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Court of Appeal for Ontario Offers Guidance on Illegal By-Laws, Land Use Planning and Development Charges

11 minute read

Two recent decisions from the Court of Appeal for Ontario provide helpful guidance in considering the legality of municipal by-laws purporting to regulate land use planning or development charges. In light of the current political emphasis on building homes in Ontario and proposed legislative amendments impacting housing and development, municipalities and land developers alike would be well-advised to carefully consider the recent comments from Ontario’s top court.

Stelmach Project Management Ltd. v. Kingston (City)[1]

Development requires investment in municipal infrastructure. Municipal infrastructure includes sewers, roads, stormwater and wastewater systems, parks and recreational facilities, emergency vehicles, and the list goes on. Costs associated with capital improvements to municipal infrastructure are significant. Generally, these costs are borne by the developing landowners. The legislative framework permitting municipalities to impose such development costs on prospective land developers was the subject of the court’s decision in Stelmach Project Management Ltd. v. Kingston (City).

In Stelmach, as a condition of approval for the developer’s proposed a multi-unit residential property development in Kingston, the City required the developer to pay $410,000 for capital costs associated with the installation of water and sewer infrastructure to service the new development. The City passed a by-law imposing this charge pursuant to its authority under s. 391 of the Municipal Act, 2001[2] (the “Municipal Act”).

The developer challenged the legality of the by-law on various grounds, using section 273 of the Municipal Act which provides:

273 (1) Upon the application of any person, the Superior Court of Justice may quash a by-law of a municipality in whole or in part for illegality.

The developer’s main argument was that the by-law was illegal because the City could only impose fees of this nature under the Development Charges Act[3] (the “DCA”) and had no authority to do so under the Municipal Act. The developer argued that because of the anti-circumvention provision in s. 15 of the Municipal Act, the City could only have passed the by-law if it had provided the developer with the same protections under the DCA. Section 15 of the Municipal Act provides:

If a municipality has power to pass a by-law under section 9, 10, or 11 and also under a specific provision of this or any other Act the power conferred by section 9, 10, or 11 is subject to any procedural requirements, including conditions, approvals and appeals, that apply to the power and any limits on the power contained in the specific provision.

The developer argued that because s. 15(1) of the Municipal Act included reference to “any other Act,” the City was required to provide the same procedural protections prescribed in the DCA (such as a right of appeal to the Ontario Municipal Board, now the Ontario Land Tribunal). Absent such protections, the developer contended, the by-law contravened s. 15(1) of the Municipal Act and was, therefore, illegal.

The Court of Appeal undertook a detailed exercise of statutory interpretation, including a careful review of the relevant legislative history of the DCA and Municipal Act, and dismissed the developer’s appeal. The Court of Appeal held that there are two “separate and self-contained by-law making regimes; the two regimes address different juridical relations, provide for different powers and expressly contemplate different mechanisms of review.”[4] The Court of Appeal concluded the reference to “any other Act” in s. 15(1) of the Municipal Act was included as a result of significant statutory reforms to the Municipal Act. This resulted in specific powers under the previous Municipal Act regime being spun off into ancillary legislation. Additionally, because the DCA predated the reforms to the Municipal Act, the DCA had no footing in the Municipal Act.

Ultimately, the Court of Appeal dismissed the developer’s appeal, holding that the City had appropriately exercised its authority in issuing development charges under the Municipal Act and the by-law was, therefore, not illegal. Justice Miller did add a cautionary note that a municipality cannot impose the same fees twice under two different statutory regimes: “there is no double dipping.”[5]

Hummel Properties v. Niagara-on-the-Lake[6]

Meanwhile, in Hummel Properties v. Niagara-on-the-Lake,[7] the Court of Appeal confirmed that: (1) a municipality’s ability to enact interim control by-laws pursuant to section 38(1) of the Planning Act[8] can only be used as a land use tool and cannot be used to restrict the subdivision of land; and, (2) a municipality cannot enact two interim control by-laws on the same land. This decision emphasizes the importance of municipalities ensuring that their land use planning actions are appropriately grounded in their legislative authority.

The Hummel Properties case arose on the heels of a contentious debate in the 2018 municipal election campaign in the Town of Niagara-on-the Lake (the “Town”) concerning uncontrolled development in the “Old Town”, which was, arguably, impacting the Town’s history and character. Just over a month after the new council was appointed, the Town enacted an interim control by-law which prohibited subdivision of land[9] and approved condominium descriptions[10] within the Old Town.

At that time, Hummel Properties had an outstanding development application for a townhouse condominium, which was effectively shut down by this new interim control by-law. The developer brought an application under s. 273 of the Municipal Act[11] to quash the Town’s interim control by-law for illegality and bad faith. The developer also brought claims against the Town for negligent misrepresentation and misfeasance in public office. The developer’s application was dismissed at first instance, but its appeal was granted by the Court of Appeal for Ontario. This article focuses on only the questions of the legality of the interim control by-law raised in that case.

The core question on the appeal was whether the interim control by-law was properly grounded in the Town’s statutory authority pursuant to s. 38(1) of the Planning Act. Section 38(1) allows a municipality to pass a temporary by-law “prohibiting the use of land, buildings or structures within the municipality or within the defined area or areas.”

The Court of Appeal accepted the developer’s argument that the interim control by-law sought to prevent the subdivision of land and approval of condominium descriptions, which would not qualify as a “use of land.” The Court of Appeal highlighted the fact that Part V of the Planning Act explicitly concerns land use, whereas Part VI relates to the division of land. As section 38(1) concerning interim control by-laws is found in Part V rather than Part VI, the Court of Appeal found that the Town’s interim control by-law had an improper purpose, being to prohibit the subdivision of land as opposed to control land use and, therefore, the by-law was illegal.

Key Takeaways

These two Court of Appeal decisions reinforce a number of important lessons for both landowners/developers as well as municipalities.

  • For Landowners and Developers:

✓ It is important to review the details of a by-law pertaining to development costs or land use controls and whether there is legislative authority based upon which a municipality can pass such a by-law. Although municipalities have multiple sources of authority, municipal jurisdiction to regulate land use or impose fees and charges is tightly constrained to the power bestowed on them by provincial legislation. Landowners and developers should ensure any municipal by-law affecting their property is properly within the municipality’s statutory authority.
✓ If a municipality attempts to impose multiple sets of fees or charges in relation to the same project under different legislative regimes, there may be grounds to challenge such attempts as unlawful.

  • For Municipalities:

✓ Municipalities need to ensure that when acting to regulate land use, development, or development fees or charges, such actions are rooted squarely within the legislative authority granted to them by the province.

✓ Municipal staff, council, and legal counsel should be mindful of these tools and constraints on municipal regulatory powers.

[1] Stelmach Project Management Ltd. v. Kingston (City), 2022 ONCA 741 [Stelmach].

[2] Municipal Act, 2001, SO 2001, c. 25.

[3] Development Charges Act, 1997, SO 1997, c 27.

[4] Stelmach Project Management at para 55.

[5] O. Reg 584/06, s 2(1) see Section 2(1).

[6] Hummel Properties v. Niagara-on-the-Lake, 2022 ONCA 737 [Hummel Properties].

[7] Ibid.

[8] Planning Act, RSO 1990, c P 13.

[9] Hummel Properties at para 27.

[10] Hummel Properties at para 27.

[11] SO 2001, c 25.

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