee simple estate (which includes the full bundle of rights) for acquisitions and disposals of real property. Market rent involves the value of a leasehold interest, which will reflect only the bundle of rights conveyed by way of a lease or licence. Notwithstanding the estimated or appraised value of leasehold or other interest, in no case should the charge to a tenant be less than the full cost incurred by the custodian department in respect to granting a lease or licence.

In specific markets, there may or may not be a relationship between the market value of the fee simple interest and the market rental rate for a property. For example, a specific lease may specify that the market rental rate is to be a percentage of market value. This formula may be appropriate in certain markets, but it may not be a reasonable rate in other markets. For example, it would be unreasonable to charge rent as a percentage of market value for grazing land if the market value of the land was based on a highest and best use as industrial use, or more intensive agricultural uses that would generate more revenue. The basis for comparison of the market rental value(s) for grazing land should be other grazing leases that had the same rights as proposed for the subject property.

As noted above, the valuation of lease and licence agreements is based on the rights conveyed by the agreement. The valuation elements of lease or licence agreements reflect the quality (covenant), quantity (amount), and durability (term) of the income/cost of the agreement. They are unique business relationships for a fixed period of time that identify the rights and responsibilities for both private-sector landlord and public-sector tenant or vice versa. As these agreements are unique (although they can be “standardized”), any valuation of lease and licence agreements must be based on a thorough understanding of the agreement. Differences in the rights and obligations under a lease/licence agreement can have a substantial effect on their value. Therefore, it is necessary for the valuation to identify the differences in the rights and obligations, and to reflect adjustments for these variances.

Market rent would normally be determined by one of the following methods:

  • a survey of market rents for comparable real property;
  • the highest rents tendered in response to an advertisement;
  • the rent contained in the best proposal rated against predetermined selection criteria;
  • the fixed rent plus the percentage of gross sales revenue normal for the industry as determined by a survey;
  • the appraised business value of the lease; or
  • any other practice usual to the market for comparable lease situations.
Other rental considerations
  • Retail or commercial—A tenant's overall impact on the rest of the real property can mean the market rent can vary between, for example, anchor tenants, normal tenants, and tenants sought out to provide a retail or service mix that is expected to provide an overall advantage. Thus, quite distinct market rents for different tenants occupying the same location can occur depending on the lessees' contribution to the whole.
  • Monopoly situations—Cost recovery or legislated formulae often form the basis for rents set in government monopoly situations or related institutional uses. Effectively, these calculated rents become the market rent by their very application and agreement by lessees. However, departments should periodically examine the effect of such applied formulae against available market data to ensure gaps do not develop.
  • Vested improvements—Tenant improvements may have a positive, neutral, or negative effect on market value or market rent, e.g., improvements that enhance the use of the property will increase the property's value for sale or rent; improvements that are removed at the end of the lease, restoring the property to its original condition, will have no effect on the sale or rental value; and improvements that detract from the best use of the property will decrease the property's sale or rental value.

In summary, market rent can be affected by the conditions in the lease, restrictions on the use of the real property, and the impact of the tenancy on the rest of the real property. Thus managers should develop a model and document the assumptions they use and the conclusions they reach. In no case should the rental charge to a tenant be less.

8.2.4 Restricted use and public use

Public use of land does not affect the market value of real property based on highest and best use unless there is a restriction that runs with the land (i.e., an enforceable restriction that cannot be changed by the owner or custodian). Such restrictions place legal limitations on the use of the property, thereby changing the highest and best use. Public use land that has a restriction on use would be valued based on its restricted use.

In the case of disposals for public purpose, the Appraisals and Estimates Standard for Real Property requires a valuation of the surplus property based on the highest and best use, as well as a valuation based on its restricted use (continued public purpose use) as highest and best use. The rationale for this valuation requirement recognizes that properties can be sold at the restricted use value, based on a sound case for long-term continued public purpose, but that the negotiator must also ensure that there is a condition-covenant in the transaction and on title where the property is to leave the federal inventory to protect the federal Crown interest for the differentiation of value and to avoid a land flip windfall to the other public-interest party.

