Land Use in Canada - Where "Extensive and Restrictive Land Use Regulation is the Norm" by Deborah Curran

Greetings from Canada where most of the water flows north and there is no Canadian equivalent to the Fifth Amendment. Arguably the biggest difference in land use law between Canada and the U.S. is that we have no constitutionally protected property rights in Canada. Of suprise to many of you and, indeed, to many landowners in Canada, this approach to land use regulation allows provincial and local governments to restrict virtually all use of land without compensating the property rights holder for loss of land value as long as the regulation is in the public interest. As Justice Cromwell of the Supreme Court of Canada reasoned in Mariner Real Estate Ltd. v Nova Scotia (Attorney General), (1999) 177 D.L.R. (4th) 696, 178 N.S.R.(2d) 294 (NSCA) when he was a judge of the Nova Scotia Court of Appeal in a judgment that thoroughly canvassed this area of law (at paras. 41-42):

These U.S. and Australian constitutional cases concern constitutional limits on legislative power in relation to private property. As O'Connor, J. said in the Unites States Supreme Court case of Eastern Enterprises v Apfel 118 S. Ct. 2131 (U.S. Mass. 1998), the purpose of the U.S. constitutional provision (referred to as the "takings clause") is to prevent the government from "...forcing some people alone to bear public burdens which, in all fairness and justice, should be born by the public as a whole." Candian courts have no similar broad mandate to review and vary legislative judgments about the appropriate distribution of burdens and benefits flowing from environmental or other land use controls. In Canada, the courts' task is to determine whether the regulation in question entitles the respondents to compensation under the Expropriation Act, not to pass judgment on the way the Leiglature apportions the burdens flowing from land use regulation.

In this country, extensive and restrictive land use regulation is the norm. Such regulation has, almost without exception, been found not to consitute compensable expropriation.

However, the principle that a government or expropriating entity must pay compensation when expropriating an interest in property is alive and well in Canada. Its foundation rests in the royal perogative, powers bestowed on the Crown or government from the common law, and the common law principle that unless a statute explicitly provides, it is not to be construed as taking away property without just compensation (Attorney General v DeKeyser's Royal Hotel [1920] A.C. 508 H.L.). As a common law principle for which the courts have set a high bar when testing whether regulatory behaviour equals regulatory or de facto expropriation. The claimant must prove that:

1. The legislation or government action must so restrict a landowner's enjoyment of property as to constitute confiscation an interest in property; and

2. That interest in property must be acquired by the Crown (government).

It is the second part of the test that is the hardest to meet. Courts have found that simply benefitting Crown land such as a park is not sufficient to prove acquisition by the Crown.

In many provinces this common law rule is codified in a modified form in provincial land use law. For example, sections 914 of the Local Government Act in British Columbia and 621 of the Alberta Municipal Government Act state that no compensation will be paid for changes in the value of land caused by specified decisions made under a land use bylaw or permitting function. It is only when regulation takes away virtually all incidents of private ownership that the regulation will be found to be improper. The precise wording in British Columbia under s.914 is:

(1) Compensation is not payable to any person for any reduction in the value of that person's interest in land, or for any loss or damages that result from

(a) the adoption of an official community plan or a bylaw under this Division [zoning and other development regulation] or the issue of a permit under Division 9 [development permit] of this part,

***

(2) Subsection (1) does not apply where the bylaw under this Division rstricts the use of land to a public use.

These regulatory or de facto expropriations are few and far between in Canada. Although we hear about successfully argued "takings" cases in the U.S. courts, in Canada a court has never found land use regulation by a local government to result in a regulatory expropriation for which compensation is owed. See Mariner Real Estate Ltd. v Nova Scotia (Attorney General) 1999 CanLII 7241 (NSCA) for an excellent discussion of this area of law, and Canadian Pacific Railway Co. v Vancouver (City) [2006] 1 SCR 227, 2006 SCC 5 for the most recent Supreme Court of Canada discussion in the municipal land use context. Courts have ruled that significantly curtailing development on land that is environmentally sensitive, freezing development, development moratoria, and requirements to plant a vegetated buffer adjacent to a watercourse to protect a drinking water source do not require compensation.

The cases where courts have awarded compensation for loss of an interest in property centre around federal or provincial regulation that essentially prohibits an otherwise existing lawful activity or prevents access to a property right. Several cases in British Columbia award compensation for mineral rights that the provincial government rendered inaccessible upon creating a provincial park [R v Tener [1985 1 SCR 533; Casamiro Resource Corp. v British Columbia (Attorney General), 1991 CanLII 211 (BCCA)]. The classic case is Manitoba Fisheries v The Queen [1979] 1 SCR 101 where the court found a de facto expropriation by the federal government when it enacted legislation that created a monopoly in favour of a Crown corporation dealing with a freshwater fishery that removed all economic viability, including the goodwill, of one business.

Before I seal your view of Canada as the quiet socialist neighbour to the north ("What? No constitutionally protected property rights?") I must add that in practice land use regulation by local governments works much the same in Canada as in most parts of the U.S. Zoning typically awards development potential or development rights, and once an application is submitted to a local government that zoning and other regulations vest. Few local governments attempt to curb growth in any comprehensive way. There is little coordination at a regional scale about where new development will occur, and most cities are challenged with revitalization of a formerly industrialized water front or downtown core that has to compete with the big box periphery. Proposals for a slight increase in residential density in existing neighbourhoods result in an eight hour public hearing, and there is, of course, no accounting for municipal bad taste in what was kind of development council believes is in the public interest. Although we have somehow resisted building freeways through most of our urban centres and do have a few somewhat successful provincial growth management or agricultural land protection law in place (more on that this month), the local politics of land use law often favours individual property rights.

If we conducted a poll I would be willing to wager that most Canadians and, in particular, municipal elected officials believe that compensation is owed if development "rights" are taken away by regulation. Most intersting is the fact that the Canadian law of regulatory expropriation has remained unchanged since land use regulation came into vogue yet it is popularly trumped by the law of eminent domain from the U.S. Perhaps telecommunications law has more impact on land use than land use regulation itself.