Sale of Municipal

Property

How Land Selling Policies Work

John Mascarin & Jody Johnson

June 11, 2013

Introduction

• Municipalities are large landowners

• Municipal property inventory is comprised of lands

for:

• highways; parks; recreational, cultural &

entertainment facilities; municipal offices; trails;

open spaces; environmental protection; water

and waste water facilities; industrial parks;

airports; transportation facilities, etc.

• Like a natural person, a municipality is entitled to

dispose of its landholdings

2

3

Legislation

• Subsection 270(1) of the Municipal Act, 2001:

A municipality shall adopt and maintain policies

with respect to the following matters:

1. Its sale and other disposition of land.

• Subsection 270(2) of the Municipal Act, 2001:

A local board shall adopt and maintain policies

with respect to the following matters:

1. Its sale and other disposition of land.

History

• previous Municipal Acts had required municipalities

to pass by-laws establishing procedures governing

the sale of land

• before selling any land, municipalities were required

to:

• make a declaration that the land was surplus

• obtain at least one appraisal

• give public notice of the proposed sale

• municipalities were also required to establish and

maintain a public registry listing and describing the

land owned or leased by the municipality

4

Today

• under section 270 of the current Municipal Act,

2001, each municipality is entitled to determine its

own policies and procedures for the sale of land

• policies must be adopted by by-law

• see s. 5(3) of Municipal Act, 2001

• adoption of policies is mandatory

• content of policies is left to the discretion of

individual councils

5

Today

• nothing in Municipal Act, 2001 specifically provides

that the adoption of a policy is a prerequisite for any

municipal action

• despite the removal of restrictive statutory

requirements, many municipalities have re-adopted

their previous surplus land disposal schemes

• not necessarily the best approach

• prior disposal framework was prescriptive and

detailed

6

Advantages of Current Scheme

• a municipality can act more quickly when divesting

itself of property

• different types of land can be treated differently

• flexibility in determining the price of land

• all in keeping with the greater autonomy and

independence promised to municipalities under

the Municipal Act, 2001

• less strictures, less prescriptive detail from top-

down

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Developing a Policy

• caution: land dealings must be authorized by by-law

• create a process for identifying property that the

municipality wishes to make available for disposal:

• some municipalities (e.g. Chatham-Kent) have

moved away from a focus on “surplus” lands,

acknowledging that there are many reasons land

is sold by municipalities (e.g. economic growth,

income, job creation, community development,

etc.)

• determine who is responsible for identifying land to

be disposed of

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Developing a Policy

• consider whether there are there any special

legislative or policy provisions applicable to the

land

• determine who should participate in the process of

making recommendations to council

• determine the method by which council will declare

lands to be available for disposal (e.g. resolution

passed at an open meeting / formal by-law)

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Developing a Policy

10

• determine nature and interest of land:

• fee simple interest:

• general market demand or limited market

demand

• easements

• typically regarded as a disposal of surplus

property in that the municipality no longer

enjoys full use of its property interest

Developing a Policy

• determine circumstances or types of land exempt

from requirements of the policy:

• industrial land

• closed highways, road and road allowances

• cemetery plots

• land being 0.3 metres or less in width acquired in

connection with an approval or decision under the

Planning Act

• etc.

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Developing a Policy

• determine if there are any parties that should be

given priority in terms of purchasing the land:

• school boards

• other local boards

• conservation authorities

• Crown

• local agencies

• determine if exclusive notice should be provided to

certain parties

12

Developing a Policy

• determine notice requirements including the form

and duration of notice

• potential forms of notice:

• publication in a local newspaper

• publication on the corporation's website

• posting a “for sale” or “for lease” sign on the

land

• publication on professional realty websites

• determine appraisal requirements including the

number of appraisals required

• determine a method for pricing the land

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Developing a Policy

• determine potential methods of sale:

• public auction

• tender process

• direct negotiation with an abutting property

owner

• other direct negotiations

• direct advertising

• listing with a licensed relator

• determine who is responsible for determining what

method of sale should be used in particular

circumstances

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Developing a Policy

• determine specific procedures for each method of

sale including:

• notice requirements

• how to deal with offers to purchase

• setting out the market value of the land

• any commission requirements

• deposit requirements

• reporting requirements

15

Developing a Policy

• develop a communication plan to determine

how policies will be communicated to various

stakeholders:

• municipal website

• brochures,

• public notice in newspapers

• develop any reporting requirements.

