73.1 Lease Of Part Of A Parcel Of Land Enforceable

CASE LAW

In 1978, the defendant leased an unsubdivided portion of a parcel of land from the plaintiff under the terms of a 998-year lease. In 2004, the plaintiff commenced an action seeking a declaration that the lease was illegal and unenforceable because it contravened s. 73 of the Act. While the plaintiff’s action was before the courts, the Legislature enacted s. 73.1, which provided that a lease was no longer considered invalid between the parties simply because it did not comply with Part 7 of the Act and could not be registered. At trial and on the question of retroactivity, the court found that the purpose of s. 73.1 was clearly remedial. It was enacted to address the mischief and hardship caused by the International Paper case and to ensure that the unfairness caused by that decision would not continue. The parties had acted under the lease and absolutely in accordance with its terms for 26 years in complete ignorance of s. 73 of the Act. To now find the lease invalid between the parties under s. 73 would confer a significant benefit on the plaintiff and cause a grave injustice to the defendant. In upholding the validity of the lease between the parties, the trial court held that s. 73.1 applied immediately in the present and did not allow for the survival of the previous legislation as it had previously applied to the parties to a lease of an unsubdivided portion of a parcel of land.

The trial court decision was overturned on appeal. The appeal court found there was nothing in the wording of s. 73.1 that expressly or by necessary implication required or supported retrospective effect. Furthermore, s. 73.1 could not properly be characterized as procedural or remedial because it had the effect of granting substantive rights in respect of a previously otherwise unenforceable lease. In this case, both the creation of the lease in 1978 and the commencement of proceedings in 2004 occurred long before s. 73.1 was enacted. As s. 73.1 was substantive and not procedural or remedial in character, the presumption against retrospectivity applied. On other grounds of relief claimed by the respondent, including irrevocable lease, constructive trust, and damages, the appeal court remitted the claims to the trial court for adjudication and full argument (Idle-O Apartments Inc. v. Charlyn Investments Ltd., 2010 BCCA 460, reversing 2008 BCSC 849). In further proceedings before the trial court, the defendant succeeded in establishing its claim in proprietary estoppel. A court may prevent a party from relying on a statute and grant an equitable remedy where the statute merely regulates dealings between parties rather than laying down a more general rule of a public character. In this case, the court held that the underlying policies in s. 73 of the Land Title Act were altered or amended with the enactment of s. 73.1, thereby recognizing unregistered leases as legal and enforceable. As s. 73 was not essentially prohibitory, a claim in estoppel was not barred. The court found that both parties shared a mistaken belief they were bound by a legally valid lease and, for 22 years, both parties conducted themselves on the basis of this belief. While the court could not lend its assistance to support an illegal contract (Top Line Industries Inc. v. International Paper Industries Ltd., 2000 BCCA 23), this decision did not prevent the court from upholding a claim in proprietary estoppel flowing, as it does, out of the conduct of the parties. The defendant expended money on the disputed property and paid rent and taxes, thus resulting in a detriment to the defendant. In finding that it would be unconscionable for the plaintiff to take advantage of the mutual mistake, the court ordered that the parties enter into a replacement lease on the same terms as the original lease (Idle-O Apartments Inc. v. Charlyn Investments Ltd., 2013 BCSC 2158).

On appeal, the court confirmed the decision of the trial judge that the right to a remedy for proprietary estoppel arises out of the conduct of the parties and not out of an agreement between them. The representations made by the plaintiff were founded not on the invalid lease but on the plaintiff’s conduct. In fashioning a remedy, the court held that the trial judge erred in stating that the relief granted must be the minimum equity necessary to do justice “in meeting the defendant’s expectations”, that is in granting the defendant what he was promised or its monetary equivalent. The court acknowledged that the defendant’s reasonable expectations were a very important factor, perhaps the primary factor, in fashioning a remedy. However, this principle must be balanced with the notion that the remedy should be proportional to the detriment experienced by the defendant as a result of its reliance on the plaintiff’s words or conduct. In this case, both parties were unaware of the restrictions on subdivision under s. 73 of the Act. The court noted that many of the conditions required to obtain subdivision approval, such as appropriate sewage disposal, were not addressed in the agreement between the parties and that failure to do so was contrary to the public interest in providing for the proper subdivision of land. For these reasons, the court struck out the 998-year term of the agreement, substituted instead a term that the land could only be used for the purposes of recreation by the defendant’s current directors and their children, and held that the agreement would continue to be binding only between the parties themselves until the death of the last survivor of the defendant’s current directors or their children (Idle-O Apartments Inc. v. Charlyn Investments Ltd., 2014 BCCA 451).

In related proceedings, the court held that it had jurisdiction to decide a matter argued at trial but not adjudicated upon in its earlier reasons for judgment. In this aspect of the proceedings, the defendant tenant sought an order either that the plaintiff landlord be required to consent to an application for subdivision of the property or that the court dispense with consent thereby permitting the defendant to apply unilaterally, as agent for the plaintiff, for subdivision and registration of the lease in the land title office. The court held that a landlord’s obligation under s. 5(2) of the Property Law Act to deliver a lease “in registrable form” does not extend to or imply a landlord’s obligation to carry out the steps required to effect a valid subdivision. Absent a landlord’s express written consent or express terms in a lease with regard to the registration of a subdivision, the court cannot make an order dispensing with the landlord’s consent or an order implying consent within the terms of the lease where that consent was not expressly contemplated by the parties at the time the lease was agreed upon between the parties (Idle-O Apartments Inc. v. Charlyn Investments Ltd., 2010 BCSC 132).

The plaintiff, a marine services business, occupied land administered by the defendant harbour authority. At issue between the parties was whether failure to comply with s. 73 of the Act created a legal impediment to the formation or enforceability of a valid lease as between the parties. As a matter of law, the court held that s. 73.1 does not operate as an exemption from, and does not relieve parties from the obligation to comply with, the requirements of s. 73. Rather, s. 73.1 states that non-compliance with s. 73 does not render a lease unenforceable as between the parties to it. The statutorily mandated consequence of non-compliance with s. 73 is the inability to register the lease in a land title office. Section 73.1 clarifies the intended effects of ss. 73 and 20, namely that a lease that does not comply with s. 70 cannot be registered and that, under s. 20, an unregistered lease does not grant the lessee a legal or equitable interest in land except as against the lessor. Failure to register does not preclude the existence and enforcement of contractual in personam rights between the parties to a lease (Marine Masters Holdings Ltd. v. Greater Victoria Harbour Authority, 2009 BCSC 953).