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Halifax lease dispute delays expropriation
January 27, 2001

A lease dispute has delayed an expropriation required to complete the site assembly for a new sewage treatment plant in Halifax, Nova Scotia.

The dispute involves a commercial development on land located at 2173 Barrington Street, Halifax. The land is owned in fee simple by the Halifax Regional Municipality. It is now required for the proposed sewage treatment plant, but it was acquired by the Regional Municipality before that use had been identified. In 1997 it was leased to Michael Frevola for a one year term with a renewal clause permitting annual renewal "until such time as the landlord demolishes the premises for the widening of Barrington Street." Subsequently, the lease was assigned to 3006128 Nova Scotia Limited which in turn sublet the premises to Rolls Auto Glass Incorporated. Rolls sublet a portion of the premises to National Tilden Car Rental Systems.

In June 1999, the Regional Municipality gave notice to 3006128 Nova Scotia Limited that it required vacant possession of the property for municipal purposes and subsequently announced that it would be utilized for a sewage treatment plant. In August 1999, 3006128 Nova Scotia Limited responded with a lawsuit against the Regional Municipality intended to prevent cancellation of the lease.

In July, 2000 without any resolution to the lease dispute in sight, the Regional Municipality gave notice that it intended to commence expropriation proceedings to acquire the leasehold interest. It also made an offer of compensation to 3006128 Nova Scotia Limited in the amount of $2,568.00. In August, 2000, 3006128 Nova Scotia Limited applied for a court order to prevent the expropriation proceedings from going ahead pending resolution of the litigation over validity of the lease.

The application for a stay of the expropriation proceedings was heard by the Nova Scotia Supreme Court in November, 2000. The decision was reserved until January 17, 2001. The court found that the lease dispute raised serious issues that would have to go to trial. However, it also found that a stay of the expropriation proceedings was not required and that application was dismissed.

The lease dispute contained some interesting issues. For example, the terms of the renewal clause anticipated cancellation for road widening purposes rather than a sewage treatment plant. Also, there were allegations of impropriety against the realtor who negotiated the 1997 lease agreement with the Regional Municipality. Of course, if the head lease is valid, the Regional Municipality probably cannot rely upon the cancellation clause to obtain vacant possession. Expropriation would be the only option available. On the other hand, if the lease is not valid, none of the parties occupying the premises have an interest in the land and therefore no right to compensation.

The court decision allows the expropriation to proceed so the sewage treatment plant project should not be delayed because of the lease dispute. However, the lease dispute will have to be resolved before compensation can be determined. Under the Nova Scotia Expropriation Act, compensation is determined by the Utilities and Review Board. However, this tribunal does not have jurisdiction to determine whether the occupants of the building have a legal interest in the land so that issue will still have to be determined by the Nova Scotia Supreme Court.

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