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Legal Liability in Zoning Administration in Saskatchewan

Table of Contents

1. Introduction

2. The Rules of Conduct

3. The Legislative Scheme

4. Know the Legislation

5. Know and Understand the Bylaw

6. Notice Requirements

7. Proper Exercise of Discretion

8. The Consequences

9. Conclusion

10. Recent Developments in the Law

11. Contacting a Lawyer on this Subject

 

1. Introduction

This paper is intended to give the reader the opportunity to reflect on three things:

  • The moral and legal responsibility of Council and Administration to properly manage their Zoning Bylaw;
  • The procedures and decisions which may give rise to these responsibilities; and
  • Some specific fact patterns which may arise in your situation, and the potential traps for the unwary.

2. The Rules of Conduct

Obviously, Council and Administration have both a moral and legal responsibility to discharge in administering the zoning bylaw. Each situation and each decision turns on its own facts. However, there are three rules of thumb which will serve you well in discharging your moral obligation and avoiding legal entanglement. These are:

  • Read, understand and follow The Planning and Development Act, 2007 (the “PDA”);
  • Read, understand and follow the Zoning Bylaw (the “Bylaw”), and the related Official Community Plan or Basic Planning Statement.
  • Where there is discretion to be exercised, do so honestly, in good faith, and with a view to the best interests of the Municipality.

This may seem rather simplistic. However, almost every successful zoning lawsuit arises from a failure to follow these rules.

3. The Legislative Scheme

Zoning issues are administered by municipalities, subject to supervision by the Minister and such approving authority as may be specified under the PDA.

Municipalities are creations of the provincial government. As such, they do not have any inherent powers, but only those granted to them by the provincial legislature.

In Saskatchewan, most municipal powers are conferred by The Cities Act, The Municipalities Act, and The Northern Municipalities Act. In zoning matters most municipal powers are conferred by the PDA.

Accordingly, as a general rule of thumb, if one of these Acts does not authorize a course of action in zoning matters, a municipality is not so empowered.

4. Know the Legislation

Every municipality should print out and refer to an up-to-date copy of its governing Act. This paper is aimed at those governed by The Municipalities Act (the “MA”) and accordingly, references will be directed to that statute. Municipalities should also possess a current copy of all legislation they are required to administer, in this case, the PDA.

Regulations are important, too. Municipalities should possess a current copy of all regulations passed pursuant to each of these Acts.

All Provincial Acts and Regulations can be viewed by clicking on the Freelaw link at the Publications Saskatchewan Website: https://publications.saskatchewan.ca/#/freelaw.

Having a working knowledge of the legislation is a required second step. The reason is quite simple. While a zoning bylaw will contain a great deal of useful information, not all aspects of zoning administration will be set out in the bylaw.

Consider the following.

a) Failure to provide public notice of Discretionary Use Application:

While less common than previously, a number of situations have arisen where discretionary use applications have been made under the zoning bylaw, without public notice of the application having been given by the municipality.

Subsection 49(i) of the PDA requires that a zoning bylaw prescribe the procedures for providing public notice of a discretionary use application.

In some cases, the Bylaw is missing this provision, either by virtue of its age or by oversight at the time of drafting. In the latter case, the Bylaw contravenes the PDA. In some other cases, administration has simply forgotten about the provision and does not engage it. This gives rise to the

possibility that an affected party may subsequently seek to overturn a discretionary use approval, on the basis that the Bylaw is illegal or the process was contrary to the Bylaw.

b) Minor Use Variations:

Another situation which has arisen concerns minor variances and their approval pursuant to section 60 of the PDA.

This provision was added to the PDA to permit Council or the Development Officer to approve certain minor variances without the necessity of denying the permit application and referring the matter to the Development Appeals Board.

However, there is a precondition to the exercise of this power. The Bylaw must specifically authorize such minor variance applications.

