Or, Why You Can’t Sell your Home, Unless You Can.
Since the posting of our Complete Guide to Easements in Ontario, we continually field calls from homeowners with land division questions. Property owners in Ontario continually request modification, creation or deletion of easements. The general consensus from the population at large seems to be: “If I have a plan, an agreement with my neighbor, and a lawyer, I can do it!”. Sadly, this is not the case.
Transactions of Real Property in Ontario are heavily regulated by The Planning Act. The primary purpose of the Act is to control the acquisition, disposition, and severance of land in a way that aligns with a municipality’s planning objectives. The Act also gives the municipality the power to enact Zoning prohibitions, perform expropriations, and generally prohibit unauthorized use of Land in Ontario.
Section 50 is likely the most germane for residential property owners in Ontario. This section is especially restrictive in nature.
The Consequence of Infringement
Contravention of Section 50 of the Planning Act doesn’t just affect the owner; it affects subsequent owners. Subsection 50(21) of The Planning Act stipulates that any transaction prohibited by the Act (including conveyances and mortgages) does not create a valid interest in the land.
It is for this reason that careful due diligence must be undertaken by the buyer (or buyer’s solicitor) to ensure a valid interest in the land can be granted upon completion of the transaction.
It’s especially important to ensure the subject property of conveyance does not have a history of contravention. For example, suppose two neighbors agree to registration of an easement, without obtaining consent from the applicable authority. Such transaction would contravene the act. If you were to offer to purchase one of these properties, your interest in the purchased property could be rendered null and void, since the registered owner could not convey the easement nor the remaining parcel without contravening the act.
The Prohibition: Subsection 50(3)
Section 50(3) of The Planning Act reads:
“No person shall convey land by way of a deed or transfer, or grant, assign or exercise a power of appointment with respect to land, or mortgage or charge land, or enter into an agreement of sale and purchase of land or enter into any agreement that has the effect of granting the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more…”
On the surface, it would essentially seem that all transactions involving Real Property in Ontario are prohibited, with the exception of a short term lease (without the option to renew).
However, subsections 50(3)(a) thru 50(3)(h) provide exceptions to the prohibition. It is these prohibitions that are relied upon for most real estate transactions in ontario.
Merging on Title: Look Before you Leap
The Planning Act stipulates that if an individual takes title to a parcel immediately abutting another parcel they already own (the definition of abutting is discussed later), then the ownership says to “Merge on Title”. As such, Parcel A and Parcel B become one parcel, and consent from the municipality would be required if the owner wanted to sell Parcel B, as such transaction would then be considered a severance. (There are exceptions to this rule, and some are discussed later. However, to ensure avoiding of a merger, expert advice should be sought.
(A) Plans of Subdivision
Subsection 50(3)(a) provides transactions are not prohibited by the act so long as they occur in accordance with and within a registered plan of subdivision.
If the municipality has once consented to the subdivision of a neighbourhood, then why would subsequent consent be needed for the same thing?
However, this does not mean owners are free to continue further divisions or easements. Subsection 50(5) discusses the confusing topic of “Part Lot Control” (see below).
Owner owns Lot A on Plan 123, and wishes to purchase lot B. If both Lot A, and Lot B are on the Registered Plan of Subdivision PL-123, then Owner could take title to Lot B in the same manner as Lot A. If Owner wishes to sell Lot A and retain Lot B, he could do so without contravening the Planning Act.
It is important to remember that these lots must be whole in nature. If your parcel of land is comprised of Parts (which can be determined in the legal description), this exception would not apply.
**note, the act does stipulate that a municipality could revoke this privilege by enacting a by-law. Expert advice should be sought to ensure avoidance of contravention.**
(B) No Abutting Lands
Subsection 50(3)(b) is the most widely used exception to the prohibitions outlined in The Planning Act. A person may carry out the transaction as long as they “do not retain the fee or the equity of redemption” (ownership or right to) “in any land abutting the land that is buying conveyed or otherwise dealt with”, unless that land is the whole of a lot or block in a subdivision (see exception A).
If an owner only owns one parcel of land (Parcel A), and not any land abutting it, they are free to sell, mortgage, or otherwise transact Parcel A in any manner they wish, even if the parcel is described as part of a lot.
(C,D,E,G,H) Involving Government and Environmental Projects
These paragraphs, though illustrating different situations, all provide for when a governmental agency requires acquisition or disposal of land.
(F) Consent Obtained
The final major exception occurs when governmental consent is obtained with respect to the transaction.
Paragraph 53 outlines some conditions of consent, including expiry. According to The Planning Act, government consent lapses after two years the decision is given. It’s important to note that the consent period can be shortened or carry conditions by order of the consenting authority.
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There are a few notable loopholes that have been closed with amendments to The Act. A few notable closures are described below:
- Section 15 prevents prohibited transactions from occurring simultaneously. For Example, if an owner owned Parcel A and Parcel B, selling both halves to different owners at the same instant would still contravene the Act, despite the appearance of owning “no abutting lands”.
- Section 16 prevents partial mortgage discharge, with exceptions
- Section 18 Requires ministerial approval to foreclosures to parts of land. This prevents using foreclosure to force severance by conveying a designated portion of land via proceedings
- Section 19 prevents land owners from altering arrangements of ownership (i.e. tenants in common vs joint tenants) for the purpose of creating a different legal ownership structure and preventing merger.
The Planning Act, though complex in nature, is an incredibly useful piece of legislature. Proper care and expert guidance should be sought when navigating.
The importance of ensuring not only your transaction, but transactions proceeding yours is paramount to ensuring clear, legal, and valid title.
Do you have a Planning Act question or comment? Looking to obtain guidance regarding a specific issue? Contact ReaLawState for a free, no obligation consultation.