Considerations in the Sale of Surplus Lands

With the recent increase in the value of Ontario real estate, it may be appealing for a business to sell land surplus for its operations. However, there are a number of complications which could arise.

The Planning Act of Ontario provides municipalities with jurisdiction to control the subdivision of land. As a general rule, a person or corporation cannot transfer land while retaining adjacent land unless the land to be transferred is a whole of a lot or block on a plan of subdivision. Consent of the municipality to do so may be necessary. This is more commonly known as applying for a severance. A severance application may be time consuming and the municipality may impose conditions relating to servicing or access which may be onerous to satisfy. It will be necessary to retain a surveyor to prepare a reference plan which depicts the severed and retained lands.

How will the severed and retained parcels be serviced by water, hydro, gas, sanitary or storm water sewer? It may be necessary to register an easement for the benefit of either the severed or retained lands which grants the owner of those lands the right to repair, maintain, or replace these services. It may be wise to enter into joint use and maintenance agreements which attributes responsibility for costs, maintenance, and decision-making.

Finally, how would a potential purchaser use those lands and what would be the impact upon your business operations? If your business discharges contaminants (any solid, liquid, gas, odour, heat, sound, vibration, or radiation that may cause an adverse effect) into the natural environment, your business may be required to obtain an Environmental Compliance Approval (ECA). However, the presence of a residential development on those surplus lands could impact whether your business continues to operate in compliance with its ECA. You may be able to prohibit the owner from using or developing the lands in a certain manner by registering restrictive covenants on title. However, restrictive covenants must be carefully worded to ensure they are enforceable and achieve the desired result.