A major legislative change is coming to Ontario that will greatly benefit builders, developers, commercial tenants and municipalities.
A number of amendments have been proposed to improve the Planning Act (the “Act”), which will simplify how land is dealt with in this province.
For the uninitiated, the Act is the governing statute which sets out the rules for land-use planning in Ontario. It comes into play when determining how land uses may be controlled and by whom.
Section 50 a particular problem area
In particular, section 50 of the Act deals with the subdivision of land.
Under this section, tracts of land cannot be divided into smaller parcels unless a specific exception applies. This one section of the Act has led to so many difficulties and nonsensical results over the years that an entire book (with three editions) has been dedicated to it.
Any experienced real estate lawyer or land-use planner will tell you dealing with section 50 of the Act often becomes a frustrating and headache-inducing exercise. Essentially, whenever landowners are faced with situations that involve dividing land or dealing with properties that exist side-by-side, they often find themselves having to conquer multiple hurdles and bureaucracy to get the result they want, even if it seems straightforward.
One oft-cited example is the merger of land in the case of a joint tenancy. If one person (Person A) owns a parcel of land individually and also owns the abutting parcel of land jointly with someone else (Person B) as joint tenants, the lands will automatically merge as a single parcel upon the death of Person B. Under section 50 of the Act, this result cannot be avoided, even if person A never intended it.
Despite all of the issues presented by section 50 of the Act, very little has been done to address these problems over the years. A draft set of amendments was introduced over 20 years ago, but they never went anywhere.
Fortunately, Ontario attorney general Doug Downey has fought hard to finally introduce a number of meaningful changes as part of the provincial government’s recent Red Tape Bill.
Ontario’s AG discusses proposals
Over a telephone interview, Downey discussed the amendments and gave me his thoughts on how they came to be.
As a former real estate lawyer, Downey has extensive first-hand experience dealing with the complications imposed by section 50.
“I was a certified specialist in real estate, that was my primary area,” says Downey. “I ran into some of these tricks and traps over the years. It cost my clients a lot of money and sometimes they couldn’t even get to the result that we wanted because the rules were so tortured.”
After getting elected, Downey took it upon himself to finally address the issue and push through some much-needed changes. The first thing he did was reach out to the legal profession with his proposed amendments to the Act and he immediately received an outpouring of support.
“I got hundreds and hundreds of emails of support from across Ontario,” he says. “Lawyers from literally every part of the province. Each one of them had their own story to tell about how the Planning Act had some sort of trap or trick that they had come across.”
To his surprise, Downey’s proposed amendments were even supported by many organizations outside of the legal profession which also had difficulties with section 50. For instance, the Ontario Federation of Agriculture and the Ontario Home Builders’ Association reached out to him and were very supportive of the changes he sought to make.
Some of the proposed changes
As for the changes themselves, the proposed amendments will address the most common and cumbersome limitations presented by section 50. For instance, once the amendments are in place, land will no longer merge as a result of the death of a joint tenant, which Downey sees as the most important change, as it has impacted the greatest number of people in his experience.
In terms of how commercial real estate issues will be affected, Downey is confident real estate investors and developers will benefit greatly from his proposed amendments as well.
Most notably, commercial developers and builders have often been set back by a difficult obstacle that presents itself where abutting parcels of land are concerned.
Section 50(12) of the Act provides that when half of a parcel of land is conveyed by way of a deed or transfer, a proper consent from the applicable municipality is often required. Once that consent is obtained, the land can be dealt with again in the future without another consent.
Unfortunately, the other half of the parcel does not get the same benefit and a further consent is required in order to deal with it, which often requires difficult workarounds.
This provision often gets in the way for developers who seek to build condominiums on abutting parcels of land. Downey explained that, while working as a real estate lawyer, he had to advise clients to find strange and creative ways to get around section 50(12).
For instance, landowners would sometimes sever a small section from the land to get around the requirement to obtain a consent.
“It was nonsense,” says Downey. “We all knew where we wanted to get to, but we had to do backflips to get there.”
To address this issue, one of the most notable amendments will permit an abutting parcel of land to be dealt with without obtaining another consent. This will be seen as a welcome change for builders and developers, who will no longer need to find ways to get around section 50(12) when dealing with land in this manner.
Benefit for commercial landlords, tenants
Another amendment will greatly benefit commercial landlords and tenants.
When commercial space is leased, the indoor portion of the space is exempt from the Act. However, adjacent outdoor building spaces are not. This often becomes a problem for tenants who sign long-term leases to use commercial premises with accompanying outdoor spaces such as parking lots, restaurant patios or laneways used for deliveries.
Since those outdoor areas are not exempt from the Act, landlords and tenants are often forced to apply for a consent from the municipality to use them, which could be a difficult and expensive process.
The new amendments will do away with this requirement. Therefore, when a commercial tenant signs a lease that includes the use of an adjacent outdoor area, a consent will no longer be required to use it, which will spare both landlords and tenants great time and expense.
In terms of when these proposed amendments will come into effect, Downey is hopeful they will be memorialized into law as early as this spring.
“It may be in the next few weeks, or it may take a couple of months,” he says. “But I’m going to keep pushing to try and get it to get it done this year.”
We would all be wise to keep a close eye on the arrival of these changes. Once the Act is amended, everyone from developers to municipalities will be able to finally focus solely on the mechanics of land-use planning, without having to spend time and money finding ways to deal with section 50.