"OUTDATED" BUILDING RESTRICTION COVENANTS

Posted: February 21, 2020 | Last Updated: July 14, 2020
Written by: Edward D. Brown

Edward D. (Ned) Brown
Pitblado LLP
February 2020

In land law, a "restrictive covenant" is an undertaking given by the owner of a parcel of land (the "burdened land") to the owner of an adjacent or a neighbouring parcel of land (the "benefitted land") whereby the burdened land owner promises, on behalf of itself and on behalf of its successors in title to the burdened land indefinitely, not to use, develop or improve the burdened land in certain specified manners for the benefit of the benefitted land owner (again, indefinitely, meaning that the promise will benefit - and be enforceable by - the benefitted land owner and all of its successors in title). A building or development scheme is an agglomeration of mutual restrictive covenants benefitting - and burdening - all of the land parcels in a defined area. Such a scheme is typically established by a property developer who wishes to subdivide its land into separate lots and have use restrictions imposed on all of the lots in the subdivision so that the restrictions both benefit and burden each separate lot owner and each of their respective successors in title, indefinitely. The objective is to achieve substantial uniformity in the affected area, thereby (at least, in theory) improving or maintaining property values and enhancing the "aesthetics" of the community.  Most jurisdictions have enacted statutory provisions which enable property owners burdened by restrictive covenants (or building/development schemes) to apply to some authority for the purpose of varying or completely removing the building restrictions applicable to an applicant's property.

The entitlement of property owners to apply for the removal - or variation - of use restrictions applicable to their particular properties is often exercised long after the time when the original restrictions were imposed.  After a period of time, some - or all - of the restrictions may have become out of date, unnecessary or difficult to comply with due to changed circumstances.

But just because a use restriction has been removed - or varied - from some of the land parcels affected by a building/development scheme, will not - of itself - necessarily justify the further removal - or variation - of the use restrictions as they apply other lots within the scheme which continue to be subject to the restrictions. This is illustrated by the Alberta Court of Queen's Bench case Restrictive Covenant Instrument 213AT (Re), (2019 ABQB 309, judgment issued April 30, 2019, hereinafter, the "New Casa Case"). In the New Casa Case, a building/development scheme (the "Scheme") was imposed on a tract of land which the original developer had subdivided into a number of lots/parcels. Over the years, some of the affected parcels within the Scheme had their use restrictions removed by Court order.  Nevertheless, a number of the currently owned parcels originally covered by the Scheme continued to be affected by it (i.e., the Scheme continued to be registered against their titles). New Casa Holdings Ltd. applied to have the Scheme removed from its parcel. The New Casa Case involved a hearing to decide whether or not New Casa's parcel should have the restrictions removed in the face of opposition from a number of other parcel owners who wanted the Scheme to continue in effect as it applied to their parcels - including New Casa's parcel.

The Court made the following statements and holdings:

  1. Although the Scheme had been previously removed from some of the affected parcels, such removals was not a justification in itself to remove the Scheme from any of the parcels which it still affected. A building development scheme is not only a land interest, but a series of mutual contracts between the affected (burdened and benefitted) land owners within the Scheme.
  2. The use restrictions under the Scheme were that:
    1. not more than one dwelling house was to be erected on each of the affected lots;
    2. each dwelling house on an affected lot was to be of no less than $3000.00 in value;
    3. no other buildings were to be erected on the affected lots, except for "such stable garage or other outhouse as (the owner) may reasonably deem necessary for the proper enjoyment of the lands";
    4. no building on the affected lands was to be used for "business or commercial purposes"; and
    5. no dwelling house on an affected lot shall be less than 25 feet from any street which is a boundary of any of the affected lots.

As the affected lots were in the middle of Calgary and given the reference to "stables", "outhouses" and improvements having to be of a value of at least $3,000.00, it was arguable that the use restrictions were outdated.

Although arguably outdated, the Court held that it was not appropriate for a Court to "…paternalistically decide that the persons principally interested in the (restrictive covenant's) enforcement will benefit from this modification in the face of protests to the contrary by the interested parties".

3. Notwithstanding the foregoing, the Scheme should not continue to be enforced because of the occurrence of a number of lot consolidations and title "splits".  The boundaries had changed and the altered legal descriptions now made it difficult - and probably impossible - to determine which lots/parcels continued to be affected by the Scheme and to what extent.  If one cannot now determine what is a "lot" for the purpose of applying the restrictions contained in the Scheme to the current title holdings, one of the "bedrock" requirements for a valid restrictive covenant had disappeared.

The New Casa Case should stand as a warning to developers who wish to impose use restrictions on adjacent or neighbouring parcels of land and for lawyers counselling such developers. Of course there is always a danger that restrictive covenants may become outdated when there are future changes to the properties or the neighbourhood. That is one of the main reasons for the existence of the statutory entitlement to apply for the variation or the removal of restrictions. But the New Casa Case was not decided on the basis of change of use or change in circumstances. It was about the difficulty in determining currently what parcels of land were - and were not - affected by the Scheme, given the parcel consolidations and title "splits" which had occurred. Perhaps a restrictive covenant (or a building/development scheme) should contain provisions to deal with what happens when the underlying boundaries of the affected lands are altered.

 

Edward D. (Ned) Brown has extensive experience in Corporate and Commercial law. Ned is focused on the areas of lending and secured transactions, banking law, subdivisions and commercial real estate development.