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Real Property - Air Ownership. Toronto (City) v. Craft Kingsmen Rail Corp. ['air parcels']
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court considered the novel real estate sales device of 'air parcels':[8] With one important exception, I adopt the facts as set out by the Application Judge, at paras. 12 -14 of his Reasons:In this case, the applicant has purchased blocks of space described in air parcels that lie above railway lands near the lake shore in Toronto. It has sought zoning approval to build structures on a physical deck that will be built 27 feet above the ground. The deck will cover the railroad tracks below and serve as the base for the future structures to be developed by the applicant or its successors in the space above the deck.
The proposed deck will have to be anchored to the ground below of course. When it bought the air parcels, the applicant also bought easements to ensure that it has the ability to enter upon the land below so it can build and affix its deck to the land below.
The applicant has purchased the air parcels described as “A”, “B” and “C” in the picture below. Until a deck is built between the air parcels and the land below, the air parcels are just legally defined limits of air rights. They cannot be accessed or used for any meaningful purpose.
[image not displayed] [9] I do not accept the second-last sentence of the facts as described by the Application Judge: “Until a deck is built between the air parcels and the land below, the air parcels are just legally defined limits of air rights.” This statement is, in my view, a conclusion that is incorrect in law.
Additional Facts
[10] I also note the following additional facts, which add some context to the statutory interpretation that must be undertaken.
[11] Air Parcels A and B have a site area of 12.23 acres, and span from Bathurst St. to the west and Spadina Ave. to the East. Air Parcel C spans from Spadina Ave. to the west to Blue Jays Way to the east. Although the Application did not relate to Air Parcel C (Air Parcel C was acquired after the Application was commenced), there is no dispute that the decision with respect to Air Parcels A and B will also apply to Air Parcel C.
[12] The Air Parcels were acquired from the vendors, the Canadian National Railway and the Toronto Terminals Railway Company, in three separate transactions which flowed from an Agreement of Purchase and Sale (APS) dated December 2, 2013. The total consideration for all three parcels was $43,325,000. Air Parcels A, B, and C were transferred to Craft in three transactions in 2018, 2019 and 2021 respectively. Municipal and provincial land transfer tax in the amount of $1,591,350 was paid.
[13] The legal description in the APS of what was conveyed to Craft was:[T]he freehold interest of the vendor in the air rights and space beginning at a point that is approximately twenty-seven (27’) feet above the highest point of the top of rail on Front Street Rail Lands, subject to and together with any easements, rights-of-way and attachment rights existing as of the Execution Date, and delineated as Parcels 5, 6, and 7 on the property plan attached hereto…all as legally described in Schedule “A” hereto under the heading “Legal Description of Property”. [14] The Air Parcels were registered under the Land Titles Act, R.S.O. 1990, c. L.5, and are assigned a 9-digit PIN number. Deeds noting the transfer of the fee simple to Craft of Parcels A and B were registered on title on September 24, 2018.
[15] Craft sought consents to sever the surface lands used for rail purposes from the Air Parcel pursuant to the Planning Act, R.S.O. 1990, c. P.13. Severance was granted by the Ontario Land Tribunal on October 16, 2020.
[16] Craft applied to the City of Toronto requesting an Official Plan amendment to permit Craft to build 3,500 residential units plus office and retail space in the Air Parcels.
[17] The total assessed value of Air Parcels A and B is $51,801,000. Air Parcel C is assessed at $13,002,000. The assessed value of the Air Parcels is not an issue in this application or appeal. Appeals relating to the assessed value proceed to the Assessment Review Board pursuant to s. 40 of the Assessment Act. Craft did appeal the assessed value of Air Parcels A and B to the Assessment Review Board, but withdrew its assessment appeals on August 9, 2021. . Toronto (City) v. Craft Kingsmen Rail Corp.
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court examines the ownership of air space in relation to land ownership:[44] The Appellants argue that the Application Judge erred when he commenced his analysis with the proposition, at para. 10, that “we do not actually own the air above our land.” The Appellants argue that this statement is inconsistent with the common law principle expressed in the Latin maxim “cuius est solum, eius est usque ad coelum et ad inferos”, which, roughly translated, means “whoever owns the soil, holds title all the way up to the heavens and down to the depths of the earth”. This maxim has been adopted in the English common law: Bruce Ziff, Principles of Property Law, 5th ed (Toronto: Carswell, 2010), at 92.
