On January 22, I conducted a webinar for the Law Society of Ontario seen by over 800 registered lawyers in Ontario on the basics of Section 50 of the Planning Act. Section 50 affects virtually all dealings with land in Ontario, regulates how land can be divided and contains numerous traps for the unwary lawyer. At issue often is whether two parcels of land are considered a single merged parcel to which the Planning Act applies that would prevent each of the parcels being dealt with separately without a municipal approval. Following the webinar, I received many questions and promised to follow up and answer them. Here are the answers:
Many questions related to how title is taken. Assume A and B abut and are not whole lots on a plan of subdivision. (I always recommend that you draw a diagram of the parcels to better visualize the problem.)
- Smith and Jones own A, Smith alone owns B. Titles are not merged. They have different powers of disposition. There are cases on point.
- Smith and Jones own A as tenants in common and Smith and Jones own B as joint tenants. The properties merge. The manner in which two people hold title is not relevant. The power of disposition rests with the same two people There was one very old case (Venta) that said no merger but all of the other cases have said merger. Venta has been totally dismissed and should be ignored. It is not consistent with the principles espoused by the courts on meaning of ownership of abutting land. Do not rely on it.
- Mickey and Minnie own A as joint tenants, Mickey alone owns B, and Minnie dies. The law of survivorship for joint tenants says that immediately on death, Mickey owns A. There is merger of the two parcels. What happens on recorded title is not relevant to legal ownership in my opinion.
- Following that result, could Mickey deal with B which he owned in his own name before you correct the title to A by registering a survivorship application. In my opinion, the answer is no. Mickey owns the abutting parcel A even though Minnie’s death and Mickey’s ownership by survivorship is not recorded on title. A lawyer cannot sign the Planning Act statements as the vendor’s lawyer for a sale of B since he or she knows that Minnie died and that Mickey owns the abutting parcel A, even though it is not in his name on the parcel register. And the buyer from Mickey for B will run into problems when he or she sells because an abutting land search will disclose have the transmission application on A that shows that Minnie died before Mickey sold B. There will be a requisition that the transfer from Mickey of B was void. And in my opinion, it is.
- Mickey and Minnie are tenants in common of A and Mickey alone owns B; Minnie dies. Mickey is the estate trustee and sole beneficiary of Minnie’s will. Estates appear by a decision of the court to be regarded as a separate entity so that A is owned by Mickey and Minnie’s estate as tenants in common and B is owned by Mickey. There is no merger as long as A is not transferred to Mickey. See the Fralick case (1981) 21 R.P.R. 281. But as someone pointed out, that is a Registry Act case and could conflict with my Land Titles theory about the power of disposition residing with Mickey on both parcels. See below about trusts.
Other questions and answers
- If the property is the whole of a lot on a registered plan of subdivision which has not been deemed not a plan of subdivision by bylaw under section 50(4), do you have to search ownership of abutting land. Technically, the answer is no because the property is on a plan of subdivision (50(3)) and you are not dealing with part of a lot on a plan (50(5)). But, it never hurts to pull the pin map at least, because you still may not get all of the property on a transfer of the whole lot on the plan. If there has been a lot addition such as a closed lane at the rear, or some other small parcel of land that is also part of the property, then you may get a valid transfer to the whole lot but you have not captured all of the property. The PIN map may disclose clues that require some further investigation. As I said at the webinar, that is what happened on the Windsor lane closures. The two PINs were never consolidated into one PIN representing a single property. Title was good for the whole lot but the client did not get a transfer of all of the vendor’s property. It also can happen that a property consists of the whole of two blocks on two different plans of subdivision. This happens when a plan of subdivision is intended to fit into a road pattern with a second subdivision and the two blocks will make up the whole of a property. You may only get one of them depending on how you search PINs. Remember, just doing an address search or a name search will not necessarily get you all of the component PINs of a property. You may get good title to part of the property but you did not get all of it. Get the PIN and look at the PIN map. Ask your client some questions. You also need to make sure that there has been no bylaw under section 50(4) to satisfy yourself that you can rely on the exception in 50(3a) that the lot is a lot on a registered plan of subdivision.
