73 Restrictions On Subdivision

PRACTICE

Restrictions on Subdivision by Way of Transfer or Lease: Section 73(1)

Section 73(1) prohibits the subdivision of land by way of a transfer or a lease for a term exceeding three years of a part of a lot. The exception to this rule is contained in s. 73(3), which exempts leases of buildings or parts of buildings.

Restrictions on Subdivision by Way of Mortgage or Other Charge: Section 73(2)

Section 73(2) prohibits the filing of options to purchase, rights to purchase, mortgages, and other charges of part of a lot. When an owner applies to subdivide a lot, the owner must concurrently apply to register transfers and mortgage extensions or releases to ensure common ownership of the new parcels.

Restrictions on Subdivision by Way of Conditional or Determinable Fee: Section 73(4)

Section 73(4) is an absolute prohibition against the creation of a conditional or determinable fee for an undivided fractional interest in a freehold estate in land unless, under s. 73(5), an indefeasible title to or a right to purchase an undivided fractional interest in such an estate was registered before May 30, 1994. There may be separate indefeasible titles for each undivided fractional interest. The registrar reviews each title to determine whether one of them was registered before May 30, 1994. If the first estate was registered before May 30, 1994, the examination of the application can proceed. If no such estate was registered before May 30, 1994, the application is refused.

The registrar may make the following entry in the legal notation segment for the parcel:

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

Description and Plan of a Leased Portion of Parcel

See s. 99(1)(k) of the Act regarding permissible descriptions and plans for a leased portion of a parcel.

Plans Accompanying Leases of All or Part of a Building

See the practice discussion under this subheading for s. 99 of the Act.

Registration of Future or Contingent Interests

See s. 155 of the Act regarding the registration of future or contingent interests.

Subdivisions within the Agricultural Land Reserve

Where the land to be subdivided has a notation that it is within the agricultural land reserve and the applicant believes that to be in error, it is up to the applicant to provide proof from the commission that the land described in the title being subdivided is not within the agricultural land reserve. See s. 60 of the Agricultural Land Commission Act, S.B.C. 2002, c. 36.

Subdivision under the Partition of Property Act

See s. 17 of the Partition of Property Act, R.S.B.C. 1996, c. 347, which provides:

• 17 An order for the partition of land into 2 or more parcels is deemed to effect a subdivision as defined in the Land Title Act and must contain an express declaration that the order is subject to compliance with that Act.

Subdivision under the Vancouver Charter

See s. 292(4) of the Vancouver Charter, S.B.C. 1953, c. 55, which provides:

• 292 (4) Where any provision of, or made under, the Land Title Act or any other Act with respect to the subdivision or resubdivision of real property, or the approval, acceptance, or refusal thereof, is inconsistent with any provision of a by-law passed pursuant to this section, the provision of the by-law shall prevail.

Secondary Sources

See Di Castri, Registration of Title to Land, vol. 1, paras. 139, 146, 148 to 150, 152, and 153.

CASE LAW

Notes on Case Law: Section 73 may be relevant to cases considering the effect of unregistered conveyances or leases under s. 29 of the Act. While some of the cases annotated under that section before International Paper Industries Ltd. v. Top Line Industries Inc., 1996 CanLII 3340 (BC CA), supplementary reasons 1996 CanLII 8383 (BC CA), reversing 1994 CanLII 1228 (BC SC), annotated below, may have considered s. 73, such cases tended to focus on the effect of notice instead. In light of the Court of Appeal’s decision in International Paper, notice may now be irrelevant where an unregistered conveyance or lease of a portion of a parcel of land is at issue. However, see also s. 73.1 of the Act enacted following the decision in International Paper.

Agreements Contingent upon Subdivision

An agreement for purchase and sale contingent upon there being a subdivision does not constitute “subdividing” contrary to s. 73 of the Land Title Act (Bank of British Columbia v. Tri Holdings Ltd., 1992 CanLII 1089 (BC CA)).

