The Supreme Court of Canada has given developers and property owners a major victory, making it easier for them to sue governments over regulations that remove all reasonable uses of their lands.
The 5-4 ruling on Friday takes aim at governments that in effect steal land, through development freezes, zoning changes or environmental restrictions that render private property unusable.
Annapolis Group Inc., a developer, has amassed about 1,000 acres of land in the Halifax area since the 1950s. The municipal council of Halifax passed a regulation in 2016 affirming that no building on those lands would be permitted for some years. Annapolis accused the municipality of trying to take the lands for a park without saying so directly – and without paying the company for the lands.
Halifax said it was simply sticking to a long-term zoning plan that precluded development of certain lands for 25 years; it said it has no present plans for a park. When Annapolis sued, the city said the developer was asking taxpayers to insure it against losses caused by its own speculation. A judge refused to throw out the lawsuit, but the Nova Scotia Court of Appeal did just that, saying nothing even remotely like government stealing occurred. (The legal term is “forcible acquisition for public purposes,” a “taking,” “constructive taking” or “de facto expropriation.”)
But the Supreme Court majority ruled that the Annapolis lawsuit can go to trial, and set out a strong defence of property rights, despite their absence in the 1982 Charter of Rights and Freedoms.
“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,” Justice Russell Brown and Justice Suzanne Côté wrote for the majority. (The common law is a thousand-year-old body of precedents.)
The previous Supreme Court precedent on de facto expropriation, from 2006, asked in part whether the government had taken a “beneficial interest” in the lands in question, usually translated as ownership rights. But the majority ruled that simply means an advantage or benefit. That is a far lower standard that will make it easier to sue governments over regulations.
The dissenting judges said that all Halifax had done was to refuse, in 2016, to “up-zone” the site to allow for building, the type of refusal made routinely at municipal councils across the country.
“Our colleagues’ opinion risks radically changing the complexion of municipal planning law by providing, in like up-zoning contexts, a windfall to developers who speculate at municipal taxpayers’ expense,” Justice Nicholas Kasirer and Justice Mahmud Jamal wrote for the dissenters.
The home-building industry applauded the majority ruling. “It signifies the court’s desire to protect property rights, and ensure that when governments materially interfere with property rights, there’s a corresponding right to compensation,” Shane Rayman, a lawyer for the Canadian Home Builders’ Association, which intervened in the case, said in an interview.
He said the ruling could lower costs for homebuyers because of reduced financial risk for developers. “You don’t have to worry about government passing a bylaw and taking everything away.” With less risk, a lower rate of return becomes possible, Mr. Rayman said.
Malcolm Lavoie, a lawyer for the Canadian Constitution Foundation, which also intervened, said the ruling enhances property rights by putting the focus on the effect of a regulation on a property owner. “If the effect is to substantially or unreasonably deprive an owner of her rights, then there is a presumptive right to compensation,” he said.
An environmental group that intervened said the ruling will make it harder for governments to take actions such as protecting a species at risk, if it would limit activities on certain lands.
“Municipalities are going to be more reluctant to say no to developers,” said Randy Christensen, a lawyer for Ecojustice Canada Society. “It’s going to be just much harder for cities to develop livable communities and avoid sprawl.”
The federal government and four provinces had urged the court to give elected officials wide latitude to regulate land uses in the public interest.
The court split almost entirely by party of appointment: four in the majority were Stephen Harper picks, and three dissenters were Justin Trudeau picks. It was the eighth time in the past three years for a split along similar lines. Until then, no such divides had been apparent in the court’s modern, post-1982 era.
When the Charter was being drafted, the Progressive Conservative Party pushed for property rights to be entrenched, but the governing Liberals did not do so.