Summary

On May 25, 2023, the Minister of Transport, Geneviève Guilbault introduced Bill 22: An Act respecting expropriation ("Bill 22"). The intent of Bill 22, which is currently being considered by the National Assembly of Quebec, is to completely replace the Expropriation Act in order to substantially reduce the indemnities paid to expropriated parties by the government of Quebec, provincial parapublic bodies and municipalities. Bill 22 responds to numerous well-publicized calls by mayors who want to acquire properties in natural environments at a low cost in order to protect them. However, it does not cover natural environment expropriations alone; rather, it covers all expropriations that will be instituted six months after the coming into force of Bill 22. In addition, and for the first time, the bill formally recognizes the concept of disguised expropriation, in order to enable public bodies that engage in such practices to revisit their decisions once a final judgment of the Superior Court is rendered ordering them to pay an indemnity to a property owner.

Authors' Commentary

A. Philosophy of the Bill

To start, we note that Bill 22 is a detailed and complex bill that takes a very restrictive approach in several respects, and in particular with respect to property rights in general. In fact, at a first glance, we noted that Bill 22 codifies the issues encountered by expropriated parties in recent years. The current Expropriation Act contains two sections relating to the expropriation indemnity that allows the Administrative Tribunal of Quebec (the "Tribunal") to indemnify expropriated partieson a case-by-case basis with necessary flexibility. On the other hand, Bill 22 attempts to codify every imaginable scenario, thus greatly limiting the powers of the Tribunal and diminishing the importance of its expertise in the field.

Another example showing the new philosophy adopted by the legislator is the fact that a contestation of the right to expropriate at the Superior Court does not stay the expropriation procedure. Historically, contestation proceedings before the Tribunal were stayed, to respect the authority of the Superior Court, which had to rule as to the legality of the expropriation on an urgent basis. The situation of contestation proceedings not staying the expropriation procedure had arisen in several particular statutes in precise contexts (e.g., Act respecting the Réseau électrique métropolitain and Act respecting the acceleration of certain infrastructure projects), but this had never been applied generally to every expropriation proceeding. Bill 22 now essentially presumes that expropriating bodies are always right when it comes to the legality of the expropriation and will never abuse their power to expropriate. Should Bill 22 be adopted as is, this change will cause a significant increase in costs to expropriated parties, even if they ultimately succeed in proving the illegality of the expropriation proceedings taken against them.

As well, undermining property rights in a statute is an unprecedented approach in Quebec. If Bill 22 is passed as it now stands, after the various stages of legislative consideration currently underway, it is highly likely that there will be constitutional challenges.

The reaction of the Union des municipalités du Québec (UMQ), the Montreal Urban Community (MUC), the City of Montreal, and a number of other elected municipal bodies across the province to the introduction of Bill 22 should be a source of concern for real estate developers and property owners in the province.

B. Compensation Approaches

Clause 75 of Bill 22 provides six distinct approaches that the Tribunal will have to choose from in order to establish the final indemnity due to the expropriated party. The six approaches are as follows:

  1. the approach based on the cost of acquisition of the expropriated right;
  2. the approach based on redevelopment of an immovable;
  3. the approach based on the relocation of a construction;
  4. the approach based on cessation of operations of a business;
  5. the approach based on relocation; and
  6. the approach based on the reinstallation theory.

We note right away that for a lessee or an occupant in good faith, only approaches 2, 4 and 5 are available.

Clauses 76 to 81 of Bill 22 govern the choice of the approach that the Tribunal must apply with respect to a particular expropriation. We expect that a large part of the disputes that will arise will deal with the approach chosen by the Tribunal, since the approach that is chosen will ultimately have a substantial impact on the final indemnity awarded.

