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Real Property - Definition. Drewlo Holdings Inc. v. Municipal Property Assessment Corporation
In Drewlo Holdings Inc. v. Municipal Property Assessment Corporation (Div Court, 2023) the Divisional Court considers the meaning of 'land', here under the 'Change re land omitted from tax roll' provisions [s.33] of the Assessment Act:“Land”
[29] Drewlo complains that the Board erred in its interpretation of the words “land liable to assessment” in s. 33(1) of the Act. It argues that the May omit had already assessed the Property as three newly-constructed apartment towers, and that therefore MPAC could not properly issue omits for the 330 converted condo units and one apartment tower, which are simply different legal ways of describing the Property.
[30] Drewlo submits that in Magee v. Municipal Property Assessment Corporation, 2010 ONSC 6498, [2010] O.J. No. 5619 (Div. Ct.), at para. 9, this court held that “land liable to assessment” in s. 33(1) of the Act meant only physical land and improvements, and not land “whose description has been omitted from the description of the property in the assessment or tax roll.” But “land” in Magee referred only to “physical land and improvements” because it was only the assessment of a golf course on rural properties that was at issue in that case. The legal description of the land did not change.
[31] In the same paragraph of Magee, the court emphasized that s. 33(1) refers to land liable for assessment that has been omitted from the tax roll, and not land whose description has been omitted from the tax roll. The comparison fails in the circumstances of this case, where the Board correctly concluded that provisions in the Act and the Condominium Act created new “land” in the condo units and the remaining tower that must be assessed as separate properties with their own assessment roll numbers. In this circumstance, s. 33(1) could be used, as the condo units and remaining tower were land that had been omitted from the roll.
[32] Drewlo further likens this case to East of Bay (2003) Development Corp. v. Municipal Property Assessment Corp., 2011 ONSC 242 (Div. Ct.), 79 M.P.L.R (4th) 303 (“East of Bay”), in which MPAC sought to use the omit power to reassess condominium units and was refused by the court. However, the facts in East of Bay are distinguishable from this case and highlight how MPAC acted properly here. In East of Bay, the court held that when a plan of condominium was already accounted for in the roll, and MPAC had already put a nominal value on the condo units in order to buy time to offer proper assessments because of a staffing shortage, the units could not be said to have been “omitted”. Here, the October omits were the first assessment of the newly created condominium units in the Property, as opposed to the three multi-residential towers, as observed by the Board at para. 28 of its decision.
[33] In a similar vein, Drewlo refers to Re Beaver Lumber Co Ltd. and City of Ottawa, 1976 CanLII 621 (ON SC), [1976] O.J. No. 2115 (Div. Ct.), 12 O.R. (2d) 314, in which it was held that MPAC had no authority to use the omit power to correct the assessment of land that had been assessed, but at a value that, through error, was too low. No land had been omitted; it was just undervalued, and therefore s. 33(1) was inapplicable. Again, that authority is distinguishable from this case, where the registration of the condominium plan did not simply increase the value of property but created 331 new properties.
[34] Moreover, the Board’s conclusion is reinforced by a recent decision of this court. In Toronto (City) v. Craft Kingsmen Rail Corp., 2023 ONSC 292 (Div. Ct.), 165 O.R. (3d) 561, the issue was whether air parcels could be considered “land” and subject to assessment. At para. 41 of the decision, the court held that the word “land” in the Act should have the same meaning as in such legislation as the Land Titles Act and the Land Transfer Tax Act, and concluded that any land that is conveyed, registered, or severed should also be deemed to be assessable and taxable land. In the same way in the circumstances of this case, under the Condominium Act, 1998, S.O. 1998, c. 19, new parcels are created by registration of the condo plan and become lands that were omitted and need to be assessed and added to the roll.
[35] Drewlo’s argument fails because, as the Board explained, its registration of the condo plan created 330 new condo properties and a new roll number for the third tower. The registration of the condo plan, once accounted for, created 331 new parcels of land for tax purposes, each of which then became liable for assessment and taxation. The Condominium Act, in s. 15(1), states that each condominium unit “constitutes a parcel for the purpose of municipal assessment,” and in s. 1 makes clear that all units “are held in fee simple by the owners.” Thus, as found by the Board (at para. 44), the individual condominium units are “real property” with new and unique rights of ownership.
[36] The Board correctly held (at para. 45), that Drewlo’s registration of the condo plan for the Property was more than just a change in the description of the land. Rather:Clearly, new “lands” were created, which were omitted on the Assessment Roll for the 2019 tax year. Therefore, s. 33 of the Act clearly obligated MPAC to make the further September 2019 assessments [viz., the “October omits”] to correct the omission respecting this property. . Upper Canada Land Titles and Patent Research Initiative v. Niagara (Municipality)
In Upper Canada Land Titles and Patent Research Initiative v. Niagara (Municipality) (Ont CA, 2023) the Court of Appeal considers some rarely referenced property law basics, including Crown Patents:[4] In addition, the by-law does not conflict with the Crown patent. The Crown patent is not a legislative Act, but rather a grant of title to the lands in issue pursuant to the Crown’s prerogative. The patent gives the owner of the lands all of the property rights that normally flow from ownership of private property. However, it does not immunize the lands or the owners of the lands from regulation by the municipality in accordance with the powers under the Municipal Act over activities that are allowed on the property. Accordingly, s. 14(1)(b) [SS: "Conflict between by-law and statutes, etc."] of the Municipal Act has no application on the facts of this case. . Drewlo Holdings v. MPAC
In Drewlo Holdings v. MPAC (Div Court, 2023) the Divisional Court held that the definition of "land" applied in a municipal tax matter was in dispute (and thus was in need of resolution), and thus would justify the granting of leave to appeal to a full panel of the Divisional Court:Issue 1: Board’s Interpretation of “Land”:
[42] Drewlo argues that s. 33(1) can only be used to correct erroneous omissions of physical land and improvements from the Assessment Roll.
