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With Ontario infrastructure spending at an all-time high, governmental land requirements are expanding; expropriation is occurring rapidly throughout Ontario. Here are 10 simple but crucial points you need to know if your land or business is being taken by the government.
Expropriation. Expropriation is the government’s exercise of its right to acquire land from landowners for a public purpose – for example, to build roads, Light Rail Transit projects, schools, etc. The Supreme Court of Canada has stated that expropriation is one of the ultimate exercises of governmental authority. While nobody enjoys having their land expropriated, it is very difficult to stop an expropriation from happening. As such, the expropriated landowner’s focus should be obtaining full and fair compensation.
Compensation. Expropriated landowners are entitled to fair compensation; this compensation should make them “whole” – that is, fully compensate them for all losses arising from the taking. This can include compensation for the land itself, compensation for business losses, special difficulties in relocating your business and other damages that flow from the expropriation. The types of compensation owing to a landowner greatly vary on the facts of each case and the use made of the land. It is important to note that expropriation claims are not limited to landowners. Mortgagees, tenants, estate trustees and creditors may be entitled to compensation too.
The Scheme. The expropriation “scheme” is the overall project resulting in the land taking or the steps taken by an expropriating authority leading to the eventual public project. The scheme can arise years or even decades before the expropriation comes to fruition. Identifying the scheme is important because it can be a starting point for pre-expropriation damages and other losses. While the scheme is ignored for the purposes of determining compensation for the fair market value of expropriated land, it is taken into account in other respects.
Law. In Ontario, the expropriation process is regulated by the Expropriations Act – specialized legislation that sets out the rights of governments and the rights of landowners. Expropriation law has also developed over time through case law and precedents, some of which have been appealed all the way to the Supreme Court of Canada. The Ontario Municipal Board is the administrative tribunal that has exclusive jurisdiction over compensation proceedings arising from expropriations. Other legislation often becomes relevant to these matters including the Municipal Act, Planning Act, and environmental legislation.
Full or Partial Expropriation. The government can acquire your entire property or simply a portion of your property. However, a partial expropriation can have detrimental impacts on the use and value of your land. This concept is known as “injurious affection” – the permanent adverse impacts of an expropriation on land or a business on that land. For example, if a partial expropriation reduces the economic viability of an intensification development (i.e., a condo project), compensation may be owing for that loss.
Section 25 Offers. Within 90 days of an expropriation coming to fruition on title to your property, the expropriating authority must offer you compensation for the taking. This offer can be accepted “without prejudice” – leaving available an opportunity to seek additional compensation. Often, Section 25 offers do not include full and fair compensation for injurious affection and business damages, so a further claim should be pursued even after the acceptance of the Section 25 compensation payment.
Section 30 Agreement. Expropriating authorities and landowners can enter into a transaction in which the landowner voluntarily transfers the land to the expropriating authority in exchange for agree upon compensation payments. Section 30 Agreements can be useful and creatively crafted so that other issues such as road access or construction management can be addressed, which could offer protection for the landowner (and authority) so as to mitigate losses before they occur.
Expertise. Formulating a strong claim and navigating negotiations requires the expertise of land use planners, real estate appraisers, business loss valuators and legal counsel familiar with the specialized nature of expropriation matters. These professionals should also have experience giving evidence at the Ontario Municipal Board, as expropriations sometimes lead to hearings over the appropriate amount of compensation. Land use planners help assist in the valuation process by determining the “highest and best use” of the property and real estate appraisers are trained in determining the fair market value of the expropriated land based on other comparable property sales that have occurred in the marketplace.
Costs. To create fairness in the process, the expropriating authority is obliged to pay for reasonable fees for the assistance of legal counsel, real estate appraisers, land use planners and sometimes business valuation experts and engineers. Landowners should seek out these specialized experts to advise on the full extent of their claims as soon as they become aware of a public project involving expropriation.
Tax Implications. There are important tax implications arising from expropriation. For example, you may be entitled to a “rollover” under the Income Tax Act if you replace your expropriated property with a similar property. A rollover allows the expropriated landowner to benefit from deferred taxation of the replacement property instead of triggering a capital gain for the deemed disposition of the expropriated property. The advice of a tax accountant familiar with the rollover and replacement property rules can greatly assist in expropriation planning and such advice is usually paid for by the expropriating authority.
Expropriation law is a specialized area requiring specific legal and professional expertise. It can have a debilitating effect on your business and being expropriated is a worrisome and uncertain process.
We would be pleased to speak with you about your expropriation, or potential expropriation, and the ways to maximize potential compensation and mitigate losses. We can assemble and guide the appropriate expert team required to maximize compensation and negotiate fair market value compensation. We have experience negotiating numerous 7-figure compensation payments for clients.