A three-phase, bare lot strata development included common property for the purpose of providing septic fields for the strata lots. In the filed disclosure statement, the developer indicated that he would reserve an option, within each phase, to purchase the common property at some time in the future if a public sewage system became available to the development and the septic field was no longer required.

Before the strata plan was registered under the Condominium Act, R.S.B.C. 1979, c. 61 in 1993, the developer signed a special resolution on behalf of the strata corporation granting the contingent option with respect to the septic field in phase one. After the strata plan was registered, the developer signed special resolutions on behalf of the strata corporation granting the contingent options with respect to the septic fields in phases two and three. After the strata lots were sold, the owners applied to court to set aside the options on the grounds that they were prohibited by the combined effect of ss. 20(1) and 21(4) of the Condominium Act and s. 73 of the Land Title Act. The trial court found the first option unenforceable because it was executed before the strata plan was registered. With respect to options two and three, the trial court found that both were validly executed and that, because they did not purport to effect a subdivision of land, they were not prohibited by the legislation. The Court of Appeal disagreed. In distinguishing Bank of British Columbia v. Tri Holdings Ltd., the appeal court found that, in this case, the granting of the option itself constituted a disposition and that, by operation of s. 21(4) of the Condominium Act, the disposition constituted a subdivision of land. The option itself was not contingent upon there being a subdivision, rather the option was contingent upon the availability of a municipal sewage system. In allowing the appeal, the court held that the combined effect of ss. 20(1) and 21(4) of the Condominium Act and s. 73 of the Land Title Act rendered the options invalid and they constituted subdivision which had not first obtained subdivision approval (Strata Plan VIS 2968 v. K.R.C. Enterprises Inc., 2009 BCCA 36).

As part of a complex joint venture agreement, the plaintiff and the defendant entered into option agreements for the purchase of two lots to be created following subdivision. No subdivision plan was filed at the time the options were registered in the land title office. The plaintiff applied for an order that the option agreements were void because they did not comply with s. 73 of the Land Title Act. The court distinguished Strata Plan VIS 2968 v. K.R.C. Enterprises Inc., 2009 BCCA 36 (see above) because, in that case, as a result of the combined effect of the Condominium Act and s. 73 of the Land Title Act, the option itself constituted an unapproved subdivision and, therefore, the option was invalid. In the present case, the court followed Bank of British Columbia v. Tri Holdings Ltd. (see above) and held that granting an option did not constitute a subdivision of land, that registration of an option was not governed by s. 73, and that the option remained valid (Gadhri v. 0760815 B.C. Ltd., 2016 BCSC 521, varied on another point 2017 BCCA 31).

Restriction on Leasing Unsubdivided Interests in Land

A document purporting to be a lease for a term exceeding three years that provides that the parties agree the land has not been subdivided, and that the lease is not registrable, creates no interest in land. However, the lease may create personal rights between the parties to the lease (Nesrallah v. Pagonis, 1982 CanLII 777 (BC SC); note that this case must now be read in light of International Paper Industries Ltd. v. Top Line Industries Inc.).

An important purpose of the prohibition in s. 73 against subdivision except in compliance with Part 7 is to ensure that municipal authorities retain control over subdivision as a means of regulating zoning, drainage, utility supply, building encroachment, siting, local aesthetics, and land development and use generally in the public interest. Another objective of the prohibition is to ensure the operation of the Torrens land registration system. Any order that assured a tenant a right of occupation under a lease that violated s. 73, whether exclusive or otherwise, would offend these objectives. For this reason, the court would not imply a covenant or obligation to seek and obtain subdivision approval into the terms of such a lease, notwithstanding that such a covenant or obligation would on one view merely give business efficacy to the lease. Such a term might involve major expense, and the court could not be confident that the parties would have agreed to it if they had turned their minds to the subdivision issue upon creation of the lease. Section 73 precluded the tenant in this case from enforcing either personal or proprietary rights pursuant to a lease that violated the section’s terms. Furthermore, the societal interest represented in s. 73 had to prevail over an otherwise unassailable argument that the validity of the lease, which had been assumed during judicial proceedings on two previous occasions, was res judicata. The lease was unenforceable (International Paper). On appeal, in subsequent proceedings, the Court of Appeal held that, as a matter of principle and precedent, the landlord’s claim for occupation rent must fail. The landlord’s consent to the tenant’s occupation was given only by virtue of an illegal lease. As it was the landlord who sought and obtained a declaration that the lease was illegal, it would be unfair to permit the landlord to rely on the same document in order to claim occupation rent (Top Line Industries Inc. v. International Paper Industries Ltd., 2000 BCCA 23).

