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Alberta Court of Appeal Refuses to Discharge Restrictive Covenant- This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Would a recent Alberta restrictive
covenant case have been decided differently in Ontario?
In New Casa Holdings Ltd. v. Reference Re: Instrument 213AT [2021] A.J.
No. 507, the Alberta Court of Appeal held that the owner of land in a
Calgary neighbourhood was subject to the terms of a registered 1912
restrictive covenant. The covenant limited the land to one house and
required a minimum of a 25-foot setback from the street. Over the years,
the land had been redeveloped, consolidated and subdivided so that in
2018, the covenant applied to 11 fee simple titles and seven mineral
leases. In that year, the appellant owner obtained municipal approval to
subdivide its property into two lots. This required the owner to apply to
discharge the restrictive covenant from its title. The Court of Appeal held
that the 109-year-old restrictive covenant was valid and enforceable and
should not be discharged.
At common law, there would not seem to be any reason for an Ontario
court to reach a different conclusion. The restrictive covenant was
imposed by way of a “building scheme.” This is an arrangement in which a
subdivider binds each purchaser and their successor owners to restrictive covenants on the basis that
each are bound by and may enforce the covenants against all other owners whose title is subject to
the same restrictions. Since the Alberta Court of Appeal found that the 1912 building scheme was
legally enforceable, this made each owner of lands to which the building scheme applied concurrently
the dominant and servient tenement with respect to the registered covenants, as would have been
the result in Ontario.
The relevant provincial statutes differ significantly. Restrictive covenants may be modified or
discharged in Ontario under section 61 of the Conveyancing and Law of Property Act (CLPA).
Although the CLPA is silent on the considerations to be taken into account by the court in determining
if the restrictive covenant should be modified or discharged, Ontario jurisprudence requires that a
restrictive covenant may be discharged only where the restriction is spent and so unsuitable as to be
of no value such that its continued enforcement would be clearly vexatious (see Ontario Lime Co.
(Re), [1926] O.J. No. 505).
An Ontario court will not generally apply a balancing test (that is, balancing the inconvenience of
having to comply with the restrictive covenant against the benefit of such compliance to the
enforcing party) in determining whether a restrictive covenant should be modified or discharged.
Section 48 (4) of the Alberta Land Titles Act provides that where the restriction “conflicts with the
provisions of a land use by law”, and the modification or discharge is “in the public interest” the court
may modify or discharge the restrictive covenant. The court held on apparently purely procedural
grounds that it was too late for the applicant to make arguments related to the conflict with the
bylaws and the public interest.
The applicant’s arguments in this regard had been raised for the first time at the Court of Appeal. It
seems that these arguments might have been successful, and the result may have been the
discharge of the covenant, had the court entertained such arguments. Generally, it seems that it may
be easier to discharge a restrictive covenant under the Alberta statute if a land use bylaw has been
made which is inconsistent with the restrictive covenant. In Ontario, there is no authority for a court
9/9/21, 2:18 PM Alberta Court of Appeal refuses to discharge restrictive covenant – The Lawyer’s Daily
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to discharge a restrictive covenant merely because it is inconsistent with a zoning bylaw.
However, the most obvious reason why the matter would almost certainly have been decided
differently in Ontario is that s. 119(9) of the Land Titles Act deems a restrictive covenant for which
“no period or date was fixed for its expiry” to have expired 40 years after its registration on title. No
such limitation appears in the Alberta statute. It seems likely therefore that in Ontario the restrictive
covenant in New Casa would have expired in 1952 (being 40 years after its registration).
Ray Mikkola is a partner with the firm of Pallett Valo LLP. (The author wishes to thank Gagandeep
Singh, student-at-law, for his assistance in the preparation of this commentary.)

Just heard about Pallett Valo being chosen as One of Ontario's Top Three Regional Firms. Congratulations – well deserved.
Peter Campbell, BDO Canada LLP