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Real Estate

Subdivision control: Section 50 of the Planning Act

The Purpose of Section 50 of the Planning Act

Section 50 of the Planning Act aims to control the manner in which land can be divided and used. In view of this, transactions will fail if its provisions are not fully complied with.  Generally, the provincial government does not exercise direct control over development, and therefore the legislation is designed to allow development decisions to be made by municipalities and to be overseen by the Ontario Municipal Board. Presently, the emphasis has been on restoring local accountability and transparency to land-use planning. The Strong Communities (Planning Amendment) Act, 2004 strengthens planning at the municipal level and Bill 51, the Planning and Conservation Land Statute Law Amendment Act, 2006 limits the Ontario Municipal Board to acting as a true appeal body.

It is necessary to keep in mind while reading the following material that reference to a “chain of title” refers only to land registered under the Registry Act. Having regard to the currently ongoing process of converting most land in Ontario from the Registry system to the Land Titles system, the outcome will eventually dispense with the relevance of, for example, the “start dates” referred to in s. 8 below, because chains of title have no meaning under the Land Titles Act.

Effect of contraventions: subsection 50(21)

According to subsection 50(21), any transaction prohibited under s. 50 (or the equivalent section in an earlier statute) “does not create or convey any interest in land.” The types of documents specified in the subsection include agreements, conveyances, mortgages and charges. If section 50 is contravened, then the contravening document does not create an interest in land and, consequently, the purpose of any such document (i.e., to convey or charge) is substantially undermined, because in each case the essence of the document is to create or convey an interest in land. Thus, it is absolutely essential that one ensure compliance with s. 50 is ensured. Nonetheless, subsection 50(21) contains a provision to protect the interest in land created by an Agreement of Purchase and Sale, where the Agreement at the outset is in contravention of s. 50, but it is possible to cure the contravention prior to closing. So long as the Agreement entered into is “subject to the express condition contained therein that such agreement is to be effective only if the provisions of this section are complied with,” (as all real estate boards’ forms are) the agreement is valid and fully enforceable, pending the resolution of the Planning Act problem. Should the express condition be included, neither party can immediately declare the agreement ineffective on the ground that the agreement creates no interest in the land due to the Planning Act contravention.

It is imperative that such an explicit provision be included in every Agreement of Purchase and Sale, Option to Purchase Agreement, Lease or other document involving an interest in land, so as to guarantee protection for the agreement from the effect of s. 50(21) in the event that an unexpected Planning Act problem arises. If this express condition permitted by the Act is not there, a document contravening the section would not create an interest in land.

The basic prohibition: subsection 50(3)

Under subsection 50(3), a person is prohibited from affecting a broad variety of transactions relating to land or interests in land. A “Person” there includes a corporation and any other type of entity, such as a partnership or a sole proprietorship, as well as an individual. The subsection is applicable to everyone, and so are the following prohibited transactions:

1) Conveying land by deed or transfer;

2) Granting, assigning or exercising a power of appointment (a power to appoint is equivalent to a power to convey with respect to land). In other words, land held by an owner to uses includes a power of appointment;

3) Mortgaging or charging land;

4) Entering into an agreement of sale and purchase of land; and

5) Getting into any agreement that has the effect of granting the use of or right in land, directly or indirectly by entitlement to renewal, for a period of 21 years or more. To illustrate by an example, this would include:

i) Granting a right-of-way or easement in perpetuity;

ii) Permitting a lease with a term of 21 years or more;

iii) Granting a 15-year lease with an option to renew for ten years; or

iv) Permitting an option to purchase.

The net cast by section 50 is extremely broad and virtually all common transactions, except perhaps short term leases without options to purchase or renew, are caught by the prohibition.

Call Levy Zavet PC (Levy Zavet) today to schedule an appointment with one of our Real Estate Lawyers!