The parties entered into two written agreements styled as “lease and crop sharing” agreements, which dedicated portions of the defendant’s land to be developed and used as ginseng gardens by the plaintiff for a term of 57 months. Both parties applied to the court for a ruling on whether the agreements, for a portion of an unsubdivided parcel of land for a term in excess of three years, were unenforceable as offending s. 73 of the Act. The court examined the agreements to establish their true nature and intent and found that they were leases rather than licences. The agreements were purportedly drawn to allow registration as leases in the land title office. They speak of demise and the remedy to the landlord on default is stipulated as re-entry and taking possession of the land. The tenant covenants not to assign, sublet, or otherwise part with the land. In International Paper Industries Ltd. v. Top Line Industries Inc., 1996 CanLII 3340 (BC CA), the Court of Appeal found that there is a “necessary inference” in the construction of s. 73 prohibiting leases of less than a whole parcel of land for a term greater than three years. Therefore, the leases are unenforceable and they cannot found an action for breach by either party, whether the claim for relief be by way of enforcement of possession or damages (R & R Ginseng Enterprises Ltd. v. Layton BrysonOutfitting & Trailriding Ltd., 1997 CanLII 3824 (BC SC)). In subsequent proceedings, the court ordered cancellation of a certificate of pending litigation and a caveat. See the annotation for Layton Bryson Outfitting and Trailriding Ltd. v. R & R Ginseng Enterprises Ltd., 1998 CanLII 5895 (BC SC), under s. 215 of this Act.

The appellant P entered into an oral agreement with the respondents to sell them half of an unsubdivided parcel of land. After the respondents took possession of a cabin on the property and built an addition to it, P executed an agreement for the sale of the entire parcel to the appellants J and Z, and then registered the agreement in the land title office. J and Z subsequently gave notice to the respondents to vacate the cabin and demolished it. In concurring with the findings of the Provincial Court at trial, the Supreme Court held that, although the agreement between P and the respondents was informal, the respondents reasonably understood there was a firm commitment, and P chose to repudiate what was a binding agreement by accepting a more lucrative offer from J and Z. The court agreed that s. 73 of the Land Title Act does not make it an offence for a person to create an informal subdivision without complying with the statutory requirements under Part 7 of the Act. Rather, it merely makes it legally impossible to register any instrument that is based on an agreement or plan of subdivision that does not comply with the registration requirements of the Act. Further, although the Court of Appeal in International Paper expressly rejected the idea of imposing, as a condition precedent, compliance with s. 73, or of otherwise imposing a duty on either party to make the effort and expenditures necessary to obtain a subdivision, the court in this case found that the obligation on a transferor to obtain, if possible, a subdivision that would allow registration of the transfer of title and to deliver to the transferee a transfer registrable under the Land Title Act is a statutory one imposed under ss. 4, 5, and 8 of the Property Law Act. In the circumstances of this case, P did not fulfill the statutory obligation to deliver the transfer in registrable form. Because the respondents accepted P’s repudiation of the agreement and no longer sought to enforce it, they were entitled to damages for its breach (Pfeiffer v. Russell, 1999 CanLII 1766 (BC SC). (But see also the following annotation for B.C. Rail Ltd. v. Domtar Inc., 1999 CanLII 5065 (BC SC))

