2017 Harvest

2017 Harvest

Friday, February 3, 2017

Compensation for Injurious Affection: Impact on remaining land or impact on financial position of owners?

AltaLink expropriated a right-of-way over a strip of land from an Alberta couple for an electrical transmission line.  In a compensation hearing before the Alberta Surface Rights Board (the "Board"), the owners were denied compensation for injurious affection.  The injurious affection they claimed was a loss in value of the remainder of their property that was not taken by AltaLink.  The owners appealed the Board's decision to the Alberta Court of Queen's Bench and, on appeal, the Court reversed the decision of the Board and awarded the owners $125,780 in lost value plus interest.

The land in question consisted of two adjacent parcels containing approximately 230 acres, of which approximately 121 acres were cultivated.  The owners had purchased the land in February, 2013 for $511,500, and they were aware at that time that AltaLink had received approval from the Alberta Utilities Commission to construct and operate the transmission line across the property.  Prior to the purchase of the property, the new owners had rented the property for approximately 27 years, and it appears from the decision that they were able top purchase the property at below market value.  The Board found that the market value at the time of the expropriation in 2014 (the date of valuation for the purpose of calculating compensation) was somewhere between $902,000 and $930,000.

The owners argued that the taking of the right-of-way resulted in a loss of value to the balance of the property that was not taken as right-of-way related to the presence of the right-of-way and the transmission line.  They argued that their loss was not limited to the loss of value to the land as they were currently using it, but should be calculated based on their loss of ability to subdivide the property for new residential lots.  But for the AltaLink right-of-way, the owners could subdivide and sell the individual lots.  They put the value of their loss at 30% of the market value of the property.

The Court disagreed with the owners that the right-of-way would prevent the development of multiple residential lots, but accepted that the right-of-way would result in a loss in the value of the lots that could be created.  On that basis, the Court would have calculated the compensation to be paid to the owners based on  a market value loss of 15% (half of the 30% proposed by the owners), or approximately $131,000.  The Court then ended by making a finding that the $125,780 that would have been awarded by the minority dissenting member of the Board (in the original hearing) was therefore reasonable and set compensation at that amount.

Taken on its own, the Court's ruling on loss of value to the remainder of the property based on loss of value of prospective subdivision lots is not remarkable.  However, what is noteworthy is the Court's rejection of AltaLink's argument that no injurious affection compensation was payable at all because the market value of the property never fell below the amount the owners paid for the property.  AltaLink argued, and the majority of the Board had agreed, that an award of injurious affection would result in a windfall for the owners because they had paid substantially less than market value for the property.

But the Board had incorrectly "focused on the financial loss to the landowners and not the loss in value of the remaining land ... they were suspicious that the negative impact of the transmission line had already been factored into the sale price."  The Court ruled that "the fact that the Appellants purchased the land after the Respondent obtained a permit and license to build the line is of no consequence.  The payment for injurious affection is based on the impact on the value of the remaining land, not the impact on the financial position of the owners.  This does not result in a windfall or unjust enrichment to the Appellants because, until the line is removed, it will have a negative impact on the Land's value, which is an economic loss."

Read the decision at: Koch v Altalink Management Ltd.