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Cohen Highley LLP

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Compensation for downzoning
February 9, 2001

Dan Bennett, partner with the Vancouver law firm of Bull, Housser & Tupper, spoke yesterday on the topic of compensation for downzoning. Bennett was attending a meeting of the British Columbia Expropriation Association held in Vancouver.

Bennett recently acted for a municipality in a widely publicized case known as Canada Mortgage and Housing Corp. v. North Vancouver (District) [2000] EXLAW 302. This case involved the zoning of a large block of land in North Vancouver to a zone entitled "Parks, Recreation and Open-space". Many of the permitted land uses in this category were public uses and the rest were either not practical or not economically feasible for the land in question. The rezoning had been initiated by the municipality in response to public pressure from residents who wished to prevent development of the land. This type of fact pattern is not uncommon in Canada today.

In British Columbia, s. 914 of the Local Government Act requires a municipality to compensate where zoning restricts the use of land to a public use. In addition, the common law has developed to the point where a zoning bylaw will be set aside where the effect of the bylaw is to reserve private lands for public use. Bennett observed that an owner appears to have a choice of either of these remedies when caught in this situation.

As owner of the lands, CMHC applied to the court to strike out the applicable portions of the zoning bylaw. CMHC alleged that the downzoning effectively reserved the land for public use. However, the British Columbia Supreme Court held that the bylaw would only be struck out if the permitted land uses were restricted entirely to public uses. In this case there were still some private uses available in the zone even though none of them had any economic value to CMHC. The action was dismissed. This decision was upheld on appeal and leave to appeal was denied by the Supreme Court of Canada.

Bennett stated that he had not been able to find any cases where compensation has been awarded under the Local Government Act provision in question.

To illustrate the point that the outcome in the CMHC case was not unique, Bennett referred the association members to a recent Nova Scotia case, Nova Scotia (Attorney General) v. Mariner Real Estate (1999), 177 D.L.R. (4th) 696 (N.S.C.A.). In this case, Mariner's property was designated as a beach under the provincial Beaches Act. This had the effect of eliminating virtually all of the land's economic value. The issue considered by the Nova Scotia Court of Appeal was whether compensation should be paid on the basis that there had been a constructive expropriation of Mariner's property. However, after an extensive analysis of private property rights in relation to expropriation the court concluded that not all of the incidents of ownership had been extinguished. It followed that there was no constructive expropriation and therefore no compensation was payable.

Bennett agreed with a comment from an audience member that these decisions demonstrate that municipalities can probably avoid compensation claims for zoning bylaws that are really intended to reserve private land for public uses through the simple insertion of permitted private uses that are uneconomic or impractical.

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