To determine the amount of a final expropriation indemnity where the approach taken is not the reinstallation theory, which will apply only in rare circumstances, the legislator specifies that the approach to be taken will be the one that results in the lesser of the indemnities, even if a more appropriate approach could be taken. This is another example of interference by the legislatoir in the expertise of the Tribunal, whose power to grant the best indemnity based on the evidence and the specific circumstances of a case is being removed. The only exception to the "lesser of the indemnities" rule is found in clause 117 of Bill 22, which would allow the Tribunal to grant a higher indemnity where it considers that the public interest justifies it, in particular if the operation of the enterprise or the carrying on of institutional activities is essential to the community. In our opinion, this could cause serious interpretation problems, and possibly injustices, regarding what constitutes an "enterprise essential to the community."

It is also worth noting that under clause 108 of the bill, the Tribunal could, on its own initiative or on an application by a party at a preliminary stage of the case, determine the compensation approach to be taken. That implies that the experts might be bound by a preliminary decision of the Tribunal in exploring the potential scenarios for ensuring that the expropriated party is not impoverished by the expropriation. Contrary to the objective that seems to be to simplify the expropriation process, we believe that a number of contestations both before the Tribunal and on appeal could take place at any point in the course of the expropriation proceedings and that this will actually complicate the expropriation process and increase the costs for professionals for all parties involved.

In addition, where a Tribunal considers the question of the compensation approach to be taken at a preliminary stage, it could have the benefit of transcripts of pre-hearing examinations of certain witnesses, since pre-hearing examinations – examinations held before the trial on the merits – will now be permitted in expropriation cases in which a detailed declaration equal to or greater than $500,000 has been filed.

C. Composition of the Final Indemnity According to the Compensation Approaches

The final indemnity due to an expropriated party corresponds to the aggregate of the following indemnities:

  1. the immovable indemnity;
  2. the indemnity in reparation for injuries;
  3. the indemnity for loss of value for convenience; and
  4. the indemnity for trouble, nuisance and inconvenience.

Only the owners of expropriated residences will be able to claim indemnities 3 and 4, which are also limited to $20,000 and $5,000, respectively. This is a new rule that seems to minimize the impacts suffered as a result of an expropriation, whether for a business, by disallowing any indemnity on this basis, or for a residence, by limiting the indemnity to meagre sums.

For the immovable indemnity, clause 87 of Bill 22 proposes to limit the probable horizon for putting a use into effect so that it can be accepted as the highest and best use (HBU) for the purpose of determining the market value of the expropriated property. It is often the case that land is held for investment purposes, for projects to be carried out on a longer horizon than three years, and this explains why the professional standards of chartered appraisers require them to use a longer horizon in expropriation cases. A narrow interpretation of clause 87 by the Tribunal could lead to obvious impoverishment situations, where land that could be used for real estate development in five or six years, for example, could not be appraised using that potential at the time of expropriation, although its value would be obviously higher on the open market, given its potential.

The eligibility criteria for the indemnity in reparation for the damages suffered for an expropriated enterprise are so stringent that they make any chance of receiving it unlikely. For example, a real estate developer whose land is expropriated when the developer has not yet obtained all of the permits needed for the project would be unable to obtain an indemnity to compensate for lost profits. In our view, that opens the door to blatant abuses of power where expropriating municipalities may want to intentionally delay the permit issuance process in order to reduce the indemnities they will have to pay, something that is contrary to the case law, which has been unanimous for several decades in preventing municipalities from taking action to artificially reduce the value of properties before expropriating them.

Rather exceptionally, Bill 22 provides that preparatory work may be carried out by an expropriating body even before a notice of expropriation is filed. As well, Bill 22 provides an exemption from paying an indemnity for any damage caused by construction of the infrastructure project that led to the expropriation (e.g., noise, dust, or any other nuisance causing the loss of profit or of the goodwill of an enterprise).

D. Abandonment of the Concept of Value to the Owner

One of the most problematic points in Bill 22, in our opinion, is the abandonment of the concept of the value of an expropriated property to the owner, replaced with the simple market value. The reason why indemnities were historically established as the value to the owner was that a person whose property is expropriated is not an ordinary seller who negotiates their price as they choose with a buyer in a free market. On the contrary, an owner whose property is expropriated is forced to transact at a time not of their choosing, and that is why the potential value of the property was included in determining the indemnity.

