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Cancelling Charges under Section 35 of the Property Law Act – Don’t Count On It

A recent decision of the BC Supreme Court demonstrates the difficulty of obtaining an order under Section 35 of the Property Law Act. The case will be of particular interest to developers who intend to rely on the Section as part of their development plans. Section 35 grants the Court authority to cancel or modify certain types of charges including easements, statutory rights of way, and restrictive covenants in a variety of circumstances, including when:

  • cancellation would not injure the chargeholder;
  • the charge is invalid or unenforceable; and
  • the chargeholder has expressly or impliedly agreed to the cancellation of the charge.

In Natura Developments Ltd. v Ladysmith (Town), Natura Developments Ltd. (the “Developer”) acquired a parcel that was encumbered by a Section 219 Restrictive Covenant (the “Covenant”) in favour of the Town of Ladysmith. The Covenant prohibited development of the parcel except with approval from Ladysmith and outlined a specific review process for obtaining approval. The Developer’s proposal for a 27 townhouse development was rejected by Ladysmith, which preferred to see a smaller scale project.

The Developer applied to have the Covenant cancelled under Section 35 of the Property Law Act. The Developer argued that cancellation of the Covenant would not injure Ladysmith because, absent the Covenant, Ladysmith had the ability to limit density through the zoning and development permitting process. The Court rejected this argument, holding that “[t]he processes provided under the [C]ovenant differ from those otherwise available to Ladysmith both in function and form. Furthermore, Ladysmith’s zoning and permit powers relate to its ability to regulate land use generally, rather than specifically in relation to the property.”

In rejecting the Developer’s application, the Court reviewed the caselaw considering this provision. In the relatively rare circumstances where courts have cancelled charges, the applicant presented facts that very closely mirror the circumstances contemplated by Section 35. Short of that, courts have shown themselves reluctant to exercise their power under this provision.

The takeaways from this case are two-fold. Firstly, it shows the importance of retaining a lawyer to prepare a title report as part of routine due diligence. This is a critical step in identifying potential roadblocks to development plans. Secondly, the case serves as a cautionary tale for those who intend to rely on Section 35 of the Property Law Act. Developers should view it as a last resort, as the courts have only applied it in very narrow circumstances.

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Our Real Estate Law Blog provides brief commentary on current legal trends and developments affecting your business. The topics addressed in Lawson Lundell’s Real Estate Law Blog are of interest to commercial real estate developers, real estate and strata agents, investors, landlords and tenants, as well as a variety of industry groups. 
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