An example of this could be a surplus property in an area with potential for residential development. It is determined that this surplus property is required for continued public purpose by a federal security agency and therefore will not leave the federal inventory. The valuation includes highest and best use as development lands ($9,000,000) and the restricted highest and best use as institutional ($6,800,000). This information is provided to the property officer to guide the negotiations. The property officer must ensure the transaction price is justified in accordance with the market value determination and must ensure the terms of conditions of the agreement reflect the restricted use.

8.2.5 Solicitation of offers

The use of estimates in support of a lease or licence assumes the transaction will occur in an open and competitive market or that it is not in the public interest to have a solicitation of offers. In the first instance, the thinking is that a competitive process tests the value of the lease or licence, therefore estimates are sufficient and are intended as a cost-effective process to ensure that the principle of value for money is achieved.

For lease or licence without a solicitation of offers, where the nature or subject matter of the transactions dictated such a course of action, departments should consciously assess whether an estimate is sufficient, based on the rationale for excluding a solicitation of bids, as well as the value, sensitivity, or complexity of the proposed transaction.

For example, departments should not rely on transactions involving the Crown (as one of the parties to the transaction) as evidence of market behaviour except under exceptional circumstances where it is impossible to obtain a sufficient number of comparable leases. Under those circumstances, one of the comparables may involve the Crown.

In the valuation of real property, fair, open, and transparent transactions are the ideal comparable in estimating market value for a real property transaction. An example would be a tender for the acquisition or disposal of an asset. However, real estate markets are by nature imperfect. Prior to completing a transaction, an estimate or appraisal is required as a benchmark to ensure that the proposed transaction price/cost is representative of market value.

For those transactions in which an open market does not exist, the due diligence necessary for the valuation to support the transaction must be defensible and as such must have well-supported data and analysis demonstrating the market value as the performance measurement prior to completing a transaction. The documentation on file must be able to stand the test of public scrutiny.

8.2.6 Special considerations affecting value

There are a number of considerations that will affect market value, such as the following:

  • Heritage: It is crucial that any designation and/or restrictions on the use of the property are clearly identified to the valuator, as this may have a major impact on the market value. Historical designations that do not “run with the land” will not have a significant impact as the new owner or lessee will not be obliged to respect the heritage requirements.
  • Environment: The Treasury Board Policy on Management of Real Property allows departments to have a proposed purchaser assume responsibility for carrying out remediation of contaminated sites. In cases where this is a possible consideration, the valuation would include an estimate of market value for the site as clean, with adjustments to reflect the market value if the remediation is assumed by the purchaser.
  • Species at risk: It is important to highlight any limitations on future use identified by a species at risk assessment to ensure the valuation recognizes the impact of these limitations on the value.

8.2.7 Granting options to purchase

Departments must determine the market value of a property before granting any exclusive option to purchase the property. The amount of consideration to be paid to the government for granting an exclusive option to purchase should be at least equal to the costs to the government related to entering into the agreement and holding the property for the option period.

8.2.8 Critical or extraordinary assumptions

Any valuation that has critical or extraordinary assumptions may not be reliable, as the value is conditional upon the assumptions being true. The valuation analysis may result in a misleading value estimate if the assumptions are not true. The use of extraordinary assumptions is a useful tool for valuation, as it allows for options to be considered, typically for budget and planning purposes. Valuation of a building “upon completion,” as vacant, as if leased for 5 years, 10 years, etc., are examples of extraordinary assumptions. Therefore, extraordinary assumptions must be clearly stated in a report that relies on such assumptions in estimating value.

If an extraordinary assumption or critical assumption is used as the basis of an estimate of value in support of a transaction, the transaction should not be completed unless the limiting condition or assumption has been satisfied or realized.