With the new method put forward by Bill 22, it seems to us that the legislature is assuming that immovable properties have no potential value, and have only a value established at the time when the expropriating body sees fit to confiscate them. In fact, there would now be a presumption that all landowners hold their properties for purely speculative purposes and have no concrete long-term plans, which is obviously not the case. It seems to us that this is inconsistent with the values and principles of our constitutional democracy.

E. Disguised Expropriation

Clauses 170 and 171 of Bill 22, which appear in Part V, entitled "Right resulting from the application of certain municipal by-laws", cover cases in which there is disguised expropriation of landowners' property. In fact, this is the first time the provincial legislature has expressly addressed the concept of "disguised expropriation"; until now, it had been defined only in the case law.

It seems that the legislator's intent is to provide an exit door for municipalities that dispossess owners of their property without paying a fair indemnity. The proposed new provisions give municipalities a chance to revisit their decision, but only once the Superior Court has rendered a judgment regarding the disguised expropriation. This will inevitably open the floodgates to disguised expropriation actions, given that municipalities will now have a statutory incentive to try to engage in consequence-free disguised expropriations, all the while knowing that they will have an opportunity to revoke their actions in the event that the Superior Court renders a judgment in the property owner's favour and concludes that they have been illegally dispossessed of their property.

For example, if a municipality decided to make a by-law whose effect was a disguised expropriation of a real estate developer's property, the municipality in question would be given the choice of repealing its by-law, that should not have been made in the first place, or paying the indemnity determined by the Superior Court, but only after the Superior Court renders a final judgment, that is, after several years and probably after very expensive appeal proceedings. It is foreseeable that municipalities will decide in most cases to withdraw the problematic provision or provisions. This will cost all the victims of disguised expropriation in Quebec enormous amounts of wasted time and lost opportunities, in addition to damages associated with the capital in a property "temporarily" affected by the disguised expropriation being frozen.

Municipalities would now be able to knowingly block real estate projects by making by-laws that limit the permitted uses on the immovable in question, with no consequences.

Contrary to the representations made by the municipal bodies that testified before the transport and environment committee of the National Assembly of Quebec during the legislative consultations on Bill 22, a simple zoning change that does not prohibit any reasonable use of an immovable is not synonymous with disguised expropriation as the law now stands. On the contrary, the requests made by those bodies asking that it not be possible to base a disguised expropriation action on any by-law made under the Act respecting land use planning and development, CQLR, c. A-19.1, and the Cultural Heritage Act, CQLR, c. P-9.002, will result in the complete dispossession of the owners of a number of immovables in the name of achieving certain public objectives.

Essentially, if those requests to eliminate disguised expropriation actions were agreed to by the legislator, municipalities would no longer need to use their power to expropriate and thus to pay a fair and reasonable indemnity to owners of expropriated properties when they want to protect lands and buildings that they have their eye on in order to achieve their objectives, entirely contrary to the fundamental principles codified by section 6 of the Charter of Human Rights and Freedoms and by article 952 of the Civil Code of Québec.

F. Transitional Provisions

One positive point is that every expropriation proceeding already begun will continue to be governed by the current Act and will remain so until six months after the date of assent to Bill 22. However, this could well encourage expropriating bodies to improperly delay serving notices of expropriation so they are able to benefit from the new legislative provisions. In view of the new restrictions relating to indemnities, we might wonder about the damage that landowners who incur costs for land that would normally already be subject to expropriation proceedings might suffer in the meantime.

As well, Bill 22 provides that the government may, by regulation, enact any other transitional measure it considers necessary, which seems very broad to us. This situation will be monitored and a further bulletin will be issued, if necessary.

Conclusion

We believe that Bill 22 raises more legitimate questions than it provides answers to, as it now stands. Most of the actors invited to participate in the legislative consultations, in our view, placed less weight on the rights of owners of expropriated property and focused only on how the bill benefits the expropriating bodies. If Bill 22 is passed and assented to as it now stands, we will inevitably see numerous proceedings concerning the interpretation of its provisions.

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