On September 17, 2015 the Supreme Court of British Columbia demonstrated the deference that courts give to Section 219 covenants. Section 219 of the Land Title Act, RSBC 1996, c 250 permits the registration of a covenant in favour of a municipality in respect of the use of land or buildings on land, the subdivision of land, and the preservation of land.
In the decision of Natura Developments Ltd. v Ladysmith (Town), 2015 BCSC 1673, the petitioner Natura Developments Ltd. ("Natura") owned property in the Town of Ladysmith ("Ladysmith") and proposed a residential development project in Ladysmith. Ladysmith planning officials advised Natura that the proposed development was inconsistent with a Section 219 covenant that was registered against the title to the property. In general terms, the covenant had the effect of limiting the density of development on the property to 15 multi-family townhouse units in accordance with plans and specifications approved by Ladysmith.
Natura sought an order that the covenant registered against the property be cancelled. Natura relied on s.35(2) of the Property Law Act, RSBC 1996, c 377 (the "Property Law Act") and, in particular, that the covenant was:
- obsolete;
- impeding the reasonable use of the property and without practical benefit to others;
- able to be cancelled without injuring the person entitled to its benefit; and
- invalid, unenforceable or expired.
Obsolescence
Natura argued that the covenant was obsolete because it served a defunct purpose, namely to "commit a previous developer to a particular multi-unit phased development." In Natura's submission, the covenant was also obsolete because it charged only a portion of the property, and could not restrict the petitioner from using "all of the available density" in areas to which it did not apply.
The Court rejected Natura's argument that the covenant bound the owner to a specific, now-defunct development plan, on the basis that there appeared to be nothing in the covenant that prevented Natura from seeking approval of a new development plan under the process set out in the covenant. The Court also found that the covenant did not serve a defunct purpose because one purpose of the covenant was to control density.
The Court was also not persuaded by Natura's argument that the covenant was obsolete because it "cannot and does not restrict the petitioner using all of the available density on the area of the property not charged by it." If Natura built every portion of the property not charged by the covenant to maximum density, that would likely enhance the vitality of Ladysmith's interest in controlling density or the development approval process on the remaining property.
Reasonable Use of Property and Cancellation
Natura submitted that the covenant impeded the reasonable use of the property without practical benefits to others, and that the cancellation of the covenant would not injure Ladysmith. In support, Natura noted that: the covenant did not reduce the available density on the unencumbered portions of the property; the covenant did not injure Ladysmith because Ladysmith remained capable of considering the "needs of the community and the public good" through zoning and the development permit process; and that the cancellation of the covenant did not injure third parties because neighbours lack "standing to enforce a covenant between a municipality and an owner."
The Court was not persuaded that the benefits offered by the covenant were redundant in light of Ladysmith's ability to otherwise control development or density of the property through zoning and the development permit process. Also, although the neighbours could not legally enforce the covenant, they derived a benefit from the covenant in the form of decreased density, increased privacy and controlled development of the property. In the result, the Court concluded that cancellation of the covenant would injure Ladysmith because it would deprive Ladysmith from fulfilling its objectives in protecting and responding to community needs.
Invalidity and Unenforceability
In Natura's view, the covenant was uncertain because the development approval was left to the sole discretion of Ladysmith. The Court concluded that although the scheme in the covenant provided Ladysmith the sole discretion for approval, this was not uncertain because Ladysmith could only approve a new use of the property upon application by the owner.
Natura also argued that the covenant fettered Ladysmith's statutory authority, and that Ladysmith acquired rights through the covenant that it was not statutorily entitled to have.
The Court held that there was nothing to suggest that the covenant fettered Ladysmith's statutory authority. This was particularly so in light of the language of the covenant, which expressly stipulated that the terms of the covenant did not affect or limit Ladysmith's discretion, rights, duties or powers. The covenant further provided that the covenant did not impose any duty of any kind on Ladysmith, and provided only permissive rights. The Court determined that the covenant did not interfere with or fetter Ladysmith's ability to make decisions; it merely prevented the owners of the property from insisting on natural justice or the duty of fairness. Ladysmith remained at liberty to render a decision consistent with those doctrines to the extent that it was consistent with its statutory grant of authority.
Final Thoughts
Despite all these objections, the Court ultimately concluded that the covenant was valid and enforceable. This case highlights the importance of Section 219 restrictive covenants and the reluctance of courts to use Section 35 of the Property Law Act to render these covenants unenforceable.
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