In conducting a title search on a property, it is not uncommon to discover one or more registrations for easements for public and even private utility services. A municipality may have an easement for a sewer line through a property or an easement for access to maintain a sewer in an adjacent property. Oil and gas companies have easements for pipelines. Electricity distributors have easements for electricity transmission and distribution lines. Telephone companies have easements for telephone lines. A neighbour may have an easement for a private water line. In all of these cases, there will be some restriction on the use that may be made of the land encumbered by the easement. The “servient” owner of the affected land, whether by the terms of a contract or through the Common Law, is generally prohibited from substantially interfering with the rights of the “dominant” owner for whose benefit the easement exists.
Some minor utility easements will have little effect on property use, such as those running parallel to a road allowance where building is already prohibited by setback requirements in a zoning by-law. Other utility easements can have a major impact on land use. For instance, the easement for a large diameter high-pressure natural gas pipeline or for an overhead electricity transmission line can effectively sterilize a property. Within urban centres, such easements may be condemned to serve as “green space”. In agricultural areas, these easements can often continue to be used for cultivation and other agricultural purposes but not for any other non-agricultural development.
In standard forms of Agreement of Purchase and Sale for land, buyers agree that they will take title to the property subject to minor easements for utility or telephone services or easements for public utility lines that do not have a material effect on the use of property. While the seller is generally obligated to provide clear title to the property, those easements are an exception. In some cases, a buyer will know about easements affecting a property before signing the Agreement of Purchase and Sale. In other cases, easements will only be disclosed after the deal is signed when a title search is conducted. Sometimes the discovery of an easement can scuttle the closing of a transaction.
In a case decided in 2016, the Ontario Superior Court of Justice ordered that sellers return a $50,000 deposit to a buyer in a failed transaction involving a $1,685,000 home. The Agreement of Purchase and Sale included the exceptions to clear title mentioned above, but the buyer refused to close the transaction after discovering that there was an easement for a TransCanada Pipelines natural gas pipeline running through the backyard directly beneath the property’s pool, cabana and patio. There was an agreement registered on title that provided TransCanada with the right to remove the pool and cabana if necessary to deal with its pipeline.
There were actually two TransCanada easements registered on title to the property. While the sellers had disclosed the existence of one of the easements (registered in 1959), which did not affect the pool, cabana and patio, they failed to disclose the second easement (registered in 1992), which did affect those components of the property. The sellers had constructed the pool, cabana and patio in 2011 without TransCanada’s consent, and had subsequently entered into the agreement by which TransCanada could require removal of the pool and cabana in order to allow construction to be completed.
The Court ruled in the buyer’s favour, finding that he was entitled to rescind the agreement to purchase the property because of the undisclosed easement and agreement which could “affect, in a significant way, the [buyer’s] use and enjoyment of the property.”
The Court of Appeal for Ontario just released a decision in another utility easement/swimming pool case. This time, homeowners constructed a swimming pool on a part of their property that was subject to a 1972 general municipal utility easement. The terms of the easement reserved to the landowners the right to use the surface for any purpose which did not conflict with the Municipality’s rights. The easement also specifically prohibited planting of trees and the erection of any building or structure.
The homeowners had purchased the property in 2012. They knew about the utility easement, but believed it was abandoned or never used. They were wrong. The easement contained an electricity distribution line servicing a neighbouring property. The homeowners built their pool in 2014 without a building permit, which resulted in prosecution under the Building Code Act. In 2018, the easement rights holders (the Municipality and the local electricity distributor) applied to the Court for orders declaring that the pool encroached upon the easement and requiring the removal of the pool.
A judge of the Superior Court granted the application, ruling that the pool “actionably” encroached on the easement because it contravened the express prohibition in the terms of the easement. Without that express prohibition, though, the judge would have found that the pool did not have to be removed because it did not meet the test for “substantial interference” with the easement; the pool could only “cause some unspecified or unknown, but probably quite minor, degree of inconvenience” to the rights holders in exercising their easement rights.
On appeal, the Court of Appeal upheld the finding that the construction of the pool was an actionable encroachment. The words of the easement document were clear – do not under any circumstances plant a tree or build a structure within the easement lands.
Whether you own a property or plan to buy one, don’t ignore easements. And, no, that caution doesn’t just apply to properties with swimming pools.
Read the Court of Appeal's decision at: 2021 ONCA 1.
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