8.2.9 Independence of valuation

As indicated in the Standard, there must be segregation of the transactional and valuation responsibilities, therefore the individual completing the valuation should not be part of the negotiation or decision making relating to the transaction

8.3 Policy conformity

In all three physical phases of acquisition, use, and disposal, departments should refer to the Policy on the Management of Real Property to ensure that all policy requirements are met. If any policy exceptions are necessary, Treasury Board approval is required. Transaction approval limits are outlined in Appendix B of the Policy. Treasury Board approval is required for transactions that exceed these limits.

Departments should note that the custodian, the Treasury Board of Canada Secretariat, or Public Works and Government Services Canada can flag the need for Treasury Board approval of a transaction strategy notwithstanding financial authorities of the minister.

The ADM Steering Committee on Real Property, which is chaired by an Assistant Secretary of the Treasury Board of Canada Secretariat, may also provide advice and guidance to custodians on whether properties valued under the prescribed approval limits warrant the attention of Treasury Board ministers.

8.4 Arbitration

When disputes arise with respect to any real property transaction, departments should consult their legal services unit or Department of Justice Canada regional offices and make all reasonable efforts to resolve any real property dispute in the best interest of Her Majesty through discussion, good faith negotiations, mediation, or conciliation.

One of the non-judicial methods of resolving disputes in real property transactions is arbitration, which is normally binding. “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 a permanent arbitral institution administers the arbitration.

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.

On the other hand, arbitration may have 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).
  • Given the nature of real property law, in some real property disputes, there may sometimes be an advantage in using courts rather than arbitration. In some instances, summary processes exist that provide relatively speedy resolutions.

Decisions on whether to use arbitration should be treated on a case-by-case basis. Departments should consult with their respective Department of Justice Canada legal services units or Department of Justice Canada regional offices before negotiating any arbitration agreement. Departments may be required to provide a legal risk analysis regarding appointment, law regulating arbitration, matters to be arbitrated, and legal costs.

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.

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.

8.5 Transfer of Administration

8.5.1 General commentary

The transfer of administration between federal departments is a transaction that appears like a new acquisition to the receiving department, a disposal to the transferring department, and ongoing use when viewed from the perspective of the Treasury Board. Special considerations, therefore, can be expected to apply.

From the perspective of the Treasury Board, the move of an asset from one federal custodian to another should be relatively seamless. This is to say that plans and performance, which were submitted and reported with regard to the asset while with one custodian, will remain essentially unchanged when the receiving federal custodian takes over. The asset's condition will be the same, as will be its environmental impacts, title, and other legal issues such as resource rights, rights-of-way, easements, Aboriginal rights, and so on.

A transfer is nonetheless an asset transfer from one department to the other and must be reflected in the government's accounts as a transaction that was made at market value. This means that an accurate assessment of the asset's market value is required; the asset should be in a condition that meets the receiving department's program requirement and investment capacities; and the environmental concerns should be clearly identified or dealt with.

In situations where additional work must be done on an asset in order to prepare it for transfer, the receiving department can be expected to insist that the work be done prior to the transfer or that the transferring department include a transfer of reference level funding, in the amount estimated as necessary for all the work to be done, along with a transfer of the asset itself. This will be especially true where an asset is being transferred that has environmental issues or is a designated heritage building with specific conservation obligations.

A transfer would be a time when more than just condition, environment, and other such matters are addressed. It is also a time to review and confirm legal title of the asset. Any burdens upon the title such as Aboriginal rights and claims would be noted and, if necessary, brought up to date.

8.5.2 Other interests

While transfers internal to the federal government will usually be transactions between two departments that have considered the matter in terms of their respective program obligations and requirements, custodian departments must confirm with other federal departments and agencies whether there are competing interests to take into account. Aboriginal interests

Transfers are Crown conduct of a kind that raises questions of consultation with Aboriginal groups. Especially in situations where a transfer will entail a change in type of use, there is a possibility that a legal duty to consult may apply and may require an accommodation of Aboriginal rights and claims depending upon their nature and strength. Department of Justice Canada legal advisors should therefore be part of transfer transactions.