- A good question about mortgages. RBC has a valid mortgage on A. The owner buys part of the adjacent property as a lot addition. Or in the joint tenancy situation above (Mickey and Minnie own A and Minnie alone owns B,) there is a mortgage on A and Minnie dies and Mickey now owns A and B. What happens to the validity of the mortgage on A if the owner buys more land that is not covered by the mortgage. Or in the death case, Mickey now owns A and B and the mortgage is only on A. Here is the answer. Once a mortgage is validly created, it cannot be made invalid by the owner acquiring additional abutting land. Section 50(18) says a lender can enforce a mortgage as long as it is all of the land described in the mortgage assuming that it was a valid mortgage to begin with. It invites the next question: does the existing mortgage cover the additional land. No, and so far as I know, you cannot amend a mortgage to add land to it. The LRO won’t let you do it. The additional land has to be “charged” and you do that in a charge and not an amending agreement. You have to put a new mortgage the title to both parcels in order to capture the additional land. You might do that by simply reregistering the same mortgage but add the additional lands to it. Most important, don’t put the mortgage just on the newly acquired parcel. Since your owner owns the abutting land, that mortgage on the lot addition will be void.
- Aco and Bco, two corporations own abutting lands A and B. Same directors, shareholders, etc. Section 15 of the OBCA says a “corporation has the capacity and the rights, powers and privileges of a natural person.” Two corporations would be the equivalent of two natural persons, i.e. different persons. It has always been accepted that corporations even if controlled by the same person do not merge the properties. As noted below, the question is what if they are nominees for the same beneficial owner. Which prevails: the OBCA, the Land Titles Act or investigating to determine who has the power of disposition over the two parcels? See below with trusts.
- Trusts: This continues to be a difficult issue to resolve and despite my Land Titles analysis noted below, there are lawyers who don’t like it. The question is simple: in a case involving trust ownership, does the registered owner have the power of disposition or does the beneficial owner have the power of disposition and if it is the latter, how do you satisfy yourself as to where the power is. And how do you reconcile section 68 of the Land Titles Act with the beneficial owner’s power of disposition? No court has ruled on the issue. There are two theories and approaches.
First, section 68 of the Land Titles Act says only the person registered as owner can deal with the property. Land Titles does not recognize trusts. What if Jones holds A for Mickey and B for Minnie. Do you look behind the registered ownership to find the beneficial owner and determine if the beneficial owner has the power of disposition. Section 68 says only the registered owner can deal with the property. That is where the power of disposition is—in the registered owner. There is merger of the titles in Jones regardless of the beneficial ownership. There is certainty in the power of disposition. That is the argument.
But what happens if Jones owns A for Mickey and Smith owns B for Mickey. Mickey is the beneficial owner of both properties. Do you have to ask about beneficial ownership? What if you know about the trust and the common beneficial owner, can you still rely, if you want to, on Section 68. Many will say no; you cannot take that position if you know that there is common beneficial ownership.
Continuing with the analysis, some say that the trust agreement governs the power of disposition depending on its terms and rely on Captain Developments v. Marshall, a Registry Act case. In that case, the court held that if the same person is registered as owner of A and B, but in trust for different beneficial owners, there is no merger since the power of disposition is not with the person registered as owner. They may be right depending on the facts and the terms of the trust agreement. Too often, especially with unsophisticated owners, there is no trust agreement or the trust agreement does not clearly indicate who has the power to dispose of the property. Beneficial ownership is not indicated on title and consideration of the power of disposition is made only after title was taken.
