A recent Ontario Court of Appeal decision provides guidance to leasing lawyers on the thorny issue of drafting, enforcing and advising on renewal terms which may extend a lease beyond the Planning Act (the “Act”) mandated “21 years less a day” limitation period set out in sections 50 (3) and 50 (5) thereof. Leases which contain terms exceeding this temporal limit may be void ab initio.
In McDonald’s Restaurants of Canada Ltd. v. North Elgin Centre Inc., 2026 ONCA 129, the court had before it a ground lease for vacant land for an initial term of 21 years less a day with two rights of renewal of 10 years each for an aggregate term of over 40 years. The lease contemplated the construction of a fast-food restaurant on part of the landlord’s property. The lease expressly required an application by the landlord for a Land Division Committee consent. Where a lease extends beyond the 21-year period, it may be held not to create any interest in land pursuant to section 50 (21) of the Act. In this case, if no consent of the Land Division Committee were obtained, the lease term by its contractual terms would be deemed to expire on the day before its 21-year anniversary. As it turned out, the landlord determined that it no longer supported any renewal of the term, and so it conducted itself so as to ensure (unsuccessfully, in this case) that the lease would not extend beyond its initial term. Ultimately, the Court held that the lease was not void despite no consent having been obtained by the deadline stipulated by the lease, and the Court relied on the prospectively retroactive effect of obtaining the consent under the Act.
The case serves as a reminder to the profession that, to properly prepare, negotiate or advise in respect of a lease that has a term, directly or by renewal, of 21 years or more, a leasing lawyer should generally begin by reviewing registered title. Not all long-term leases require consent to comply with the subdivision provisions of the Act.
When determining subdivision control compliance for a long-term lease, such compliance falls into two categories:
- First, if the subdivision control provisions of the Planning Act permit land to be transferred, then a long-term lease of the same land is permitted; and
- Second, there are exemptions that apply only to long-term leases that do not apply to transfers of the land.
Examples of the first category where Land Division Committee consent for a long-term lease is not required (that is, the lease is not caught by the 21-year term limitation) are:
- The leased lands consist of all contiguous property then owned by the landlord. The purpose of the 21-year term limit is intended to prevent a landlord and tenant from effectively circumventing the prohibition on unauthorized subdivision of land by the creation, for example, of a 1000-year lease for part of the landlord’s property. (As an aside, note that any lease for a term of 50 years or more may attract land transfer tax at fair market value under s. 1 (6) of the Land Transfer Tax Act R.S.O. 1990 Chapter L.6). No such concerns arise where a lease pertains to all of the contiguous lands of the landlord. Similarly, if the lands contemplated by the lease are already separated from other lands owned by the same landlord (that is, they are not contiguous with such other lands), a ground lease of any duration presents no subdivision concern under the Act. The landlord may own its property in a manner that avoided merger of title, typically achieved by acquiring its lands from separate vendors, as is often the case in a land assembly by the landlord. It is common in those circumstances for a landlord to hold such lands in separate or distinct ownerships (for example, by related corporations), or to “checkerboard” the land in such a fashion as to avoid any “square” from being owned contiguously with another square by the identical owner(s). Any such arrangement, properly created, allows the leasing of lands constituting an entire square without being caught by the 21- year lease limitation.
- The leased land may constitute the whole of a lot or block on a registered plan of subdivision . If it does, then no 21-year term limitation would apply, even if the landlord owned other contiguous lands, because planning authorities would already have turned their mind to the question of whether the land could be transferred in parcels consistent with the lots or blocks created by the registration of a plan of subdivision. Put another way, if such lands could be transferred in fee simple, there would be no planning concerns in conveying a lesser, leasehold interest in such lots or blocks, even for a very long term. Some additional due diligence may be required. For example, a lawyer should ensure that the underlying registered plan has not been “de-registered” by means of a municipal bylaw authorized under as. 50 (4) of the Act, which is available to a municipality where the subdivision plan is at least eight years old. Where such a de-registration by law has been registered, a purchase could not rely on the “whole of a lot or block on a registered plan of subdivision” exception contemplated by the Act, and likewise a lease of 21 years or more might therefore require separate authorization by way of a Land Division Committee consent under the Act in order to create an interest in land.
- The leased land may constitute the remainder of a whole of a lot or block on a registered plan of subdivision. The landlord can lease the whole of a parcel of land that is not the whole of a lot or block on a plan of subdivision while owning other contiguous lands provided that those contiguous lands are themselves a whole of a lot or block on a registered plan of subdivision. As with the preceding section, a lawyer should ensure that the underlying registered plan affecting those contiguous lots or blocks has not been deemed to be “de-registered”.