[45] As stated by Frank Goodwin in A Treatise on the Law of Real Property (Boston: Little Brown and Company, 1905), at 1:The word “land” or “lands” comprehends the soil of the earth, and everything upward to the skies and downward to the depths below. [46] This principle has been applied by courts in Ontario: Rice Lake Fur Co. Ltd., et al. v. McAllister, 1925 CanLII 402 (ON CA), [1925] 2 D.L.R. 506 (Ont. C.A.), at 513; Toronto Transit Commission v. City of Toronto et al., 1968 CanLII 409 (ON SC), [1968] 2 O.R. 481 (H.C.), aff’d by the SCC in the TTC case.
[47] While the authorities reject the literal suggestion that property rights extend to an unlimited height—hence you cannot sue an airplane in trespass for flying over your home—the principle does support the general proposition that land at common law is three-dimensional and includes the air space above the ground: R. v. Air Canada (1978), 1978 CanLII 2210 (MB CA), 86 D.L.R. (3d) 631 (Man. C.A.) at 636–637; Stratton v. Richter, 2022 BCCA 337, at para. 60; Didow v. Alberta Power Limited, 1988 ABCA 257, 60 Alta. L.R. (2d) 212.
[48] See also British Columbia (Assessor of Area #09-Vancouver Sea to Sky) v. Amacon Group, 2016 BCSC 146, at para. 56, and cases cited therein. After reviewing several of the above sources, the British Columbia Supreme Court concluded, at para. 56:The other authorities to which I was referred also suggest that, while the cuius est solum principle is not an accurate pronouncement of the law, the owner of the surface nevertheless has rights to the air space up to a reasonable height above the ground that accrue not only when the air space is actually used but also in relation to potential use. [49] The Supreme Court of the United States has also considered the landowner’s rights in air space in United States v. Causby, (1946) 328 U.S. 256. While rejecting the Latin maxim as having no place in the modern world where “the air is a public highway” for airplanes (at 261), it confirmed the landowner’s ownership of the usable air space above the ground, at 264:The landowner owns at least as much of the space above the ground as he can occupy or use in connection with the land. … The fact that he does not occupy it in a physical sense -- by the erection of buildings and the like -- is not material. [50] The point here is that, at common law, the air space above the surface is part of the property, as much as the minerals below the surface and (subject to the Beds of Navigable Waters Act, R.S.O. 1990, c B.4) any water that might flow above the surface. This applies not only when the air space is actually used but also in relation to potential use.
[51] In the present case, the air space was part of the real property when it was owned by the Canadian National Railway and the Toronto Terminals Railway Company. The air space did not stop being real property when it was severed under the Planning Act. It did not stop being real property when it was sold by the vendors to Craft. Nor does severance or sale result in the air space transforming into personal property or a chattel. It retained its former attribute as real property or land despite severance and sale.
[52] The Application Judge is undoubtably correct when he states, at para. 10, that the “air moves through the space above our houses freely as nature dictates.” Nobody can own the wind. But the issue is not whether the wind is land or property, but whether the defined boundaries above the surface, which were part of the real property before severance, ceased to be real property when severed, or when sold, only to become real property again when “affixed” to the ground by the construction of some structure.
[53] These legal principles summarized in the Latin maxim support the position that at common law land is a three-dimensional concept and the definition of “land” or “real property” includes as much of the space above the ground as the owner can potentially occupy or use. Neither severance nor sale of the air space above the surface changes this characterization.
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D. Common Law Definition Continues to Apply
[65] The significance of the 1904 amendment to the Assessment Act was a central feature of the Supreme Court of Canada’s decision in Northern Broadcasting Co. v. Mountjoy (Improvement District), 1950 CanLII 9 (SCC), [1950] S.C.R. 502. Both the majority and dissenting opinions reviewed the history of the amendment.
[66] The majority of the Supreme Court held that the definition of land, real property and real estate meant that certain items not considered fixtures at common law would nonetheless be considered part of the land for the purpose of valuation, so long as they are placed on land with some degree of permanency. The specific item at issue was a transformer connected to a transmitter by wires. The question for the Court was whether the transformer was a chattel (and therefore not subject to assessment or taxation) or qualified as real property under the expanded definition in the Assessment Act.
[67] The majority judgment of Kellock J. held that the transformers were caught by the expanded definition and qualified as “land” under the Act, stating, at 509 -510:The second question which arises is as to whether or not a machine merely “placed” upon land without having acquired the character of land at law, falls within the definition.
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I am content to assume that the Statute of 1897 was concerned only with fixtures at common law in the sense that they had become part of the realty.