Situations have arisen where minor variances have been permitted, supposedly on the strength of section 60, but without the municipality having passed the necessary amendment to the Bylaw. Where this occurs, Council or the Development Officer is acting without statutory authority. It is open to an affected party to have the development permit overturned.

c) Conclusion:

In summary, the risk in not having a current working knowledge of the PDA is threefold.

First, while there are provisions in the PDA which require a Bylaw to be approved, this does not mean that the Minister will have reviewed the Bylaw completely for accuracy and thoroughness. Ultimately, the responsibility for drafting an appropriate Bylaw lies on the municipality. This is particularly so in times of provincial funding reductions, where government staff have been reduced.

Second, even though a Bylaw may be compliant, it may not properly authorize all action contemplated by the PDA. In many cases, the PDA is permissive and not mandatory. This means that the municipality must make a decision whether to exercise all of the powers granted by the PDA. If it does not expressly adopt permissive powers through its Bylaw, the municipality cannot exercise those powers.

Third, the PDA may be amended at any time, requiring an update to the Bylaw.

5. Know and Understand the Bylaw

Just as the Development Officer and Council must understand the Act, so too must they read and understand the Bylaw.

Some errors are what may be termed “garden variety”. For example, where there is an oddly configured parcel of land involved, the Development Officer may have confused the front yard with the side yard, and issued a permit contravening the setback requirement set out in the Bylaw.

While understandable, such errors can be eliminated by simply reviewing the definitions set out in the Bylaw.

While the error may seem slight, it may end up being a major issue. An adjacent property owner may take issue with the permit issuance and launch an appeal, resulting in delay and expense to the developer and the municipality. Even if no appeal is taken, when the developer seeks to sell the property or borrow against the property as security, the non-compliance may result in a lost sale, or a refusal of financing.

Spot zoning to relieve against this non-compliance may not be a solution, as we will discuss below.

Some failures are more serious. For example, consider a situation where a developer makes an informal inquiry of the Development Officer as to the possibility of acquiring land for a subdivision. The Development Officer errs in advising as to permitted uses of the property under the current zoning. On the strength of that advice, the developer purchases the property. In such circumstances, if the development permit is then refused, the municipality may be liable for having given negligent advice.

Care therefore must be taken in providing information to development proponents. Advice should be restricted to referring a developer to the requisite portions of the Bylaw and offering procedural advice as to how to get a development proposal submitted for consideration. Additional advice should be avoided or should be carefully qualified so that the listener understands that the Development Officer takes no responsibility for its use.

Similarly, discussions with Councillors should not take place without the listener being carefully reminded that all decisions must ultimately be made by resolution or bylaw of Council. This prevents a development proponent or opponent from saying that they were misled as to their chances of success.

6. Notice Requirements

The most frequent errors committed in zoning administration arise from a failure to give proper notice.

These failures include:

  • Failure to give notice to all required parties;
  • Failure to properly specify matters in the notice;
  • Failure to deliver the notice in the required fashion; or
  • Failure to give sufficient time.

Thus, where notice is required, it is imperative that the Development Officer reviews the Bylaw (and the PDA if required) to ensure that full and clear notice is given.

As well, it is important that proof of the notice be preserved. Certified mail receipts should be retained, and properly filed. Where personal service has been effected, an affidavit of service should be obtained. Records should be made of any applicable telephone calls and inquires.

The reason for such record-keeping is obvious. Personnel change issues may arise sooner or later. If a Development Officer has departed, and proof of service has not been retained, it may be impossible to refute a later suggestion that proper notice was not given.

As well, the Development Officer should consider giving notice even where not required by the PDA or the Bylaw. Giving “extra” notice cannot hurt, and if a person has been given notice it is difficult for them to later complain that they had no chance to speak.

To illustrate the point, one might consider the case of Hoffman v. Regina Beach1. In that case, the municipality passed a bylaw which rezoned certain land from residential to commercial use. Subsequently, a neighbouring property owner sought an order declaring the bylaw invalid.

