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What is expropriation?
In Canada, governments are entitled and often do pass laws authorizing them to take private property in order to put it to use in the public interest. This is known as a de jure expropriation and triggers a right for a landowner to receive compensation.
Sometimes, however, government rules and regulations relating to land use can become so onerous that they have the effect of severely restricting what a private landowner can do with their land. This is called a de facto or constructive expropriation. Although in such cases, governments do not expressly pass a law authorizing the taking of private property. However, the effect of extensive regulation can be the same as though they had; private property owners are deprived of their right to use and enjoy their property as they see fit. In such cases, landowners are equally entitled to compensation.
Not all regulation amounts to a constructive expropriation. Governments can regulate land in the public interest without causing an expropriation: zoning bylaws are an obvious example. However, problems arise when “the effect of the regulatory activity deprives a claimant of the use and enjoyment of its property in a substantial and unreasonable way, or effectively confiscates the property.”
In order to determine whether government action has crossed the line and become a constructive taking, the Supreme Court set out the following test in a 2006 decision called Canadian Pacific Railway Co v Vancouver (City):
- The public authority must acquire a beneficial interest in the property; and
- Regulation has removed all reasonable uses of the property.
But there has been some confusion about what exactly constitutes a “beneficial interest.”, which the Supreme Court of Canada sought to clarify in its recent decision in Annapolis Group Inc v Halifax Regional Municipality.
Starting in the 1950s, Annapolis Group Inc. began to acquire land with the intention of securing enhanced development rights and eventually re-selling it. In 2006, the Halifax Regional Municipality adopted a planning strategy throughout the municipality that applied to Annapolis’ lands. Part of their land was reserved for future inclusion in a public park but was also zoned for potential residential serviced development. However, Halifax was required to pass a resolution to allow for serviced development to occur on the lands.
In 2006, Annapolis began to make multiple attempts to develop its lands. In the meantime, Halifax encouraged public use of the lands and held them out as a public park, even erecting signs with the municipality’s logo posted on trails throughout. On September 16, 2016, Halifax finally refused to allow the development and Annapolis sued for constructive expropriation.
Law and Analysis
The Court recognized that the two-part test developed in Canadian Pacific Railway continues to apply but took the opportunity to clarify the first element: beneficial interest. Specifically, the Court held that a “beneficial interest” means any advantage, in the broadest possible sense.
More importantly, in determining whether a public authority acquired an advantage, the focus on the analysis must be on the effect of the government’s regulation on the landowner. That is, whether
the landowner is no longer able to use and enjoy their property.
Finally, although the majority was clear that the effects on the property owner are what matter, the objective of the rule in question may be relevant evidence of an acquired advantage.
In setting out that a “beneficial interest” means simply an advantage – a criterion that can easily be satisfied – the Supreme Court of Canada effectively lowered the threshold for establishing constructive expropriation. That is, going forward, it will be easier for landowners to successfully argue that their land has been constructively taken, thereby establishing a right to compensation. On the flip side, public authorities will need to be mindful of how they regulate private lands.
More fundamentally, the Court’s focus on the effect of a government measure on landowners, arguably more in line with the underlying principle of expropriation focusing on deprivation, signals a willingness to recognize the importance of private property rights. This is of particular importance as, unlike some liberal democracies with written constitutions, the text of the Canadian Constitution, notably the Charter of Rights and Freedoms, does not expressly protect property rights. Mindful of this lacuna, the majority nevertheless explained that the Charter is not an exhaustive source of rights and liberties. Rather, the common law also affords protection for individual liberty and was relied on in this particular instance.
 Annapolis SCC, at para 19.