9. Enquiries

Please direct enquiries about this policy instrument to the organizational unit in your department responsible for this subject matter. For interpretation of this policy instrument, the responsible organizational unit should contact: TBS Public Enquiries.

Appendix A: References

Legislation, Regulations, and Policies

Real Property

Partial List of Other Relevant Legislation, Regulations, and Policies Affecting Real Property Management

Other Resources

Appendix B: Real Property Glossary

Acquisition (Acquisition)
A transaction that adds real property to a department's inventory by purchase, lease, licence, exchange, gift, easement, expropriation, transfer of administration from another department or agent Crown corporation, or a transfer of administration and control from the provincial Crown.
Administration (Gestion)
A minister's stewardship of real property owned by Her Majesty.
Agreement (Entente)
An instrument, such as a memorandum of understanding, a memorandum of agreement, or an occupancy instrument, that, while not legally binding, creates a custodian-tenant relationship by conferring certain real property rights of use or benefits and obligations on the part of the two parties as if it were a truly enforceable instrument.
Annual consideration (Versement annuel)
In relation to a lease or licence, the total consideration divided by the length of the term in years.
Appraisal (Évaluation)
An adequately supported written opinion of the market value of the real property as of a specified date that evaluates the real property rights, interests, or benefits involved according to accepted appraisal practices.
Arbitration (Arbitrage)
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 a permanent arbitral institution administers the arbitration.
Consolidated Crown corporation (Société d'État consolidée)
A type of Crown corporation, identified in the Public Accounts, that relies on the government for most of its financing. In Canada, there are 23 such Crown corporations whose financial activities are consolidated in the Public Accounts of Canada.
Contaminated Site (Site contaminé)
A site at which substances are found at concentrations that (1) are above background levels and pose, or are likely to pose, an immediate or long-term hazard to human health or the environment or (2) exceed the levels specified in policies and regulations.
Custodian/Custody (Gardien)
A department whose minister has administration of real property for the purposes of that department's programs.
Custody transfer (Transfert de la garde de biens immobiliers)
A transfer of administration of real property that supports an adjustment to or transfer of program accountability.
Department (Ministère)
A department to which the policy in question applies. See the application section of each policy instrument for details.
Disposition/Disposal (Aliénation)
A transaction that alienates real property from a department's inventory by sale, lease, licence, exchange, gift, easement, transfer of administration to another department or an agent Crown corporation, or transfer of administration and control to the provincial Crown.
Estimate (Estimation)
An opinion, judgment, or calculation of the market value of real property, in writing, as of a specified date that evaluates the real property right, interests, or benefits involved and provides sufficient information and analysis to support the conclusion.
Financial performance (Rendement financier)
A performance measure that addresses the cost of operating and sustaining an asset relative to established standards or targets.
Functionality (Fonctionnalité)
A performance measure that addresses how effectively an asset meets defined program and service requirements.
Heritage building (Édifice patrimonial)
A federally owned building to which the minister of the Environment has assigned a "classified" or "recognized" designation.
Incremental costs (Coûts différentiels)
Costs incurred as a result of an action, i.e., costs that would not have been incurred had the action not been carried out. For example, in a letting, it means any costs that result from the letting activity, including any additional operation and maintenance costs, and any costs of servicing the real property to make it more suitable for letting.
Investment (Investissement)
The allocation and reallocation of financial resources to new and existing real property.
Licence (Permis)
Any right of use or occupation of real property that is not a legal interest in land.
Management of contaminated sites (Gestion des sites contaminés)
The spectrum of approaches for dealing with a known contaminated site. Management includes, but is not limited to, one or more of the following: monitored natural attenuation, warnings, restrictions to site access, change in land usage, isolation of contaminants from human and ecological receptors (contaminant stabilization, barrier walls, capping), interim remediation, partial remediation, phased remediation, full remediation, remediation in any of the previous approaches to varying standards (industrial, commercial, agricultural, residential, parkland), and postponement of action until contamination stops. Management also includes risk management.
Market value (Valeur marchande)
The price that a property would likely bring in a competitive and open market on a specified date under all conditions required for a fair sale, with the buyer and seller each acting prudently and knowledgeably, and where the price is not affected by undue stimulus.
Minister (Ministre)
In relation to a department, the minister who, under the Financial Administration Act, is the appropriate minister with respect to that department.
Open market (Marché libre)
A solicitation of offers giving the public fair and equitable opportunity to acquire real property from or to dispose of real property to the government.
Physical performance (Rendement physique)
A measure that addresses the physical state of repair and environmental condition of an asset relative to its current and long-term service delivery requirements.
Public purpose (Fins publiques)
For federal departments and agent Crown corporations, "public purpose" means program need; for provinces and municipalities, "public purpose" generally refers to roads, utilities, and parks. Other public purposes could be considered if they are non-commercial and for the common good of all citizens.
Real property (Biens immobiliers)
Any right, interest, or benefit in land, including mines, minerals, and improvements on, above, or below the surface of the land.
Remediation (Assainissement)
Improving a contaminated site to prevent, minimize, or mitigate damage to human health or the environment. Remediation involves developing and applying a planned approach that monitors, removes, destroys, contains, or otherwise reduces the exposure of contaminants to receptors of concern.
Risk management (Gestion des risques)
The selection and implementation of a strategy of control of risk, followed by monitoring and evaluation of the effectiveness of that strategy; it may include direct remedial actions or other strategies that reduce the probability, intensity, frequency, or duration of the exposure to contamination.
Sustainable development (Développement durable)
Development that ensures that:
  • the use of resources and the environment today does not damage prospects for their use by future generations; and
  • the management of our economic system maintains or improves our resource and environmental base.
Term (Durée)
The period of time covered by a lease, licence, or other agreement, including any renewal option(s).
Total consideration (Versement total)
In relation to a lease or licence, the total consideration payable under a lease by the tenant to the landlord or under a licence by the licensee to the licensor, during the term of the lease or licence. For leases or licences where all or part of the consideration is based on revenue or otherwise unquantifiable, a reasonable estimate of the total consideration should be used.
Utilization (Utilisation)
A performance measure that addresses the type, suitability, and intensity of use of an asset relative to its capacity or potential.