While notice had been served in accordance with the PDA and on time, it contained a map which contained illegible street names. The Court held that a reasonable reader might not understand that he might be affected by the proposed rezoning and held that the bylaw was invalid.

Interestingly, the court noted an additional reason for overturning the bylaw. Even though the Town had no duty to inform the complainant of the proposed bylaw, it had apparently kept him informed as to other matters involving the rezoning. The court held, therefore, that the complainant had developed a reasonable expectation that he would be afforded the further courtesy of being notified about the bylaw.

This case illustrates the importance attached to notice by the courts. While the decision may be questionable in its conversion of a courtesy into a legal requirement, it does illustrate how giving “extra” notice may not hurt in certain circumstances.

Another case demonstrating the notice requirements is Kingfisher Inns Ltd. v. Nipawin2. In the original decision, a municipality sought to rezone certain land to permit the construction of a hotel. There were irregularities in the manner in which the original bylaw was passed, including that some members of Council had a pecuniary interest in the proposed development. Upon realizing the irregularities, those members of Council excused themselves and a second bylaw was passed. A number of the other hotel owners in Nipawin, who opposed the development, sought to set aside the amending bylaw on a number of grounds.

They failed on most grounds. However, the Court was concerned that the second bylaw flowed directly from and was related to the first. The bylaw was set aside. The Court made it clear that this decision to set aside related to the individual bylaw in question, and that subsequent amendments were not necessarily precluded.

The Town then decided to deal with the issue of the proposed development as part of an overall review of its Development Plan and its Basic Planning Statement. Some months later this was completed. A new Development Plan and Zoning Bylaw were prepared in draft form. Prior to public

meetings being held, the Town published large advertisements in a local paper. These included large colour maps, which identified the different proposed land uses.

As part of the public information process, the Town also prepared copies of the proposed bylaws and of the maps. The maps were prepared on a black-and-white photocopier, and were distributed to persons who asked for them at the Town Office

There was some confusion as to whether everyone who came to the Town Office received complete copies of the proposed bylaws, including the maps. The Town had sought to rectify any problems by re-delivering copies of the bylaws and maps to those that they knew had received them.

Prior to the public meeting, the opponents of the development sought a court order to prevent the Town from proceeding any further.

On the hearing of their application, they pointed out that the black and white copies of the maps rendered it difficult to discern between the various proposed land uses.

Although there was no evidence before the Court that anyone had been actually misled, the potential for confusion was enough for the Court. It ordered that the process be stopped and required the Town to do it again.

The Town did so, and on its third attempt, yet another court application was brought. This time, however, the Court found no fault with the process followed by the Town and permitted the process to proceed.

In summary, decisions such as these underscore the care a municipality must exercise in ensuring full and documented notice.

7. Proper Exercise of Discretion

In certain circumstances, the Development Officer, and more usually, Council, is required to exercise discretion.

An obvious instance arises where there is a rezoning application before Council. While Council is bound to consider such applications in accordance with the Development Plan or Basic Planning Statement, and to proceed in accordance with the Bylaw and the PDA, substantial discretion as to the approval or rejection of the proposal lies with the elected representative. Similar discretion resides with Council on a discretionary use application.

Where such discretion is to be exercised, it is important that it be exercised properly.

a) Ensure that the Council or the Development Officer does have discretion to exercise.

For example, in certain municipalities, it is not unusual for a Development Officer to refer Development Permit Applications to Council for approval, even where the application does not refer to a discretionary use. Some bylaws provide for a referral to take place in certain circumstances however, these bylaws uniformly provide that the referral is for the purposes of seeking advice and

guidance from Council. They are no intended to displace the duty of the Development Officer to issue or to refuse a permit.

If the matter is referred to Council for the purposes of having Council determine whether to issue the permit, both the Development Officer and Council are acting improperly. If the use is a permitted use, the Development Officer has no discretion. The permit must be issued upon application. Council has no role to play in approving such an application.