[43] “Land” is defined in s. 1 of the Act. Drewlo argues that the classes of “land” enumerated in s. 1(1)(a)-(e) all relate to physical aspects of land.
[44] Drewlo relies upon Magee v. Municipal Property Assessment Corporation and the City of Belleville, 2010 ONSC 6498 (Divisional Court). In Magee, the subject property had originally been four rural residential properties. Between 2003 and 2005, a golf course was constructed on portions of the four properties. The course opened in 2005 and buildings and improvements continued to be added to the golf course in the ensuing years. The properties were assessed in 2005, 2006 and 2007 without taking into account the improvements to the land made as a result of the construction of the golf course. MPAC relied upon s. 33(1) of the Act to issue new assessments in 2007.
[45] Sachs J. addressed the taxpayer’s submission that the focus of s. 33 is to capture “land” that was omitted from the description in the assessment or tax roll. She described that the taxpayer’s interpretation was not supported by the wording of the section which referred to “land” that is liable to assessment that has been in whole or in part omitted from the tax roll. It does not refer to “land” whose description has been omitted from the description of the property in the assessment or tax roll (at para. 9).
[46] Thus, Drewlo argues that Magee stands for the proposition that “land” in s.33 refers to the physical land and any improvements on that land, as opposed to the Board’s interpretation that “land” means the legal description of land.
[47] The City correctly points out that the definition of “land” does not specifically refer to only physical land in the Act. Further, the City is also correct that Drewlo sought to frame the question before this court and the Board as whether “physical land and improvements were omitted from the assessment roll”, presupposing that physical land was required.
[48] The correct interpretation of “land” in s. 33(1) of the Act is an issue of law. For the purpose of this motion, I need not decide whether the Board’s interpretation is wrong or even probably wrong. It is sufficient if the correctness of the decision is open to very serious debate. It is difficult to reconcile the Board’s interpretation of “land” in light of Magee and the Board did not squarely address Magee. For that reason, I find that there is reason to doubt the correctness of the Board’s interpretation of “land” as used in s. 33(1) of the Act. . 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. . Toronto (City) v. Craft Kingsmen Rail Corp.
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court considered the Assessment Act taxability of real estate 'air parcels', a task which required a basic examination of what constitutes 'land' (also 'real property' and 'real estate'):Applicable Legislation
[19] The terms “land”, “real property” and “real estate” are used interchangeably in the Assessment Act. Section 1 of the Assessment Act provides:“land”, “real property” and “real estate” include,
(a) land covered with water,
(b) all trees and underwood growing upon land,
(c) all mines, minerals, gas, oil, salt quarries and fossils in and under land,
(d) all buildings, or any part of any building, and all structures, machinery and fixtures erected or placed upon, in, over, under or affixed to land,
(e) all structures and fixtures erected or placed upon, in, over, under or affixed to a highway, lane or other public communication or water, but not the rolling stock of a transportation system. [20] Section 3(1) of the Assessment Act provides:All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation: [21] There follows a long list of exemptions, such as Crown Lands, cemeteries, land owned by a church or religious organization, public educational institutions, public hospitals, conservation land, etc.
[22] Section 3(1) was interpreted by the Supreme Court of Canada in Toronto Transit Commission v. City of Toronto, 1971 CanLII 8 (SCC), [1971] SCR 746 (the “TTC case”). The Court stated, at 751:The construction, however, is not difficult as the section provides simply for the assessment of “all real property”. In the same initial lines appear the words “subject to the following exemptions from taxation” and since that provision sets up an exemption the person must show plainly that he comes within the exemption. [23] None of the exemptions listed in s. 3 of the Act apply in this case.
[24] The assessment is done for the purposes of taxation—property taxes are based on the assessed value and classification of the land.
[25] Also relevant is s. 1 of the Land Titles Act, which defines “land” as follows:“land” means land, tenements, hereditaments and appurtenances and any interest therein. [26] Also relevant is s. 1 of the Land Transfer Tax Act, R.S.O. 1990, c. L.6, which defines “land” as follows:“land” includes lands, tenements and hereditaments and any estate, right or interest therein, a structure to be constructed on land as part of an arrangement relating to a conveyance of land, a leasehold interest or estate, the interest of an optionee, the interest of a purchaser under an agreement to sell land, or goodwill attributable to the location of land or to the existence thereon of any building or fixture, and fixtures
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