Subdivision Control – A Checkerboarded Past and Future

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

There was a time in Ontario when property owners were at liberty to subdivide their property without municipal consent.  An owner in the nineteenth century to whom the Crown granted a 200-acre parcel could divide the parcel into smaller pieces and convey them to new owners by depositing deeds in the Land Registry.  200-acre parcels became 100-acre parcels, 100-acre parcels became 50-acre parcels, and so on.  The creation of land parcels was largely a matter of the personal circumstances and preferences of individual landowners. 

Early in the twentieth century, Ontario began to enact planning legislation intended to impose some governmental control over land use.  In 1946, Ontario passed the first version of the Planning Act, which gave municipalities the power to create and impose formal Official Plans.  Later, municipalities were given the ability to pass subdivision control by-laws that would make municipal consent a condition of severances of land.  Eventually, municipal consent was made mandatory for nearly all severances, with or without a by-law in place.

Section 50 of the Planning Act governs subdivision control today.  Section 50(3) states that, without municipal consent, and unless a special exception applies,

No person shall convey land by way of a deed or transfer, or grant, assign or exercise a power of appointment with respect to land, or mortgage or charge land, or enter into an agreement of sale and purchase of land or enter into any agreement that has the effect of granting the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more…

Section 50(21) of the Act provides the legislative hammer with which subdivision control is enforced: 

An agreement, conveyance, mortgage or charge made, or a power of appointment granted, assigned or exercised in contravention of this section or a predecessor thereof does not create or convey any interest in land …

A transaction that contravenes the Planning Act is ineffective; no interest in land is created or conveyed despite the intentions of the parties.

The transactions that require municipal consent involve the conveyance of an interest in one piece of land when the party making the conveyance retains an abutting piece of land (note that parcels that touch only at a point like squares of the same colour on a checkerboard are not considered abutting parcels).  Without municipal consent, the owner of a 100-acre parcel generally cannot sell off a 50-acre portion of the land and retain the other 50 acres.  The owner also cannot split the 100-acre parcel into two 50-acre parts and transfer those simultaneously to two different purchasers (a procedure that was once considered a loophole in the Act).  Without a severance consent, the owner is generally limited to dealing with the whole 100-acre parcel.

And it usually doesn’t matter that the 100-acre parcel, or whatever the area is, was formed from what were previously smaller parcels.  If Owner A owns a 50-acre parcel and purchases the 50 acres next door (taking title in the same name), the two 50-acre parcels merge and cannot be re-split without a severance consent.  It doesn’t matter that the two 50-acre parcels may continue to have distinct tax assessment roll numbers or may even somehow appear as separate PINs (parcel identifier numbers) in the Land Registry; for purposes of the Planning Act, they have merged unless they were previously divided with municipal consent.

The Local Planning Appeal Tribunal (the “LPAT”, formerly the Ontario Municipal Board) recently reversed an amendment to the Official Plan of the County of Bruce (the “OPA”) intended to sever a 60-hectare farm parcel into two parts.  The owners of the property had applied to the County for the amendment on the basis that it was a “correction of title” to restore the two separate parcels that had previously existed.  The owners believed that the Land Registry Office had combined the parcels by placing both within the same PIN during the administrative conversion from the former Registry system of land registration to the current Land Titles system.  For that reason, the owners believed that the County could re-separate the lands even though the Provincial Policy Statement (the “PPS”, the over-arching provincial planning policy in Ontario) would prohibit the creation of a new lot within a prime agricultural area.

The LPAT disagreed with the owners, writing:

The Tribunal is sympathetic to the Applicants’ frustrations arising from their discovery that they cannot sell the Severed Lands without the Retained Lands, as a separate parcel, notwithstanding the fact that the two parcels were once purchased separately from the Crown. However, such circumstances are not unusual and the Act governs, and has governed, such aspects of the ownership of Lands in Ontario for decades. So too have the fundamental planning considerations which the Tribunal must have regard to been in place for applications such as this, and which now require that the Tribunal ensure that [the OPA] is consistent with the PPS, and also is consistent with, and conforms, to the other goals, objectives and policies of the County OP, and represents good planning in the public interest. The issue is not merely a correction of title as the Applicants submit.