The petitioner acquired land from its predecessor in title, including lands leased to the respondent for a term of 55 years. The leased lands consisted of and straddled unsubdivided portions of two lots. Neither at the time the lease was entered into, nor at any time thereafter, were the lots upon which the leased lands were situate subdivided pursuant to the Land Title Act. Following the decision of the Court of Appeal in International Paper, the petitioner gave notice to the respondent to vacate the leased lands on the grounds that the lease was void and unenforceable. In response to the petitioner’s application for a declaration to this effect, the respondent submitted that, in International Paper, the Court of Appeal failed to address the combined effect of ss. 5 and 7 of the Property Law Act. The court disagreed. On the question of a transferor’s obligation to deliver an instrument creating a lease to a transferee in a form registrable under the Land Title Act, the court found that ss. 5 and 7 of the Property Law Act were before the Court of Appeal in International Paper and were integral to the submissions it received. Accordingly, the court in this case was bound by the decision of the Court of Appeal in International Paper; the lease is illegal and must be declared null and void (B.C. Rail Ltd. v. Domtar Inc.).

The respondent appealed and petitioned the Court of Appeal to establish a panel of five judges to reconsider its decision in Top Line. Before the hearing, the parties settled their dispute. As the appeal was now moot, the court declined to exercise its discretion in favour of reconsidering its decision in Top Line, reasoning that the issues on an appeal of this nature should be resolved by parties with an adversarial stake in the outcome (B.C. Rail Ltd. v. Domtar Inc., 2001 BCCA 117).

An agreement that purported to lease a small portion of a lot for a period of four years clearly violated the subdivision scheme established under the Act and the public policy articulated in the legislation requiring compliance with the statutory scheme. Once an agreement is found to be illegal, neither party to the agreement may seek to enforce an obligation of the other party arising out of the agreement (Master Contract Services Ltd. v. Altamar Developments Corp., 2000 BCSC 644).

For a discussion of the intended operation of ss. 20, 73, and 73.1, see the annotation for Marine Masters Holdings Ltd. v. Greater Victoria Harbour Authority, 2009 BCSC 953, under s. 73.1 of the Act.

Restriction on Leasing Agricultural Land

The restriction on leasing in s. 73(1) applies to land in the agricultural land reserve. See Abbott Street Holdings Ltd. v. McFarlane, 2000 BCSC 1067, and McIntosh v. British Columbia, 2001 BCSC 482.

Lease of Building, Not Lease of Land

The defendants entered into an offer to lease restaurant premises for more than three years. The premises were to be located in a new building on the plaintiff’s land. The defendants applied for a dismissal of the plaintiff’s action for breach of the offer on the grounds that the offer was an illegal and unenforceable offer for the lease of land. In dismissing the defendants’ application, the court found that the offer pertained to the lease of a part of a building and not to the lease of land. The description of what was to be leased was a description of a building, not a description of land. The formula for the calculation of rent was based on the square footage of the restaurant within the building. The payment of rent was not to start until the building was completed and the defendants had commenced carrying on business. Accordingly, because the offer was an offer to lease a portion of a building, it was legal, enforceable, and within the exceptions set out under s. 73(3) of the Act (456559 B.C. Ltd. v. Cactus Café Maple Ridge Ltd., 2000 BCSC 1652, affirmed 2001 BCCA 622).

The respondents, as lessees, built foundations on property owned by third parties. Later, the petitioner purchased the property from the third parties. The purchase documents specifically preserved the respondents’ lease as a permitted encumbrance, and its existence was expressly acknowledged by the petitioner’s representative. The petitioner alleged that the lease was invalid because it purported to be a lease of more than three years for part of unsubdivided lands. The court found that the lease was a lease of a building because the demise of the lease referred to a building of a certain area as shown on an explanatory plan; the lessee was required under the lease to pay all utility charges, repairs, maintenance, insurance, and taxes for the building; occupation of the building was contemplated after the expiration of the lease on a month-to-month tenancy; and the lease itself contemplated and anticipated construction of a building. The court also found that, although construction of the building had not been completed, this fact was not fatal to the characterization or validity of the lease. Accordingly, the court upheld the validity of the respondents’ lease and easement (Bowen Island Properties Ltd. v. Rogers, 2003 BCSC 1595).

Oil and Gas Leases

See the annotation for Nurnberger v. Orefyn Energy Advisors Corp., 2005 BCSC 872 under s. 99 of the Act.