Appendix C: Administration

Section 18 of the Federal Real Property and Federal Immovables Act addresses the question of administration of real property by a minister. Included in the Act is a provision to deem a minister to have administration when the minister is "satisfied" that the real property in question is under his or her administration.

A department should take the following steps to determine that its minister has administration or that its minister is "satisfied" he or she has administration of federal real property in the department's inventory:

  1. Verify that the property is owned by Her Majesty the Queen in Right of Canada. The department should consult with the Department of Justice Canada in this regard.
  2. Review departmental records for Orders in Council, Treasury Board minutes, or other documents relating to the acquisition of the property. If these documents indicate the property was acquired for the purpose of the department, then subsection 18(1) of the Federal Real Property and Federal Immovables Act would apply and the department is entitled to determine that administration was vested in the minister at the time of the acquisition of the property.
  3. Review departmental records for Orders in Council or ministerial transfers of administration that may have transferred administration of the property to the minister after the property was acquired by Her Majesty the Queen in Right of Canada.
  4. Review departmental records to ensure that the department has not disposed of the property or transferred administration to another department.
  5. Where the departmental records do not contain sufficient information to enable a determination that the minister has administration of the property, consult with the Department of Justice Canada to determine if there are any statutory presumptions, transfers, or appropriations that have the effect of vesting the administration of the property in the minister.
  6. If steps 1 to 5 do not result in a department determining that its minister has administration of the property, the following additional steps should be taken by the department to obtain other evidence of administration to ensure the minister can be "satisfied" (as that term is used in s. 18(5.1) of the Federal Real Property and Federal Immovables Act) that the property is under his or her administration.
  7. Verify that there is no evidence in departmental records or in the Directory of Federal Real Property that any other minister has a claim to the administration of the property.
  8. Verify that no other department is occupying or using the property.
  9. Verify if departmental records indicate there is evidence of use of the property for the purpose of the department during the past five years (evidence could include occupation of the property, the issuance of leases or licences, payments in lieu of taxes under the Payment in Lieu of Taxes Act, or expenditures to improve or maintain the property).
  10. If steps 7 to 9 do not result in the minister being "satisfied" that the property is under his or her administration, the department should consult with the Department of Justice Canada on how to resolve the question of which minister has administration.

