Canada: Municipal Law; Development Permit; Services; Statutory Interpretation ~ With Counsel Comments

Last Updated: November 15 2017
Article by Field LLP

Osman Auction Inc. v. Edmonton (City), 2016 ABCA 166

Areas of Law: Municipal Law; Development Permit; Services; Statutory Interpretation

~For the purposes of s.650(1)(c) of the Municipal Government Act, the word "necessary" means "indispensable", and not merely "convenient"~

BACKGROUND

The Appellant, Osman Auction Inc., purchased a parcel of land on which to run its vehicle auction business. The site was already subdivided and properly zoned, but not serviced "to urban standards". The Appellant sought a development permit to enable the construction of a new building. The permit was granted on various conditions, including that the Appellant would have to contribute to the costs of installing underground storm and sanitary utility services in the area. The Respondent City of Edmonton's Area Structure Plan for the area included a broad policy statement that the area was to be serviced to "City standards", but did not provide any detail about what constitutes "City standards". It also did not purport to deal with responsibility for the costs of installing the servicing. The Respondent Yellowhead Lands GP Inc. was developing lots abutting the Appellant's site. As a condition of subdivision approval, Yellowhead was required to construct arterial roads and storm and sanitary sewers. In accordance with usual practices, that infrastructure had to be designed and sized to service the entire area, including the Appellant's lands. The conditions in the Appellant's development permit required it to contribute a proportionate share of the cost of servicing the entire area. The Appellant argued that it was not presently able to connect into the infrastructure Yellowhead was to build, and that it would have to keep relying on its own on-site systems for an indefinite time. The Appellant took the position that it was not required to contribute to servicing, because the systems were not necessary to serve its development. The development officer imposed conditions requiring the Appellant to contribute only 20% of the $1,057,370.54 levy. The balance of the costs allocated to the Appellant's parcel would be deferred until further development of the parcel. The Appellant appealed to the Respondent Subdivision and Development Appeal Board (the "Board"), which dismissed the appeal. The Board held that it had an obligation to comply with statutory plans under s. 687(3)(a.1) of the Municipal Government Act, and that the Area Structure Plan's intent was to bring drainage services to the area, and not have owners rely on self-contained systems. The Board found that even though the Appellant could not immediately benefit from the use of the infrastructure, the value of the property would improve if it were fully serviced.

APPELLATE DECISION

The appeal was allowed. The Appellant obtained leave to appeal on one issue, being whether s. 650(1)(c) or s. 687(3)(a.1) or both of the Municipal Government Act authorize the imposition of the development conditions to which the Appellant objected. Section 650(1)(c) allows infrastructure levies as a condition of a development permit to install public utilities that are necessary to serve the development. Section 687(3)(a.1) provides that the Subdivision and Development Appeal Board must comply with the land use policies and statutory plans and land use bylaw in effect. The Appellant argued that the word "necessary" as used in s.650(1)(c) means "indispensable", and not just "convenient". The majority found that ample case law supported the Appellant's argument in this respect. The majority also held that the "development" at issue in s. 650(1)(c) was the specific construction project of the specific applicant, and not the larger area covered by the Area Structure Plan. The City argued that once it sets acceptable standards of utilities, it then becomes necessary for every developer to comply with them. Yellowhead made a similar argument, stating that the costs reasonably allocated to each development are "necessary" to "serve that development". In this context, "necessary" would be interpreted to mean "a reasonable share of the costs". The majority found these arguments without merit, stating that "necessary to serve the development" cannot reasonably be read as "in accordance with standards adopted by the municipality". While municipalities can set standards for servicing, they cannot compel developers to pay for them if they are not "necessary" to the specific development. The Board did not directly consider whether the sewage connections were "necessary" to the Appellant's development. Accordingly, the majority referred the matter back to the Board.

Mr. Justice Berger dissented. He would have adopted the argument made by Yellowhead, that the phrase "necessary to serve the development" means that each owner is responsible for only its share of the costs to service its development in accordance with City requirements. Accordingly, he would have dismissed the appeal.

COUNSEL COMMENTS

Osman Auction Inc. v. Edmonton (City), 2016 ABCA 166

Counsel Comments provided by Chris Zelyas, Counsel for the Appellant

"The key issue at play in the Osman decision is the scope of power to be accorded to Alberta municipalities with respect to imposing certain conditions on developers. Specifically, when can a municipality force a developer, as a condition of development, to contribute to the cost of building public utilities in the general vicinity of their developments? The broader issue is the balance between individual property rights and the power of government to regulate same.

In addressing this issue, the Osman decision is of obvious interest to a broad swath of parties: all Alberta municipalities must take notice, as well as anyone interested in developing a parcel of land. Alberta legislators should also take notice, given that they are in the midst of major amendments to the Municipal Government Act.

Section 650(1)(c) sets the statutory framework for the appeal. It allows a municipal council (via land use bylaw) to require that applicants for development permits enter into development agreements wherein the developer must install or pay for the installation of public utilities that are necessary to serve the development.

Traditionally, s. 650 has been seen as being both empowering and limiting on municipalities—while they can impose installation or payment conditions on developers, they can only do so where the language of s. 650 specifically permits. Thus, for public utilities, they can only insist on installation or payment by a developer if the utility in question is actually necessary to serve its development.

The disjunction between the majority decision and dissent arises due to a perceived conflict in the interpretative principles to be emphasized—should the plain language meaning of s. 650(1)(c), which was applied by Justice Slatter, be displaced by the policy concerns raised in dissent by Justice Berger?

The majority decision adopted a common sense, plain language definition of s. 650(1) (c): "necessary" means what it is commonly understood to mean—something actually indispensable, which cannot be done without. The "development" at issue is the development for which the permit was granted. For the conditions to be permissible, then, the question therefore simply becomes: are the underground services actually indispensable for the developer's development, or can that specific development do without them? This is a simple bright-line test that would seem to follow from the language of the MGA.

The dissent, on the other hand, would have interpreted "necessary" as meaning that each owner is responsible for its share of the costs to meet the City's standards of servicing. This was animated by a concern that the broader development framework requires cost-sharing by developers in an area. If each individual developer can "opt out" of contributing to City-standard servicing, then the ability to reasonably share the costs of such infrastructure may disappear. The concern is that certainty and predictability in development then disappear.

Ultimately, it appears that the majority's decision got this right: the dissent's concerns over developers "opting out" of modern servicing appears somewhat esoteric. It is not clear that many developers would in fact decide to avoid such servicing when it could very well be attractive to have fully developed "City standard" servicing for most developments. Further, the test suggested by the dissent leaves several questions unanswered and would not appear to provide the certainty and predictability that it emphasizes in its expression of policy concerns—how are we to determine an owner's "share of the costs" for City servicing? Based on their volume of use, based on the size or cost of their development, or based on something else?

Perhaps more importantly, the dissent would appear to allow municipalities themselves to define what services are "necessary" for a development. If the servicing standard that is adopted by the municipality through a statutory plan becomes "necessary" for each development, then any restriction on the power of municipalities to impose costsharing conditions that would otherwise be impugned under s. 650(1)(c) vanishes. The municipality can simply define whatever it wants as "necessary", and the section then loses any ability to limit on a municipality's power in this respect.

The remainder of the story of course remains to be written. It will be of great interest to all Alberta municipalities and developers if the next round of amendments to the Municipal Government Act involves any attempt to respond to the Osman decision. This is very much a 'to be continued . . .'"

Click here to access the Judgment.

Originally published by OnPoint Legal Research | Take Five

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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