What is Expropriation?
A government authority has the power to take land without the consent of an owner using powers that are set out in the Expropriations Act. It is common for a dispute to arise about the value of land that has been expropriated. It is also quite common for an expropriating authority to fight a claim for damages suffered by an owner or a business when there is an expropriation. Ontario law provides that the owner should be made “whole” by the expropriation process. Therefore, in addition to compensation for the market value of the lands, interest, and business and disturbance damages which are the “natural and reasonable consequence of the expropriation”, Ontario law also provides that the government authority taking the property must reimburse the owner(s) for “reasonable” legal, appraisal and other costs.
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The Expropriation Process
The process begins with the delivery of a Notice of Application for Approval to Expropriate, which must be served by the expropriating authority on every owner (which includes a “mortgagee, tenant, execution creditor, a person entitled to a limited estate or interest in land, a guardian of property, and a guardian, executor, administrator or trustee in whom land is vested”). The Notice sets out the nature of the taking and lists the property to be affected. The Notice is served by registered mail. The Authority is also required to publish the Notice for three consecutive weeks in a newspaper of general circulation.
Hearing of Necessity
Upon receipt of the Notice of Application to Expropriate, an owner has 30 days to request a “Hearing of Necessity” (also known as an “Inquiry”). If the owner was served with the Notice of Application for Approval to Expropriate Land by registered mail, the 30-day limitation period to request a Hearing of Necessity starts running from two days after the Notice was mailed. However, if the owner became aware of the expropriation because of the newspaper publication, the deadline starts running from the date when the Notice was first published.
A Hearing of Necessity is the only opportunity for a property owner to challenge the expropriation. The purpose of the hearing is for the Inquiry Officer to determine whether the proposed taking meets the legal test of whether the expropriation is “fair, sound and reasonably necessary” to meet the objectives of the authority. Under the Expropriation Act, a landowner is not permitted to question the government authority’s objectives.
This process provides affected landowners and expropriating authorities the opportunity to make submissions on the merits of a proposed expropriation prior to its final approval. The Inquiry Officer presiding over a Hearing of Necessity has a duty to give both the landowner and the authority the opportunity to present evidence and argument. This includes the right to examine and cross examine witnesses. The Inquiry’s Officer’s power is, however, limited to non-binding recommendations to the “Approval Authority.”
Unfortunately, a landowner is not entitled to reimbursement of any legal costs associated with the Hearing of Necessity, other than a token amount of $200.00. The Authority is required to serve every Owner who made a Request for Inquiry with a Notice setting out the grounds the Authority intends to rely at the hearing. The Authority is also required to make available for inspection the documents upon which it intends to rely at the hearing. This documentary disclosure does not necessarily include all documents that may be relevant.
An Inquiry can be used for strategic reasons. For example, it can create a delay in the process and therefore postpone the date of expropriation or put pressure on an authority in expropriations of a time-sensitive nature.
If a Hearing of Necessity proceeds, the Inquiry Officer produces a written report. The Authority must consider the report and approve the expropriation with or without modifications. While the Authority must consider the report, it does not have to follow the Inquiry Officer’s recommendation.
Plan of Expropriation
Within three months of the approval to expropriate being granted, the authority will register a Plan of Expropriation. When registered, land is then owned by the authority. However, possession of the lands remains with the Owner until the authority takes lawful possession.
Notice of Expropriation, Notice of Election and Notice of Possession
Within 30 days after the registration of the plan of expropriation, the authority is required to serve a Notice of Expropriation, Notice of Election and Notice of Possession. The authority may enter the lands, with the owner’s consent, for the purposes of obtaining an appraisal. The Notice of Election gives the owner three options for the date when market value is assessed: service of the Notice of Inquiry, registration of the plan of expropriation and date of the service of the Notice of Expropriation. The choice is generally made on the basis of market conditions. If an election is not made within 30 days from the date of service of the Notice, the owner is deemed to have elected the date of the registration of the plan as the Valuation Date. The authority cannot take possession of the land until at least three months after registration of the Plan of Expropriation, except by Agreement or Court Order.
The Section 25 Offer
An offer of compensation must also be made within three months of the registration of the plan of expropriation, and before the authority takes possession. This offer is commonly known as a “s. 25 Offer” because it is made according to the provisions of s. 25 of the Expropriation Act.
A s. 25 Offer will have two parts:
Offer A, which can only be accepted with prejudice. In other words, if accepted, payment of the set amount will constitute a full and final settlement with the authority.
Offer B, which is a “without prejudice” offer of advance compensation. If accepted, the Owner will be paid the offered amount without prejudice to the right to continue to negotiate or litigate for additional compensation.
A s. 25 Offer must be accompanied by an appraisal report upon which the offer is based. The report will estimate of the market value of the land as of the Valuation Date, and any injurious affection resulting from the expropriation.
Board of Negotiation
The Act provides for a mandatory mediation of all claims before the Board of Negotiation. The Board is made up mostly of qualified real estate appraisers who specialize in assessing market value for expropriations, and injurious affection. The Board process is triggered by a “Notice of Negotiation” which may be served on the authority by the owner, or vice versa. The discussions that take place at the Board are confidential and without prejudice.
Local Planning Appeal Tribunal
If there is no settlement at the Board, parties must resort to the arbitration process stipulated in the Expropriation Act. In Ontario, the Local Planning Appeal Tribunal arbitrates expropriation claims. The process is commenced by delivery of a Notice of Arbitration and Statement of Claim either by the owner or the authority. The other party then files a Reply, which is followed by documentary and oral discoveries, motions, procedural conferences and, ultimately, a hearing. The process is very much like a civil trial.
Reimbursement of Costs
While a landowner is normally fully reimbursed for the costs incurred in the context of a settlement (whether negotiated privately or at the Board), in the event of a hearing, what is referred to as “the 85% Rule” determines recovery of costs. Section 32 of the Act provides that:
Where the amount to which an owner is entitled upon an expropriation or claim for injurious affection is determined by the Board and the amount awarded by the Board is 85 per cent, or more, of the amount offered by the statutory authority, the Board shall make an order directing the statutory authority to pay the reasonable legal, appraisal and other costs actually incurred by the owner for the purposes of determining the compensation payable, and may fix the costs in a lump sum or may order that the determination of the amount of such costs be referred to an assessment officer who shall assess and allow the costs in accordance with this subsection and the tariffs and rules prescribed under clause 44 (d).
The offer referred to above is the s. 25 offer. Cases are clear that any subsequent offers made by the authority are not relevant to the application of the 85% Rule.
An expropriation appeal of an arbitration decision from the Tribunal may be filed at the Ontario Superior Court of Justice. Subsequent appeals to the Ontario Court of Appeal and Supreme Court of Canada require permission from the court.