The Treasury Board and its Secretariat are responsible for establishing a government-wide system of management, control and reporting for federal assets. The applicable authorities can be found in the Financial Administration Act, subsections 7(1), 9(1.1), 9(2) and 149(1), and section 62; the Federal Real Property and Federal Immovables Act, subsection 16(4); and the Surplus Crown Assets Act, subsection 3(1)(b). Treasury Board policies on the management of real property and materiel apply to all federal custodians and tenants, as defined in section 2 of the Financial Administration Act.

This appendix provides tenant departments with integrated guidance on goods and services related to their accommodation. Real property, whether under a minister's administration or used by a tenant, is subject to the management objectives and principles outlined in the Policy on Management of Real Property. While this appendix focuses on tenant departments occupying space in buildings under the custody of Public Works and Government Services Canada (PWGSC), the guidance also applies to tenants occupying space in buildings under the custody of other organizations.


Accommodation requirements
Space accommodation requirements of tenants, including size of office space (based on the number of full-time equivalents), special-purpose space, term of occupancy, hours of operation, and location criteria.
Additional services
Those services that are in addition to the standard services provided to the tenant for unique program purposes (e.g., additional cleaning requirements, 24-hour security and after-hours electrical operations).
Base building
The building shell, including finished floors, exterior walls, interior core and demising walls, finished ceilings complete with lighting, and other building systems consistent with the designed function and planned general use of the building. For example, in the case of office accommodation, the base building would include exterior window coverings and primary identification signage.
Alterations and improvements to the base building or base building systems in order to prepare the accommodation for occupancy by a department.
Movable objects that support the human body, provide storage or hold objects above the ground (e.g., desks, chairs, fixed shelving and filing cabinets).
Movable objects, other than furniture or office equipment, that occupy an interior office space and can serve either a decorative or functional purpose (e.g., desk lamps, artwork and plants).
All movable assets excluding money or records acquired by Her Majesty in right of Canada. Movable assets are tangible and cover a broad range of goods such as equipment (e.g., office, information technology, telecommunications and scientific), furniture and furnishings, and larger goods (e.g., vehicles and ships).
Normal working hours
The normal working hours as specified in the custodian-tenant agreement. Generally, these hours are between 7:00 a.m. and 6.00 p.m., Monday to Friday, excluding statutory holidays.
Office equipment
Equipment located in the office that is utilized in the delivery of a departmental mandate (e.g., telephones, photocopiers, computers, printers and fax machines).
Tenant department
A department occupying real property or space under its own administration or under the administration of another department or organization.
Tenant services
Alterations to existing accommodation or services that are requested by a department during the term of its occupancy. These services could include requests for construction or relocation of doors, walls and electrical equipment; enhanced security; or maintenance of tenant equipment and systems.

Roles and responsibilities for accommodation

Table 1.1 summarizes the roles and responsibilities of the Treasury Board and its Secretariat, the custodian department (usually, PWGSC) and tenant departments related to accommodation, and identifies relevant policies and guidance.

