The Supreme Court of Canada on “Constructive” Expropriations: A Critical Development in Canadian Expropriation Law

The Supreme Court of Canada (“SCC”) released a bombshell decision in October 2022 that expands on the idea of “constructive” or de facto expropriations and provides great commentary. The decision addresses both expropriation and land use planning elements of property law – rarely a focus of the Supreme Court. The decision arose from a property in Halifax; it was a 5-4 decision.

In Annapolis Group Inc v. Halifax Regional Municipality, the SCC developed the law on “constructive” or “de facto” expropriations – that is, where the expropriation of lands is not achieved through the government’s acquisition of legal title – instead, expropriation is found to occur based on the impact of the government’s land use planning regulations that restrict how a site can be utilized and where the government also achieves some benefit from the planning decision at issue.

Until Annapolis, arguments on constructive expropriations have largely failed at land tribunals and courts. Expropriation lawyers have been making arguments for years that certain planning decisions to “down-zone” lands effectively amount to expropriations of land. Property owners and developers are sometimes left with undevelopable lands as a result of the “down-zoning” or “down-designation” of lands (for example, where lands are zoned from residential to agricultural). The property owner is most of the time left without recourse since local governments do have the authority to regulate land development based on the Official Plans and Zoning By-Laws and as provided for in the Municipal Act.

Context

The property owner, Annapolis, amassed 965 acres of lands it intended to develop, pending completion of a “secondary plan” being adopted by Halifax. The lands were zoned “Urban Reserve” and “Urban Settlement” – “Urban Settlement” permitting certain forms of development pending adoption of a secondary planning process. Halifax ultimately denied Annapolis’ development application in 2016. However, Halifax also reserved a portion of the Annapolis lands for possible inclusion in a future regional park, and this was the fundamental issue with Halifax’ planning regulation. Had Halifax denied Annapolis’ development application and not reserved a portion of the lands for a future park then a constructive expropriation probably would not have taken place.

Ultimately, Halifax refused to initiate the secondary planning process thereby prohibiting development of the Annapolis lands; at the same time, Halifax retained the benefit of reserving lands for a future park.

Key Points

The key takeaway of the case is this:

An expropriation of land may be deemed to occur if the landowner can demonstrate that:

(1) the government obtained an advantage or “beneficial interest” flowing from the property; and

(2) the regulation or law imposed eliminates all reasonable or economic uses of the property.

Zoning “which effectively preserves private land as a public resource” may give rise to a claim for a constructive expropriation if it also deprives the property owner of all reasonable uses of the land.

The legal test therefore focuses on the effects of the planning law and advantages the authority receives from planning regulations. Substance and not form prevails when examining the planning regulation.

It is important to remember first principles: expropriations are for the sole purpose of taking lands for a public purpose (i.e., to build roads, schools, etc.). And that is exactly what happened in the Annapolis case. Lands were reserved for inclusion for a future park in Halifax – that is a fundamentally public purpose.

Other Factors to Consider for Constructive Expropriations

In addition to the two-part test above, a contextual analysis must also consider:

  1. The nature of the government action (i.e., whether the planning regulation targets a specific property owner or advances a greater public policy objective);
  • The nature of the land including its historical or current uses – specifically, where land is undeveloped then prohibition of all potential reasonable uses may amount to a constructive taking; and
  • The substance of the alleged advantage – permanent or indefinite denial of access to the property or the government’s permanent or indefinite occupation of the property would constitute a taking. Regulations that leave landowners with only “notional” use of the land and deprived of all actual economic value, or that limit the uses of the land to public purposes confining the uses of private land to public purposes, such as conservation, recreation, or institutional uses such as parks, schools, or municipal buildings.

Planning Regulations Do Not Always Amount to Constructive Takings

Expropriation lawyers should not get overly excited about this decision. An unfavourable planning regulation will rarely amount to a constructive expropriation. The test is stringent and there must be a very clear benefit obtained by the government pertaining to the lands at issue.

The SCC emphasized that not every instance of regulating the use of property amounts to a constructive expropriation. Governments and municipalities can validly regulate land in the public interest without effecting “takings”. The line between a valid regulation and a constructive expropriation is only crossed where the effect of the land use planning regulation deprives a claimant of the use and enjoyment of its property in a substantial and unreasonable way, or effectively confiscates the property while at the same time provides a benefit to the government, flowing from the land.

Canadians Have Common Law Protections for Their Property

We applaud the SCC for emphasizing that Canadians have common law protections of their property despite such rights not being explicitly codified in the Charter of Rights and Freedoms, as noted at paragraph 24:

It is, of course, true that the framers of our Constitution did not include the protection of property rights in the Canadian Charter of Rights and Freedoms. But the Charter is not, and never has been, the sole source of Canadians’ rights against the state; in particular, the common law also affords protections of individual liberty. Nor is the scope of common law rights dependent on whether such rights are also entrenched in the Charter. While this follows as a matter of logic, s. 26 of the Charter itself affirms that “[t]he guarantee in this Charter of certain rights and freedoms shall not be construed as denying the existence of any other rights or freedoms that exist in Canada.”

Contact Us About Your Expropriation  

Expropriation law is a complex and specialized area of law, and we would be pleased to discuss your matter with you.  Unified LLP has significant experience representing property owners in expropriation and injurious affection claims against local authorities. Please contact Michael Paiva at 416.800.1733 or at michael@unifiedLLP.com.