There's a possibility that a financially restructured Laurentian University (LU) will be raising the rent for the Northern Ontario School of Medicine (NOSM). This is based on recently released documents from the Ontario Superior Court of Justice referring to the Companies' Creditors Arrangement Act (CCAA), which is overseeing the financial insolvency matters at LU.
The documents acknowledge that LU has had a long-established lease agreement with the NOSM going back to 2005. It was a 30-year lease agreement that was to be in effect until 2035. This includes leasing building space at both LU and Lakehead University in Thunder Bay, where NOSM is also established.
NOSM communications manager Kimberley Larkin explained that the lease agreement was for a nominal sum.
"The buildings that NOSM occupies at both Laurentian and Lakehead were paid for by the Ontario Government," said Larkin. “NOSM's lease at Laurentian University originally for 30 years has 15 years remaining at $2 per year and factors in the original capital investment made by the government.”
On the Laurentian campus, NOSM occupies one entire building and roughly 60 per cent of the space in the nearby Health Science Education Resource Centre building.
In view of the financial troubles at LU that were revealed one year ago, the Ontario government decided last April that NOSM would be granted standalone university status.
"Pending the government’s proclamation of the Northern Ontario School of Medicine Act, 2021, NOSM is working with both Laurentian University and Lakehead University to explore options to renew its relationship agreements including the leases," Larkin said.
In the documents that came out last week, LU said the nominal amount in the lease agreement for the buildings would no longer be feasible.
"Given the effect of NOSM’s impending independence and the real estate review undertaken by LU on behalf of its creditors, it is not feasible for LU to continue to lease two buildings to what will now be an arms-length third party for nominal consideration," LU said the court documents.
"LU also anticipates that its creditors will require an arms-length commercial arrangement for the two buildings to be in place as part of any plan of compromise or arrangement. LU has advised MCU (Ministry of Colleges and Universities) of its expectations in that regard. Discussions are ongoing between LU and NOSM."
In addition to this, LU provides several administrative type services on behalf of NOSM, such as collecting tuition fees and other incident student fees. The university said this agreement will need to be reviewed with an eye to reflecting "fair market value" for services.
"The Relationship Agreement is reviewed by LU and NOSM every three years with the last one completed on December 19, 2018," said the court documents.
"LU and NOSM continue discussions regarding the structure and terms of a new Relationship Agreement that reflects the material change in relationship between the two entities and their anticipated ongoing close proximity on LU’s campus,” the documents continued. “LU has advised NOSM that the continued provision of any services or use of any space must reflect the fair market value for services between arm's-length parties."
Sudbury.com
