Expropriation and Tenants’ Rights
Expropriation is one of the most substantive and potentially damaging uses of power by a public body. Losing your land, or parts of it, to a public authority is stressful, to say the least. You can feel as though you are losing something that belongs to you–something you worked hard for–without having any say at all.
But, what about if you’re a tenant and not the legal owner of the land? How will the compulsory land acquisition process affect your lease or place of residence?
What is a tenant?
The Expropriations Act, R.S.O. 1990, c. E.26 (the “Act”) defines a tenant as a person who is a lessee or occupant under a tenancy that may be written, oral, or implied. Further, the Act specifies that the owner of an expropriated property can also be a tenant, and in some cases the registered owner. What does this mean? Any sections of the Act that confer rights upon the owner of lands to be expropriated are also by definition conferred upon the tenant unless otherwise specified. This point is pertinent as it directly connects key resources in the Act for tenants to make sure of; most notably, compensation.
What compensation are tenants entitled to as part of the expropriation process?
Before directly examining how tenants are compensated as part of the expropriation process in Ontario, it is prudent to identify some preliminaries.
One major point to bring attention to is how the compensation of the tenant that is affected by the expropriation relates to the compensation given to the landlord. According to Section 16 of the Act, both the landlord and the tenant have separate interests in the land being expropriated, thus the market value for each interest shall be valued separately.
In practice, certain cases (e.g. Dixon and Toronto (City) (Re) (1924) 56 O.L.R. 167) have shown that any amounts paid to either the landlord or the tenant cannot be deducted from the other injured party. Though this point is salient, it brings up the question, “How is the compensation awarded to tenants calculated in the first place?”.
Calculating compensation for tenants
It’s key to consider that any compensation calculated for tenants will be judged through their leasehold interest in the expropriated land, not the value of the land itself, per se. The reason for this calculation comes from Section 18(2) of the Act. This section states that the expropriating authority will pay the tenant occupying expropriated land in respect of a disturbance as per the methods outlined in subsection 18(1) as they regard certain parts of the tenant’s lease. These parts are:
Length of the lease term
How much of the lease term remaining
Rights to renew the tenancy, or the ability to do so
The extent of the tenant’s interest in the land
If the tenant is a business, the nature of the business
Given the above, there may be situations where a tenant will be given no compensation. If the expropriating authority chooses to retain the obligations of the tenant’s lease as the owner of the lands, and thus not adversely affect the tenant’s leasehold interest, then no compensation is required. In situations where the period remaining on a lease is quite short, expropriating authorities may choose this route rather than paying the tenant affected by their endeavors.
In cases where the leasehold interest has been adversely affected, then compensation is calculated based on two potential factors: the value of their leasehold interest or their disturbance damages.
Value of the tenant’s leasehold interest
While there are multiple ways to calculate the value of a leasehold interest, for the sake of brevity we will examine the market value of a leasehold interest only.
Simply put, the market value of a leasehold is determined by reviewing the rent paid by the tenant as per the lease, calculating what a new tenant would pay for the lease as of the date of expropriation, finding the difference between the two, and determining the profits available for the remaining term of the lease. If the lease has no profits, due to a very short remaining lease period, for example, then the lease effectively has no market value.
It is key to note that other tangential factors do play into calculating market value, such as the amount of rent reserved and other relevant terms located within the lease.
Upon expropriation of any land, the tenant located on it is removed from their right to use the property until the length of their lease expires. Expropriation efforts remove this right from tenants–sometimes with substantial consequences–which tenants should be compensated for. This is where disturbance damages come into play.
As a general outline, subsection 18(2) of the Act outlines various factors (which we mentioned above) as to how much a tenant should be paid for disturbance of their leasehold interest. Generally speaking the greater the length of the term remaining, the tenant’s investment in the land, the length of the lease term, or the tenant’s rights to renew, the greater the amount a court will award for damages.
As a rule of thumb, a tenant that has had their lease frustrated by expropriation efforts should be entitled to reasonable advertising/moving expenses as well as tenant fit-up costs at their new location.
When will a tenant receive their compensation?
Unfortunately, there is no clause bound in legislation that states when an expropriating authority must pay a tenant affected by their taking of land non-consensually. An affected tenant may not receive payment until after they have relocated to a new property. Therefore, they should be prepared to pay their relocation costs upfront and be reimbursed for them at a later date.
How can a tenant ensure their rights are enforced during the expropriation process?
If you’re a tenant at any point in the expropriation process in Ontario, you might feel completely overwhelmed by all of the nuances of your matter. That’s normal. That’s why you need experts in expropriation law in Toronto.
At Goldstein Law, we pride ourselves on bringing our clients the best chance at receiving fair representation and compensation in matters where the power is not in their hands. Our team of lawyers and staff can help you get the compensation you need to get you back on your feet after your lease has been adversely affected. Get in touch with us today for a free consultation.