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Additional Considerations

• local boards also have to adopt and maintain

policies

• clerks can work in co-operation with local boards

• determine whether it is desirable to include a policy

statement outlining the purpose of the policy

• transparency, fair disposal, consistency,

appropriate standards

• determine whether it is desirable to highlight any

municipal priorities

• identification of potential use of property for

affordable housing (City of London)

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Additional Considerations

• identify who is responsible for certain costs:

• legal

• survey

• appraisal

• removal of encumbrances

• relief of easements

• environmental testing and remediation

• demolition

• planning and administration

• due diligence research

• provision that municipality may undertake activities

to increase the value of real property prior to sale

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How To Create a Policy

• questions to ask:

• how much time does it take?

• who should be involved?

• what resources are necessary?

• should public be consulted?

• how much municipal control is desirable?

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Components of a Strategy

• Application:

• “This policy applies to the sale or other disposal of

land by The Corporation of the Municipality of X.”

• Policy Statement:

• “The Municipality will dispose of surplus land in an

open and transparent process to ensure that the

consideration for such disposal is fair, reasonable and

in the best interest of the Municipality.”

• Purpose:

• “The Municipal Act, 2001 requires that the Municipality

adopt and maintain a policy to govern the sale and

other disposition of land. The purpose of this policy is

to set out the principles governing these transactions

and the procedures to be followed.”

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Components of a Strategy

• Definitions:

• “appraisal”, “disposition”, “land”, etc.

• Description:

• “The procedures set out in this policy will ensure that

the disposal of any municipal [surplus] property is

conducted in a consistent and transparent manner and

the policy will achieve this objective.”

• Procedures:

• outline the steps to be taken and who is responsible

• Schedules:

• price of land, real estate commission, etc.

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Enforcement

• what happens if a policy is not followed?

• municipalities do not need to be in specific technical

compliance with “policies”

• under s. 440 of the Municipal Act, 2001, a taxpayer

may seek to enforce a by-law (the self-help remedy)

• could a taxpayer impeach a transaction relating

to the sale of municipal land if not in compliance

with the land disposal policy?

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Sale of Highways

• previous Municipal Acts set out strict requirements

for municipalities that wished to dispose of closed

highways

• required a by-law to close the highway

• required municipalities to first offer to sell the land

to the owner abutting the land to be sold

• the municipality could only sell the land to

another person when the abutting land owner

failed to purchase the closed highway within

the prescribed time.

• this is no longer required under Municipal

Act, 2001

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Sale of Highways

• by-law to close a private road being used as a

person’s sole means of motor vehicle access to

the highway was not valid unless that person

agreed to the by-law (s. 38 of former Municipal

Act)

• this is no longer required under Municipal Act,

2001

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Sale of Highways

• current Municipal Act, 2001 still contains additional

provisions regarding the sale of highways (although

less restrictive than former framework)

• municipality required to pass a by-law in order to

close a highway:

Highway closing procedures

34 (1) A by-law permanently closing a highway does not

take effect until a certified copy of the by-law is

registered in the proper land registry office.

• although not explicit, Municipal Act, 2001 arguably

requires municipality to close highway before

selling it

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Sale of Highways

• Municipal Act, 2001 also requires consent from

federal and provincial governments in certain cases:

Consent

34 (2) A by-law permanently closing a highway shall not be

passed without the consent of the Government of Canada if

the highway,

(a) abuts on land, including land covered by water,

owned by the Crown in right of Canada; or

(b) leads to or abuts on a bridge, wharf, dock, quay or

other work owned by the Crown in right of Canada.

43 A municipality that permanently closes a highway shall

not convey the land forming the highway if it is covered with

water without consent of the Ministry of Natural Resources.

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Sale of Highways

• Under current Municipal Act, 2001, a by-law

for the sale of land may affect an abutting

landowner’s common light right of access:

Restricting common law right of passage

35 Without limiting sections 9, 10 and 11, a

municipality may pass by-laws removing or

restricting the common law right of passage by

the public over a highway and the common law

right of access to the highway by an owner of

land abutting a highway

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Sale of Highways

• Simek v. Gravenhurst (Town), 2012 ONSC 6314: a road

located on the defendants’ property, which was the

plaintiffs’ only means of access to their properties,

constituted a public highway

• barricades existing on the road were found to offend the

Road Access Act in the absence of a closing order

• court determined that the plaintiff was not entitled to a

conveyance from the Town of Gravenhurst.

