In Pixar’s Up, a widowered balloon salesman faces the prospect of having the city expropriate his land to build a new high-rise complex. Rather than leave his life-long home, he ties thousands of balloons to his roof and escapes with his house to a far-off tropical paradise filled with stunning vistas and talking animals. Unfortunately, in real life, business owners facing expropriation cannot simply fly away. Instead, they are tethered to the cold hard reality of the Expropriations Act. We address below some of the most common questions that owners have about the expropriation process.
What is Expropriation?
Expropriation arises when government, or its agencies, takes land without an owner’s consent. Expropriation often occurs when government needs specific land for public works projects (i.e. highways or mass transit, such as LRTs). The Act attempts to compensate owners (which can include tenants) for the fair value of their interest in the land.
Can I Stop This?
The government starts the expropriation process by serving a Notice of Application for Approval to Expropriate Land. Within 30 days of receiving this notice, an owner can request a “hearing of necessity” to challenge whether taking the property is fair, sound, and reasonably necessary. This process, however, is extremely government friendly. The government is subject to limited documentary disclosure, the government sets the objectives for the inquiry, the hearing officer has no power to make a binding decision, and the government is under no obligation to accept the resulting recommendation. Most importantly, the costs awarded to an owner cannot exceed $200. Given these obstacles, a hearing of necessity may not be the best way to proceed
Ultimately, the government is not likely to back away from a proposed expropriation without political pressure. For instance, in the early ’70s, the City of Toronto sought to build a highway from the 401 to the lake shore. Owners in the path of the proposed highway launched effective, high-profile protests. They pressured the City to limit the proposed highway. And that is why the Allen Road ends at Eglington Avenue and not the lake shore. In today’s social media landscape, an owner is much more likely to stop an expropriation through a twitter post that gains traction than through a hearing of necessity.
What is the Initial Process?
The government will register a Plan of Expropriation. Once this happens, the government becomes the legal owner of the property while the previous owner becomes an occupant. The now-occupant receives two documents. First, a “Notice of Expropriation and Election,” which sets out the date as of which the property will be valued. Second, a “Notice of Possession,” which lists the date on which an owner must surrender possession of the property; this date must be at least three months after service of the Notice of Possession.
How Will I Be Compensated?
Before the government can take possession of property, it must serve an Offer of Compensation. This offer is required to: (i) list the amount offered to the owner for compensation for the property, not including business loss; and (ii) offer immediate payment of the market value of the expropriated property, as estimated by the government, without prejudice to a further determination of compensation. At the same time, the government will provide an appraisal of the property. Although an owner has little downside in accepting the offer and then fighting about whether it is fair, we suggest that an owner consult a lawyer before deciding how to proceed.
If an owner disagrees with the government’s assessment of the market value of the property or has other damages, it can make a claim for compensation under the Act to the Local Planning Appeal Tribunal (“LPAT”), formerly the Ontario Municipal Board. Importantly, a claim for compensation is not just a dispute about the market value of the property. An owner also may also seek compensation for damages for (i) business losses the expropriation causes; (ii) relocation costs (i.e. moving costs, real estate commission, legal costs, etc.); (iii) costs for inconvenience: (iv) improvements previously made to the property if the value is not reflected in market value; and (v) compensation for loss of goodwill if a business cannot be relocated.. The actual process of an LPAT hearing is beyond the scope of this article, but an owner should consult a lawyer to review the available claims and how best to assert them.
They Aren’t Taking All My Land, But…
Sometimes expropriation will effect an owner’s use or enjoyment of property. This often occurs when the government expropriates only part of the property or the expropriation results in other negative effects. For example, the proposed construction might interfere with access to property or result in reduced pedestrian traffic to a business. Affected owners can make a claim for what is known as “injurious affection.” If an owner asserts this claim, it must provide proper notice within one-year from the date on which it suffers the damages. Practically speaking, whenever there is a partial taking of property, or other indicia of injurious affection, owners should consult a lawyer to ensure that they preserve their rights under the Act.
What about My Costs?
Invariably, owners are concerned about their legal costs in seeking compensation at the LPAT. Fortunately, the Act provides that, if the LPAT awards the owner at least 85% of the amount that the government initially offered, the government is required to pay the owner’s reasonable legal, appraisal, and other costs incurred during the compensation process. As such, even if the compensation process results in an award that is less than what the government initially offered (so long as it is not too much less), the government will still pay the owner its reasonable legal fees and related costs for contesting the offer. Even if the owner does not meet the 85% threshold, the LPAT still has the discretion to order the government to pay the costs. In exercising this discretion, the LPAT will look to the owner’s conduct during the compensation hearing. Ultimately, if an owner has acted reasonably, it is unlikely to be out of pocket for its legal fees.
Expropriation is not an enjoyable or easy process. Owners have their property taken from them with no real say in the decision. Fortunately, however, owners should receive full and fair compensation. The best advice to any owner facing expropriation is not to head for the skies, but, instead, prepare for court.
Written by Tim Morgan, a litigator with a focus on commercial matters. He has appeared before all levels of Ontario Courts and has represented businesses of all sizes, from Canada’s largest corporations to privately held, family-run businesses.