Municipalities attempting to use private land for public uses could face greater risks in light of a recent Supreme Court of Canada (SCC) ruling.
On October 21, 2022, the SCC released its 5-4 decision in Annapolis Group Inc. v Halifax Regional Municipality, 2022 SCC 36 (Annapolis v Halifax), which clarified the law surrounding constructive taking of private property by government authorities.
Constructive taking, also known as de facto expropriation or regulatory taking, refers to a government authority’s taking of private lands through regulation. For example, the SCC previously found that a governmental authority’s refusal to grant park permits to the owners of registered mineral rights within a provincial park constituted constructive taking.
Previous case law held that constructive taking required a government authority to acquire a proprietary interest in the private property. However, in Annapolis v Halifax, the SCC found that constructive taking can occur where government regulation confers an “advantage” to the government flowing from the property. This broadens the scope of constructive takings, making it more important for municipalities to be keenly aware of how their conduct may impact property owners.
The Annapolis Group Inc. (Annapolis) owned 965 acres of vacant land in Halifax, which it acquired over the course of decades starting in the 1950s. Annapolis owned the land with the intention of later developing and reselling it.
In 2006, the Halifax Regional Municipality (Halifax) adopted a municipal planning strategy that reserved a portion of the land owned by Annapolis for future use as a public park. Annapolis subsequently tried to develop the land, and in 2016, Halifax denied Annapolis the authorization required to proceed with development.
As a result, Annapolis brought a claim for constructive taking, alleging that Halifax improperly used its regulatory powers to take the land owned by Annapolis without proper compensation.
Broadening the Test for Constructive Taking
The majority opinion in Annapolis v Halifax affirmed the test for constructive taking the SCC previously set out in Canadian Pacific Railway v Vancouver (City), 2006 SCC 5 (CPR). For a constructive taking to occur, there must be: “(1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property.” In Annapolis v Halifax, the SCC broadened the meaning of “beneficial interest.”
The majority clarified that a beneficial interest does not require a public authority to acquire the land. Rather, a beneficial interest can be an “advantage” that flows to the public authority, and this advantage does not need to involve actual acquisition of the property.
The majority was primarily concerned with the effect that regulation has on a landowner, not whether the land was actually acquired by the governmental authority. The majority also clarified that it is the effect of regulatory activity on the property owner that draws the distinction between valid regulation of private property and constructive taking. Only the substantial deprivation of a property owner’s reasonable use of the property combined with a corresponding advantage to the governmental authority constitutes constructive taking.
Role of Government Intention
The majority also broadened the role that a government authority’s intention plays in constructive taking claims. While the government authority’s intention is not an element of the constructive taking test, the SCC majority noted that intention is not “irrelevant.”
A governmental authority’s intention to deprive a private property owner of all reasonable uses may be used by a claimant to support a finding of constructive taking, even though the court’s focus remains on the effects of the government authority’s regulation.
Implications for Municipalities
Annapolis v Halifax provides a significant update to the law of constructive takings and municipalities should take note. Justices Kasirer and Jamal JJ. for the dissent noted that the majority’s expansion of the CPR test may lead to a dramatic expansion of potential liabilities for municipalities utilizing land use regulation for public interest.
The broadening of the constructive taking test means that municipalities need to be more careful about their conduct to ensure their actions do not fall under the newly expanded scope of “beneficial interest.” Ensuring that regulatory powers are not used to confer an advantage to governmental authorities in connection with private lands will be key in ensuring the regulation of private lands is valid and does not constitute constructive takings.
MLT Aikins has extensive experience representing numerous municipalities in Western Canada. To learn more about how this ruling could affect your municipality, please contact a member of our municipal practice.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.