Most people believe that when they purchase a plot of land, they may make whatever use they wish within the law.
Although certain rights accompany the purchase of property, it is equally subject to limitations imposed by applicable laws and legislation. For example, if a person purchases a plot of land in a residential neighbourhood, they would not be permitted to construct a slaughterhouse.
Property ownership may be negated in some circumstances if the government determines that it needs a specific parcel of land for a specific governmental purpose. In such circumstances, the government often expropriates the land to effectuate its plan, which means that the government demands that the property owner sell the property to the government in exchange for payment of fair market value.
In other circumstances, the government may contemplate that expropriation of a particular parcel of land may become necessary at some future, undefined point. Still, equally, such expropriation may never become necessary. In these cases, the government may issue a ‘no-build covenant’ that restricts the use of the property for a period of time. The issuance of such covenants and how to remove them are the topics of this blog.
Kelowna No-Build Covenant Endures for Nearly Twenty Years
Watermark Developments Ltd. v Kelowna (City) involved a dispute over a no-build restrictive covenant that was registered on the subject property nearly 16 years before the hearing of the petition in January 2009.
In January 2009, the respondent City of Kelowna imposed no-build restrictive covenants over 13 of 284 acres of land owned by the petitioner that was anticipated to be required to accommodate the Central Okanagan Multi-Modal Corridor (COMC) building. In broad terms, the COMC was intended to comprise a roadway stretching from West Kelowna, over an Okanagan Lake crossing, to the University of British Columbia Okanagan campus (UBCO). As the years passed, the scope of the COMC was amended multiple times such that by 2024, the plan now includes the Clement extension, which is not anticipated to extend beyond McCurdy Road. As McCurdy Road is located several kilometres away from the disputed lands, the petitioners sought removal of the no-build covenants from their land because they were now obsolete, given the amendment to the route of the planned COMC, such that removal of the no-build covenants would not injure or otherwise cause damage to the City.
City Opposes Removal of No-Build Covenant
The City resisted the removal of the no-build covenants because its plans for the COMC are not yet final, and as such, it may amend its plan yet again to include the lands owned by the petitioner. In these circumstances, the City argued that it would be prejudicial to order the discharge of the no-build covenants and could also be costly in that if the no-build covenants were ordered removed and the City later changed its plans to include the disputed lands, it would engender significant expense on behalf of the City to clear the land of any structures built upon it that interfere with the construction of a roadway.
The Authority to Issue No-Build Covenants
Section 219 of BC’s Land Title Act governs the registration of covenants on land by the Crown, Crown agents or other governmental authority, including a municipality (such as the City of Kelowna). That legislation dictates that the government is entitled to impose covenants on land respecting the use of land, subdivision of land, and construction of buildings on land, amongst other things.
Importantly, section 219(2)(b) of the Land Title Act specifically allows a municipality to enter into a covenant governing how and under what circumstances certain land can be developed.
Removal or Modification of No-Build Covenants
Section 35 of BC’s Property Law Act (PLA) states that any person who owns an interest in land is entitled to apply to the Supreme Court of British Columbia for an order to either modify or cancel certain interests or charges registered against said land, including a restrictive covenant that burdens the land or the owner thereof.
The court is entitled, under section 35(2) of the PLA, to modify or cancel any encumbrance on the land if it is satisfied that the application for modification/cancellation is not premature and that such encumbrance is obsolete, given changes to the character of the land, the neighbourhood or other circumstances; it is necessary to modify or cancel the encumbrance to obviate impediment to the reasonable use of the land that does not benefit others; the persons entitled to benefit from the registered encumbrance have either expressly or impliedly agreed to its modification or cancellation; modification or cancellation of the encumbrance will not cause any injury or damage to the party entitled to benefit from registration of the encumbrance; or that the encumbrance itself is invalid, expired or otherwise unenforceable and therefore its registration is worthy of cancellation.
The courts of BC have already determined that section 35 of the PLA allows the court to modify or even cancel no-build covenants. Moreover, as indicated above, the court only needs to find that one of the grounds delineated in section 35(2) is satisfied to grant relief.
For a party to be successful in obtaining the removal or modification of an encumbrance registered to their land, they must demonstrate three things:
- That the application for removal or modification, as the case may be, is not premature
- The application addresses one of the five criteria set out in section 35(2) of the PLA
- That in light of all of the circumstances, the court should exercise its discretion in favour of granting the relief sought by the petitioner
The Prematurity of this Application
In this case, the court quickly disposed of the prematurity issue by noting that the no-build covenants in question had been registered on the disputed lands for some 16 years and were made in respect of the proposed use of the lands by the City by development plans targeted to the year 2040. Given that plans beyond 2040 had not yet materialized and may not ever materialize, the court was satisfied that there was no reason to delay the resolution of the petition to some future, unknown, undefined date.
Obsolescence of the Disputed No-Build Covenant
The petitioner argued that the no-build covenant registered against its land was obsolete and should be modified or removed altogether. The court noted that the province’s courts have defined obsolescence as “something that is no longer practiced or used or is out of date.” Significantly, the court noted that determination of obsolescence does not require the court to balance the rights of the parties but rather demands that the court consider the purpose the restrictive covenant was intended to serve and whether that purpose can still be served or has become obsolete due to changes in the character of the neighbourhood, the land itself, or other material conditions.
In this case, given that any potential use of the disputed lands by the City would not commence for at least 16 years, if at all, the court concluded that the no-build covenants registered against the petitioner’s lands were obsolete. This is because the courts have previously determined, in prior decisions, that any restrictive covenant whose purpose may or will never be fulfilled is deemed obsolete. The court was satisfied that to allow the City’s continued speculation regarding whether it may or may not, at some point in the future, ever make use of the lands in question would effectively grant the City unfettered discretion to impede the petitioner’s ability to develop the land as they saw fit, which could not be permitted.
Should the Court Exercise its Discretion to Remove the No-Build Covenants?
After having determined that the application for removal of the covenant was not premature and that the no-build covenant in question was indeed obsolete, the court then turned to the third part of the analysis: whether it should use its discretion to remove the no-build covenants. Analysis of this criterion requires that the court consider whether it is equitable to both parties to remove or amend the covenant in question.
The court noted in its analysis that restrictive covenants are, legally speaking, merely contracts. As such, all restrictive covenants require an exchange of consideration to be considered valid. In this case, however, no such consideration was exchanged between the parties at the time of registration of the covenant. As such, the court was satisfied that it was a suitable circumstance to exercise its discretion, and it awarded the petitioner the relief sought–removal of the no-build covenant.
Vancouver Real Estate Litigation Lawyers Assisting Clients With Their Property Dispute
Navigating disputes related to real estate ownership requires experienced legal counsel to guide you through the complexities of the legal process and ensure your rights are fully protected and asserted throughout any legal proceedings. Meridian Law Group, located in downtown Vancouver, BC, provides thoughtful and knowledgeable legal guidance to litigants across the province. Contact us today for a confidential consultation by phone at (604) 687-2277 or online.
