When Does Land Use Regulation By Government Become So Onerous That It Amounts To What Is, In Effect, A Taking Of Land?

• Published date: 25 October 2022
• Subject Matter: Government, Public Sector, Real Estate and Construction, Government Contracts, Procurement & PPP, Real Estate
• Law Firm: McLennan Ross LLP
• Author: Ms Marika Cherkawsky, Gavin Fitch, K.C. and Darryl Carmichael

The Supreme Court of Canada has grappled with what constitutes "de facto expropriation" or "constructive taking" in a number of cases.

Most recently, on October 21, 2022, a 5-4 majority of the Supreme Court of Canada in Annapolis Group Inc. v Halifax Regional Municipality, 2022 SCC 36 ("Annapolis"), affirmed the two part test to establish a constructive taking set out by the court in Canadian Pacific Railway Co. v Vancouver (City), 2006 SCC 5 ("CPR"). However, the minority judgment in Annapolis disputes that the CPR test has been affirmed by the majority, arguing rather that it has been inappropriately broadened.

This test for constructive taking, as established in CPR and affirmed/modified in Annapolis, provides that for there to be a constructive taking, the reviewing court must decide: (1) whether public authority has acquired a beneficial interest in the property or flowing from it (i.e. an advantage); and (2) whether the state action has removed all reasonable uses of the property (the "CPR Test"). In affirming the CPR Test, the Supreme Court clarified that acquiring a "beneficial interest" does not require an actual acquisition, but can instead be understood more broadly as an advantage flowing to the state.

What is "constructive taking"?

Before summarizing Annapolis it is important to explain the difference between a "constructive taking" and a de jure taking. A de jure taking is where the government, often a municipality, takes land from a private owner for a public purpose without the owner's consent, and provides them with compensation (also known as formal expropriation). "Constructive takings" (also called "de facto expropriations" or "regulatory takings") are where the government does not directly acquire the property from the owner, but through regulation or other means, effectively deprives the owner of the benefit or use and enjoyment of its property in a substantial and unreasonable way.

Case Background and Facts

Over the course of several decades, the Annapolis Group acquired a large parcel of land in Halifax ("the Lands"), with the intention of obtaining development rights, and then re-selling the property at a future date. The City of Halifax ("Halifax") adopted a planning and regulatory strategy that ultimately prevented Annapolis from proceeding with development. When Halifax refused to initiate a further planning process, Annapolis sued, claiming that Halifax had "constructively taken"the Lands without compensation.

Halifax sought...