Canada: Top Line Toppled – A Welcome Development For Landlords And Tenants

Last Updated: April 9 2009
Article by Russell G. Benson and Scott D. Smythe

Most Read Contributor in Canada, September 2018

Section 73 of the Land Title Act (British Columbia) provides, in effect, that unless an approving officer approves, a person may not lease an unsubdivided piece of a legal parcel of land for a term of more than three years (leases of portions of a building are exempt). Prior to International Paper Industries Ltd. v. Top Line Industries Inc. (1996), 20 B.C.L.R. (3d) 41 (C.A.), it was generally accepted that the effect of this restriction was that a lease of part of an unsubdivided parcel of land did not create an interest in land registrable in the Land Title Office or enforceable against a third party purchaser, but did create personal rights enforceable as between the original parties to the lease. In Top Line, the B.C. Court of Appeal sent shockwaves through leasing and legal circles by deciding that a lease granted contrary to s. 73 was void from the outset and did not create personal rights between the parties to the lease. The decision jeopardized hundreds, if not thousands, of existing leases, and required lawyers and industry participants to develop alternative methods of achieving their goals.

On May 31, 2007, the Legislature addressed the Top Line problem by amending the Land Title Act to add the following as a new provision:

73.1(1) A lease or an agreement for lease of part of a parcel of land is not unenforceable between the parties to the lease or agreement for lease by reason only that

  1. the lease or agreement for lease does not comply with this Part, or
  2. an application for the registration of the lease or agreement for a lease may
    be refused or rejected.

In Idle-O Apartments Inc. v. Charlyn Investments Ltd. 2008 BCSC 849, the court had the opportunity to consider the effect of s. 73.1 and, in particular, whether it only operated to validate future leases or whether it also applied retroactively. The plaintiff landlord sought a declaration that a 998-year lease of a part of an unsubdivided parcel executed in 1978 was illegal and unenforceable because it did not comply with s. 73 of the Land Title Act. The landlord argued, on the basis of Top Line, that the lease was void from the outset and did not confer any personal or proprietary rights on the defendant tenant.

After considering the legislative reforms proposed by the B.C. Law Institute, the explanatory notes to the bill introducing s. 73.1 and the legislative debates (all of which indicated an intention to override the rule in Top Line), the court concluded that s. 73.1 should be applied retroactively because it is remedial legislation passed to bring fairness and equity to situations like the ones faced by the Idle-O litigants and, in particular, to address the difficulties caused by Top Line. The court held that the 1978 lease was a valid lease between the two parties.

The Idle-O case confirms that a lease of a portion of an unsubdivided parcel of land may give rise to personal rights between the original parties to the lease, even if the lease was entered into before s. 73.1 came into force. This decision may well serve to validate the many leases entered into contrary to s. 73 that would otherwise have been void on the basis of Top Line.

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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