Table 1.1: Roles and Responsabilities
Responsible Organization Roles Reference Documents
Planning and Initial Move-In Use and Occupancy
* Goods typically include furniture, furnishings, office equipment and telecommunication equipment.
1. Treasury Board and Treasury Board Secretariat Provision of direction and guidance for real property and materiel management
  • Policy Framework for the Management of Assets and Acquired Services
  • Policy on the Management of Real Property
  • Policy on the Management of Materiel
  • Policies for Ministers' Offices
  • Guide to the Management of Real Property
  • Guide to Management of Materiel
  • Guide to Management of Moveable Heritage Assets
2. Custodian Department (e.g. PWGSC) Provision of base building and fit-up of office space Provision of tenant services
  • Custodian's internal policies and standards for provision of tenant department's accomodation
  • Custodian-Tenant Agreement
  • Tenant service guidance
3. Tenant Department
  • Identification of accomodation requirements
  • Identification of required tenant services and goods* beyond those provided by custodian
Identification of required tenant services and goods* beyond those provided by the custodian
  • Tenant department's internal policies, standards, and guidelines for its accomodation requirements
  • Custodian-Tenant Agreement

These responsibilities are further described below.

1. Treasury Board and Treasury Board Secretariat

Policy direction for accommodation

The Policy Framework for the Management of Assets and Acquired Services and its associated policy instruments set the direction for the management of assets and acquired services. Within this framework, custodian and tenant departments are required to fulfill the management objectives and principles set out in the Policy on Management of Real Property and the Policy on Management of Materiel.

The objective of both policies is for real property and materiel to be managed by departments "in a sustainable and financially responsible manner that supports the cost-effective and efficient delivery of government programs."

Key management principles include the following:

  • Financially responsible management maximizes the long-term economic advantage to the Crown and provides best value to the Canadian taxpayer.
  • Cultural and environmental stewardship contributes to the preservation and protection of our heritage and the environment.
  • Fair, open and transparent transactions ensure equitable treatment.

Departments administering real property for office accommodation must adhere to the requirements of the Policy on Management of Real Property whether they are custodians or tenants. Of note, section 6.1.2 applies both to tenant and to custodian departments. It states, "When there is a custodian and tenant relationship, a formal agreement is to be entered into by both parties to ensure ongoing co-operation, timely communication and a mutual understanding of respective accountabilities, operational requirements, policy responsibilities and financial commitments to achieve optimum real property outcomes." It is important for departments to ensure that this custodian-tenant agreement be comprehensive in addressing all accommodation requirements, including management of tenant services.

It is also important that departments be aware that the movable components of an office (e.g., equipment, furniture and furnishings) are materiel, and thus are subject to the Policy on Materiel Management. This policy requires departments to consider "...the full life-cycle costs and benefits of alternative solutions to meeting program needs" for materiel assets. Accordingly, when acquiring materiel, such as office goods, deputy heads should ensure that their managers are confident and able to provide specific evidence illustrating that their departments are implementing the option that provides the best value to the Crown. The Treasury Board of Canada Secretariat's Guide to Management of Materiel provides guidance on the administration of office equipment, furniture and furnishings.

Policy direction for ministers' offices

Ministers' offices are subject to the guidance outlined in the Treasury Board Policies for Ministers' Offices. This document consolidates the various financial, personnel and administrative rules and regulations that govern expenses incurred by ministers and their exempt staff when they perform duties directly related to their responsibilities. Section 5.2.1 provides guidance on the provision of office furniture and furnishings for a minister's personal office.

2. PWGSC-Custodian department for office accommodation

Under the Department of Public Works and Government Services Act, and as stated in section 8.12 of the Policy on Management of Real Property, "Public Works and Government Services Canada is the designated custodian of general-purpose office accommodation in Canada, provided on an obligatory basis to departments, and sets the standards for them."

In this role, PWGSC is responsible for the provision and fit-up of office accommodation for government departments that are tenants in their buildings, and for the provision of building services during the term of occupancy.