Sometimes in deciding on whether there is compliance or a breach, you may have to first decide if the problem is a planning problem or a Planning Act problem. Are the lands in fact separate or is it just one large single parcel of land? Especially with developed land, that may be relevant as to which approach you might take. My own view is that I do not want to interpret the trust agreement (many of which are nonexistent or skimpy when title was originally taken) and would give precedence to the Land Titles Act which it is arguable trumps the common law. But that is my view. On a sale involving what are clearly two separate properties, signing the Planning Act statements based on Captain Developments may be the easy answer. It may not be so easy with a mortgage where you cannot have the benefit of the statements.
I have discussed the Land Titles approach with some commercial lender lawyers and they don’t like it. They worry that the trust issue may come back to bite them with an allegation that a common law trust argument prevails. A practical approach does not guarantee certainty when someone wants to take a run at the validity of a mortgage.
The reverse fact situation is also a problem that often arises on corporate transactions where abutting land may be owned by different corporate nominees for the same beneficial owner. The Land Titles Act and section 15 of the OBCA may be the easy answer. But a lender will want to know who the beneficial owners of the property are and get a charge of the beneficial interest. If there is knowledge that the same beneficial owner owns abutting land through a different nominee, what then? In the webinar, I said “Don’t ask, don’t tell” but on complex corporate deals, that may not be possible. Lenders want to know what the beneficial owners own. Under the anti-money laundering legislation, they may be required to have this information. Perhaps the answer is to make sure there is some difference, even a minuscule difference in beneficial ownership to answer the question. I know it comes up. Some may advise the client lender of the issue and let the client take the risk. Do you rely on the Land Titles Act or focus on the identical beneficial ownership. The transaction may be title insured and then it is up to the title insurer. Not so easy to resolve when all the clients want to do is close the deal.
Can we have our cake and eat it too? Here is perhaps some solace for the conflict at least on a purchase. It may well be that in the appropriate circumstances, a lawyer can rely on the Land Titles Act today to close a deal and on the power of disposition authorities tomorrow to close another deal. As someone asked, is there a difference between a planning problem and a Planning Act problem. Often, we have Planning Act problems but no planning problem at all. If it is a Planning Act problem, and not really a planning problem, maybe we have enough law and analysis to pick the practical of the two approaches in any given situation rather than feel the need to have one right answer. And if you can, sign the Planning Act statements to ensure that good title passes.
- Planning Act does not apply to whole units and common interests on a condominium. (section 9(1) of the Condominium Act.
- Can you release part of a right of way or easement. Assume there is a 100 foot right of way that goes up the side of a property for a driveway. The neighbour only uses the front 60 feet of it. The neighbour is prepared to release the rear 40 feet of it. Does the release of the easement by the neighbour while the neighbour owns the abutting property require consent. In Brankston v. Wright, the court said releasing all of a right of way is not a grant of an interest in land but simply reinstating the full rights of the owner of that land. Applying that analysis might bring one to conclude that reinstating the rights of the owner in a part of the right of way lands would also not require consent. See the analysis in my book on this one.
- And here is something I thought was obvious. A is the whole lot on concession 1, B is the whole or a part of lot 2 on concession 1 and they abut. Can the whole lot be conveyed without Planning Act approval. No, the statute says the only exception for whole lots is if the land is on a plan of subdivision. Being a whole concession lot is irrelevant. The two properties abut and a consent is necessary. As I said, the rules are in the statute.
- And once again, it does not matter if a property is the whole of a PIN. PINs are not relevant at all to the Planning Act. A PIN can be split and PINs can be consolidated. They are just the way the land registry system catalogues properties. There is no exception for land that is the whole of a PIN. Sometimes, committees of adjustment require PINs to be consolidated as a condition of granting a consent as if they think that consolidating a PIN will make it undividable. The land registry office does not monitor Planning Act. You can split a PIN into as many parcels as you want. That does not make them conveyable for Planning Act purposes.
Once again, my disclaimer: The issues raised in this bulletin are for information purposes only. My comments should not be relied upon to replace specific legal advice. Readers should investigate all matters independently before acting on the basis of material contained herein. I reserve the right to be wrong and to change my mind. Use at your own risk.