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In the context of the Statute, I think the Legislature must be taken to have had in mind the including of things which, although not acquiring the character of fixtures at common law, nevertheless acquire “locality” which things which are intended to be moved about, do not.
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It is to be remembered that when the Statute of 1904 was passed, the assessment of personal property was abolished. Prior to the change it was unimportant for assessment purposes whether a given thing had become real or continued to be personal property, as both were assessable. In my opinion, the change in the definition of “land” made by the new legislation indicates an intention which the language used connotes on its face, namely, that the Legislature did not intend to abolish but to continue the assessment of chattels which, although not fixtures at law, nevertheless were not things intended in use to be moved from place to place. [68] The Court’s decision confirms that the definition of land, real property and real estate in the 1897 legislation was the common law definition, and that the purpose of the 1904 amendment was to add to the common law definition by including within the definition of land certain items that were, at common law, chattels.
[69] This view is also confirmed by the Ontario Court of Appeal’s decision in Carsons’ Camp Limited v. Municipal Property Assessment Corporation, 2008 ONCA 17, 88 O.R. (3d) 741. The case concerned the proper interpretation of a 1997 amendment to the Assessment Act which changed the basis for valuation from “market value” to “current value.” “Current value” was defined as follows:“current value” means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer; [70] The issue was whether the assessed value upon which the owner of the underlying land must pay taxes included the value of third-party owned trailers placed on the land.
[71] Carsons’ Camp (the Respondent on the appeal) argued that by introducing the concept of “current value” as that term is defined, the legislature intended to exclude from the assessed value of land anything that would not have been considered land at common law.
[72] The application judge accepted this position and held that, notwithstanding the expanded definition of land in s. 1 of the Act, the trailers owned by third parties and not intended to be permanent fixtures on the land did not form part of the “current value” of land as that term is defined in the Act, and could not, therefore, be included in the assessment. Unable to reconcile the definition of “land” and the definition of “current value,” the application judge held that the trailers could not be assessed “until such time as appropriate amendment is made” to the definition of current value in the Act.
[73] The Court of Appeal allowed the appeal. It began its analysis by considering, at para. 12, the terms “real property”, “land” and “real estate”, which it held “are used interchangeably throughout the Act.” The Court stated, at para. 13:This broad definition has not changed since its introduction in the Act in 1904 and its interpretation continues to be governed by the Supreme Court of Canada's decision in Northern Broadcasting Co. v. Mountjoy (Improvement District), 1950 CanLII 9 (SCC), [1950] S.C.R. 502, [1950] S.C.J. No. 19. In that case, the majority held that the expanded definition of land in the Act meant that certain items not considered fixtures at common law could nonetheless be considered part of the land for the purpose of valuation, so long as they are placed upon or affixed to land with some degree of permanency. [74] The Court confirmed that the expanded definition of “land” in the 1904 legislation continued to apply notwithstanding the 1997 amendment. The Court stated, at para. 26:I agree with the appellants’ submissions that nothing on the record before us suggests that the legislature intended to change what is to be included in the assessed value of land. If Carsons’ interpretation is accepted, it would signal a dramatic change in the scope of the Act as it has existed and been applied since 1904 and render the expanded statutory definition of land meaningless. If the legislature had intended to do so, it would have changed the definition of land in the Act to make it coincide with the common law definition of land. The legislature did not, and I do not find Carsons’ submission that this failure was merely an “oversight” to be persuasive. [75] As in Northern Broadcasting, the Court in Carsons’ Camp accepted the common law definition of land as the starting point. There was no dispute that the subject trailers had been added to the common law definition by the expanded 1904 definition; the issue was whether anything was subtracted from the expanded 1904 definition by the 1997 amendment. The Court of Appeal held that the expanded definition from 1904 still prevailed—there is no suggestion anywhere that something less than the common law definition was ever contemplated.
[76] This interpretation is also consistent with the presumption against changing the common law unless there is a clear expression of legislative intent to the contrary: Owners, Strata Plan, at para. 39.
[77] The Application Judge in the present case recognized, at para. 29 of his Reasons, that the common law was the starting point for the statutory definition, but held, at para. 30, that air parcels were not recognized as a species of real property at common law, finding that the common law “has never heard of ‘air parcels.’” The fact that “air parcel” was not a term used in the 19th century does not detract from the fact that property at common law was a three-dimensional concept that included as much of the space above the ground as the owner can potentially occupy or use. That we have given a 20th century label to this common law concept does not mean that the rights did not previously exist.
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