- The leased lands could be the subject of a municipal bylaw exempting the lands from part-lot control, under section 50 (7) and 50 (7.1) of the Act. The effect of such an exempting bylaw is to make inapplicable altogether the subdivision prohibition provisions of section 50 (5) of the Act. This includes the prohibition on creating leases for 21 years or more. But careful consideration is required when relying on such a bylaw to legalize a long-term lease. For example, an exempting bylaw does not appear to be retroactive or curative, unlike the curative (and retroactive) effect of a consent: see section 50 (14) of the Act. Such exempting bylaws are often created for a limited term so one must ensure that the by-law did not expire before the grant of the lease. And, of course, any such bylaw would not be effective (and should not be passed by a municipality) if the underlying lands are not described on a registered plan of subdivision.
Examples of the second category where Land Division Committee consent for a long-term lease is not required are:
- Affordable Housing: Under clauses 50(3)(b.1) and 50(5)(a.1) where a lease for the purpose of constructing a building that will contain affordable housing can have a term of up to 99 years.
- Land Lease Community Homes: Under clauses 50(3)(c.1) and 50(5)(c.1), certain leases of land for the purposes of a land lease community home can have a term of up to 49 years. This exemption is further restricted by subsection 50(6.1) if any part of the land is in the greenbelt.
- Part of a Building: Special provisions apply where the leased premises are part of a building or structure. Section 50 (9) of the Act exempts any lease from the 21-year prohibition where the leased premises consists of a “part of a building or structure” (including, as of 2021, any use of or right in ancillary lands) for “any period of years”. In 2021, the “part of a building or structure” exemption was expanded by section 50 (9.1) of the Act to include a lease for a term consisting of “the lifetime of an individual”, thereby resolving an issue that had been for years the subject of debate in the profession (as to whether a “lifetime” is a “period of years”).
One must remember that Planning Act due diligence needs to be satisfied whenever there is a grant of a lease, including renewals, for a term of 21 years or more. This should include when there are amendments of the lease to further extend the term or to grant additional rights to renew the lease or extend the term such that, at the time such amendment is executed, the remaining unexpired term of the lease together with all unexercised rights to renew the lease or extend the term will be 21 years or more.
If a title review and the above considerations indicate that none of the above exceptions to the 21-year rule applies, then the lease may need to be authorized by an application for consent of the Land Division Committee. Such a process involves risks, expenses, and complications. (For a more exhaustive consideration of such matters please see R. Mikkola “Curative provisions of Planning Act consent trumps lease: Court of Appeal” – Law360 Canada (February 27, 2026, 8:49 am)). In view of the seriousness of a breach of the Act in respect of a long term lease (the lease is deemed to not create any interest in land), a lawyer, whether advising a tenant or a landlord, must clearly understand and advise a client as to compliance with the Act for any lease of a term, directly or by renewal, of 21 years or more.
When drafting provisions for subdivision control compliance in a long-term lease, consider:
- What will happen if consent is not obtained? For example, will the term revert to 21-years less a day, or a shorter period?
- Who is responsible for getting consent? If the party responsible does not act, can the other party act?
- By when is the consent to be obtained? The process can be lengthy, particularly if the parties are not cooperating.
- Who is responsible for complying with conditions?
- Who is responsible for the cost of applying for consent (application fees, survey costs, lawyer and consultant fees?
- Who is responsible for the costs of complying with conditions?
- What if a condition is not acceptable to a party?
- Which party may appeal a decision if consent is denied or the conditions are not acceptable?
The drafting will be similar to what one would expect if the parties had agreed to sever and sell a parcel of land rather than leasing that land. The significant difference being that in the case of a lease, the timing for the application may be deferred by several years with the parties taking a wait and see approach as the lease may be terminated or rights to renew may not be exercised.
The most serious oversight would be not realizing that the 21-year rule exists or has been engaged. But significant damages and expenses can also be incurred by a client where unworkable or problematic provisions are inserted in a lease which purport (but fail) to address or satisfy the rule, or even where the lease provisions incorrectly assume the requirement to obtain consent where it is not required. A lawyer who undertakes to draft, negotiate or advise a client in respect of a long-term lease must be aware of the prohibitions and exceptions contained in the Act, and the complex and technical considerations associated with their application. A title review is a key part of achieving such awareness.