Compliance with the Planning Act is essential to any property transaction in Ontario.  Given the drastic consequences of contravening the Act, legal advice is not optional

Read the LPAT decision at:  2021 CanLII 6240

No Free Ride on Expropriation Costs

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In the oft-cited case of Toronto Area Transit Operating Authority v. Dell Holdings Ltd. from 1997, Justice Cory of the Supreme Court of Canada wrote of expropriation:

The expropriation of property is one of the ultimate exercises of governmental authority.  To take all or part of a person’s property constitutes a severe loss and a very significant interference with a citizen’s private property rights.  It follows that the power of an expropriating authority should be strictly construed in favour of those whose rights have been affected.  This principle has been stressed by eminent writers and emphasized in decisions of this Court.

The presumption is that there will be no expropriation without compensation, and expropriation statues such as Ontario’s Expropriations Act are to be read, as noted by Justice Cory, “in a broad and purposive manner in order to comply with the aim of the Act to fully compensate a land owner whose property has been taken.”

Full compensation is normally understood to include reimbursement of the reasonable costs incurred by a landowner incurred in the determination of the amount owing for the expropriation.  The landowner will not be “made whole” if he or she is left out of pocket for legal, appraisal and other costs expended in disputing the amount of compensation offered by an expropriating authority.  Section 32 of the Expropriations Act requires the Local Planning Appeal Tribunal (the statutory tribunal that arbitrates expropriation compensation, formerly the Ontario Municipal Board or “OMB”) to order payment of a landowner’s reasonable legal, appraisal and costs “actually incurred by the owner for the purposes of determining the compensation payable” where the compensation amount recovered by the landowner is “85 per cent, or more, of the amount offered by the statutory authority”.  If the amount recovered is less than 85 percent of what was offered in compensation by the authority, the Tribunal has discretion to award costs as it sees fit.

The 85 percent rule, which is a common one across Canadian jurisdictions, means that the landowner does not need to accept the compensation offered by the authority solely out of fear of the costs of arbitrating the compensation.  The landowner will still be entitled to recover his or her reasonable costs even if the Tribunal determines that the compensation payable is up to 15 percent less than what was offered by the expropriating authority.  Only where a landowner turns down an offer by the expropriating authority that ends up to be more than 15 percent higher than the actual compensation payable (as found by the Tribunal) does the landowner risk not recovering his or her own costs and perhaps having to pay costs to the expropriating authority.

Where land is taken by an expropriating authority, Section 25 the Expropriations Act requires that the expropriating authority serve on the registered owner of the land “an offer of an amount in full compensation for the registered owner’s interest”.  In a recent decision, the Court of Appeal for Ontario confirmed that this mandatory offer is not the only offer that may be relevant to the determination of costs under Section 32 of the Act.  It is open to the expropriating authority to make subsequent offers to settle the issue of compensation, and a landowner will have to consider those offers reasonably on an ongoing basis.   The landowner cannot sit back and reject an updated offer that ends up being more than 15 percent higher than the actual compensation awarded on the assumption that his or her entitlement to costs is safe because the initial offer was too low.  At least not without putting that entitlement to costs at risk.

Writing for the Court of Appeal, Justice Hourigan explained that, “the objective of full and fair compensation cannot be divorced from the objective of the efficient resolution of claims.”  He rejected the landowner’s position in the case on appeal that only the Section 25 offer counted.  In Justice Hourigan’s view, the landowner’s proposed interpretation:

… would permit the prospect of an unreasonable claimant delaying proceedings, running up legal costs, and wasting the [former] OMB’s resources, all the while safe in the knowledge that unreasonable refusals of subsequent offers cannot adversely affect its entitlement to legal costs.

Put another way, “the statutory protection provided by the Act is not a blank cheque that permits a claimant to act unreasonably.”

And it must be remembered that unreasonable conduct by a landowner does not only put the landowner’s entitlement to costs at risk, but also exposes the landowner to possible liability to the expropriating authority for its costs.  In the case before the Court of Appeal, the landowner was appealing a decision by the OMB (upheld on appeal by the Divisional Court) that awarded the expropriating authority its partial indemnity costs incurred after the date of its offer to the landowner that ended up being far more than 15 percent higher than the expropriation compensation awarded.

Landowners facing expropriation can take comfort in knowing that the costs recovery rules are designed to afford them a fair chance to dispute the compensation amount offered by the expropriating authority.  However, the trade-off is that landowners must conduct themselves reasonably throughout the full course of the dispute.

Read the Court of Appeal's decision at:  2020 ONCA 490.