PWGSC policy direction for office accommodation

PWGSC establishes policies and standards for office accommodation provided to tenants that occupy buildings under their custody. For example, PWGSC's Fit-up Standards ensure equity and consistency in federal accommodation as well as sustainable, affordable and supportive work environments. The standards identify the typical components that may be part of a fit-up or tenant service project, and clarify the funding accountabilities of PWGSC and its tenant departments.

Under section 6.1.2 of the Policy on Management of Real Property, PWGSC enters into formal accommodation agreements with departments, which specify the terms and conditions of a tenant's occupancy, including any building services to be provided by PWGSC. Services requested during the term of occupancy that are in addition to those specified in the occupancy agreement are considered tenant services.

PWGSC also publishes Guidance for Departments Requiring Tenant Services, which provides detailed advice to departments on how to procure and implement tenant services.

3. Departments

Departments require accommodation to deliver their mandated programs. These accommodation requirements, including goods and services, must support a department's program needs and government policy objectives in a cost-effective and efficient manner.

Guidance for accommodation requirements

Departments are responsible for the development and dissemination of well-documented guidance on their accommodation needs, including requests for goods and services related to their accommodation. These responsibilities are often vested within departmental units for facilities (or real property) and materiel.

It is recommended that departments develop an accommodation management framework appropriate to their requirements. At a minimum, this framework should include clear accountability and informed decision-making structures suitable for their organizational needs. This framework should also include appropriate policies, standards and guidance for its accommodation requirements, including those related to tenant services. Departments should identify the authority responsible for the approval of requests for goods and services related to their accommodation.

As a means of establishing priorities for such good and services, a department could assess its requirements against the following three categories:

  • Mandatory - The good or service complies with a specific legal or policy requirement (e.g., code compliance, employee or public health and safety, or a government initiative, such as the Greening of Government Operations).
  • Prudent - The good or service supports the efficient and effective delivery of a department's program (e.g., accommodation modifications to enhance space functionality or productivity).
  • Discretionary - The good or service enhances functionality and productivity of accommodation or program requirements, but could be considered optional (e.g., paintings or plants).

Given limited means, a department could then give priority to funding mandatory and prudent services over those which are discretionary.

Questions for departmental managers of facilities and materiel

Planning Phase

  • Are managers aware of the approval process for goods and services related to the department's accommodation, and the level of authority required?
  • Does the department conduct a thorough analysis of requirements for these goods and services to assess if they are necessary to address a program or a policy requirement? Is consideration given to whether the requirements are mandatory, prudent or discretionary, with priority to be given to the first two categories?
  • Is sufficient departmental guidance provided to managers on planning and processing requests for goods and services related to accommodation requirements?
  • Will such service requests create additional costs for the custodian (e.g., the upgrading of the electrical system or energy consumption)? Will there be any negative impact on the integrity of the building systems, which could result in yet more costs?
  • Does the department consider alternative methods to procuring goods and services related to its accommodation (e.g., borrowing, acquiring surplus goods, leasing or cost-sharing with another department)?
  • Does the department consider methods to minimize the cost of such goods and services before making a request (e.g., having work performed during normal working hours to avoid overtime charges, bundling similar requests to reduce administrative costs, or purchasing in bulk)?
  • Does the department assess whether it will substantially benefit from the investment? For example, is the tenancy for a long-enough duration?
  • Does the department have sufficient funds to procure and pay the ongoing maintenance costs of the requested goods and services?
  • Does the department provide sufficient evidence that the chosen option provides the best value to the Crown?

Procurement and implementation phases

  • Have you reviewed PWGSC's Guidance for Departments Requiring Tenant Services to obtain advice, particularly on the procurement and implementation of services and goods related to accommodation? Is this information made available to departmental managers who have the authority to procure these services and goods?
  • Does the department conduct a thorough cost analysis of all available contracting options and choose the most cost-effective?

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