• even if the court could direct Town to close the road, the

abutting owners no longer enjoy the “right of first refusal”

under the amended Municipal Act, 2001

• court ordered the removal of the barriers to permit free

and unimpeded access along the road

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Street, Alley, and Walkway Closings

• the Street and Alley Technical Advisory Committee

of the City of Windsor has developed a process for

closing streets, alleys and walkways

• allows individuals to apply to purchase closed

alleys in order to add the land to existing property

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“Disposition” - Meaning?

• Niagara River Coalition v. Niagara-on-the-Lake (Town),

2010 ONCA 173: court considered (among other issues)

whether a licence agreement between the Town and a jet

boat tour operator constituted disposition of municipal

property under the new Municipal Act, 2001

• court found that the granting of a licence providing non-

exclusive use of municipal property, with both defined

termination and escalating rent provisions, did not

amount to a sale or disposition of land for the purpose of

s. 270

• not an indicia of a “disposition” under any definition

• moreover, a licence is an agreement to enter upon and

occupy land. It is not a transfer of an interest in land

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“Sale” - Meaning?

• Liberatore v. St. Thomas (City), [1995] O.J. No.

1570 (Gen. Div.): the conveyance by a municipality

of parking lands to a developer for the stated

consideration of $1.00 was held to be a sale of land

within the meaning of the previous Municipal Act,

rather than an illegal gift or donation of land by the

municipality.

• The word "sell" clearly denotes a sale or

transaction having a commercial character. It

must mean an exchange for value and excludes

a clear gift. The balance of the phrase "or

otherwise dispose of the same" allows for flexible

commercial exchanges.

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“Sale” – Meaning?

• 2015429 Ontario Inc. v. Dynasty Homes (Wasaga

Hills) Ltd., [2006] O.J. No. 2772, the Court of

Appeal also considered the meaning of the word

“sale”:

• may refer to an entire course of dealings

between the municipality and the developer

• according to both its ordinary and usual legal

meaning, the word enjoys a wide ambit unless

the context in which it is used indicates a

contrary intention

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By-law Requirement

• a decision to sell or transfer municipal land must

be authorized by a by-law

• 2015429 Ontario Inc. v. Dynasty Homes

(Wasaga Hills) Ltd., [2006] O.J. No. 2772 (C.A.)

• Tanner v Brockton (Municipality), 2012 ONSC

6329 (S.C.J.)

• resolution of council may not be sufficient

33

Freedom of Information

• certain information relating to a municipal land sale

may be subject to disclosure to the public under s.

4(1) of the Municipal Freedom of Information and

Protection of Privacy Act

• a draft by-law and the substance of the

deliberations of a closed meeting may be protected

• a report or other correspondence relating to the

disposition of land is not necessarily protected and

may be subject to disclosure

34

Open Meeting Rule

• Municipal Act, 2001 provides an exception to the

“open meeting rule” relating to the sale of municipal

lands

• s. 239(2)(c) of the Municipal Act, 2001 allows for a

meeting (or part of a meeting) of a municipal council

or committee to be closed to the public if the subject

matter being considered is “a proposed or

pending acquisition or disposition of land by the

municipality.”

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Municipal Bonusing Prohibition

• a municipality is expressly prohibited from providing

“assistance” to various entities under s. 106(1) of the

Municipal Act, 2001

• “assistance” includes “leasing or selling any property

of the municipality at below fair market value”

• prohibition applies to assistance given to a

manufacturing business or other industrial or

commercial enterprise

• prohibition does not apply to an institution or an

individual

• contravention of the bonusing provision could

potentially void a transaction

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Power to Make Grants

General power to make grants

107 (1) …a municipality may make grants, on such

terms as to security and otherwise as the council

considers appropriate, to any person, group or body,

including a fund, within or outside the boundaries of the

municipality for any purpose that council considers to be

in the interests of the municipality.

Loans, guarantees, etc.

(2) The power to make a grant includes the power,

…

(b) to sell or lease land for nominal consideration or

to make a grant of land.

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Municipal Capital Facilities

Agreements for municipal capital facilities

110 (1) This section applies to an agreement entered into

by a municipality for the provision of municipal capital

facilities by any person, including another municipality, if

the agreement provides for one or more of the following:

…

2. Assistance as provided for in subsection (3).

(3) …a municipality may provide financial or other

assistance at less than fair market value or at no cost to

any person who has entered into an agreement to provide

facilities under this section and such assistance may

include,

(b) giving, lending, leasing or selling property.

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John Mascarin

Partner

T 1.416.865.7721

E jmascarin@airdberlis.com

Jody Johnson

Associate

T 1.416.865.3438

E jjohnson@airdberlis.com

~ Fin ~