Conversely, where the application concerns something which is not a permitted or discretionary use, there is no discretion which resides with Council or a Development Officer. The application must be turned down, and the Development Officer must refuse to issue a permit.

Again, ensure your familiarity with the Bylaw (and any applicable provisions of the PDA). More importantly, the key is to be sure that the provisions of the PDA and the Bylaw are complied with.

Even where there is a discretion which resides with Council or the Development Officer, such discretion must be exercised properly. The discretion must be exercised honestly, in good faith, and in the best interests of the municipality.

This means that, in the first place, Council must actually exercise the discretion. If Council should simply adopt a policy that certain types of proposals will automatically be rejected or accepted, a court will hold that Council has failed to exercise its discretion properly and will overturn the decision.

Similarly, it is not enough to avoid adopting a policy. Council must carefully consider each discretionary decision it makes. For example, where there is a rezoning application, Council must hear the proponents and opponents, consider their views, and make a determination thereafter. This does not mean that councillors cannot have a point of view and cannot express it publicly beforehand. However, Council cannot simply predetermine the application and close its ears to representations.

Sometimes this is a hard thing to differentiate.

In the Kingfisher Inns case, the new Development Plan and Zoning Bylaw were hotly contested. Prior to consideration of the Zoning Bylaw, the Council issued a press release dealing with some of the matters in controversy. Opponents later cited this as evidence that the Council had predetermined the issue. While the Court refused to agree with this characterization, it is clear that, even for the judge, the press release did cause some concern.

Accordingly, prudence now dictates that municipal bodies work hard to differentiate between the position of the municipality and the position of members of Council.

It may be fair to say that the Court would not have been as concerned about expressions of opinion by members of Council, as it was by an expression of opinion by Council as a whole. Even so, when offering any opinion on a matter to go before Council, municipal officials might be wise to keep their comments circumspect, and to remind the media that decisions are taken by Council as a whole, and by resolution and bylaw. Municipal politicians should be careful to make it clear that they retain an open mind on the subject.

A final consideration in matters of discretion is that the municipality must, in exercising its discretion, do so for a proper, and not an improper purpose.

The leading Saskatchewan case in this area is that of R v Vanguard Hutterian Brethren3, a 1979 decision.

In that case, a Rural Municipality sought to prevent a Hutterite colony from being developed within the Municipality. RM Council authorized the preparation of a zoning bylaw. A further resolution was passed preventing “any development within the municipality that will be affected by the proposed zoning bylaw”.

The proposed bylaw limited family residences to two per quarter section of land, apparently bearing in mind the communal style of living followed by the Hutterites. Council minutes revealed that Council had refused to grant building permits to the Hutterian Brethren, but had granted permission to other landowners in the Municipality.

Ultimately, the Hutterian Brethren chose to commence building. A prosecution was brought against them, for contravening the bylaw.

At the court hearing, the judge considered the purpose and intent of the PDA, concluding that it was intended to control the use of land for the amenity of the community and for the health, safety and general welfare of the Municipality’s residents. The judge then went on to consider the effect of developing a Hutterite colony. He found that there was no evidence that the establishment of a Hutterite colony would in any way effect the concerns to be protected by the PDA.

Accordingly, the court concluded that the Bylaw had been enacted for an “improper purpose” and struck down the Bylaw.

A similar conclusion that discretion has been exercised for an improper purpose may arise where there is personal animosity between the parties. Another possible basis for finding improper purpose may be where there is a spot zoning undertaken to correct an earlier error in administering the zoning process.

8. The Consequences

Where there has been an error in administering zoning, the consequences may vary.

If an error has been made, it is frequently not noticed, or is ignored.

If it is noticed, and someone is motivated to seek to reverse the error, one remedy is to bring an appeal pursuant to the provisions of the PDA.

In these circumstances, the appeal is taken to the Development Appeals Board, and from there to the Saskatchewan Municipal Board. Municipal Board decisions may be appealed on points of law, only, to the Saskatchewan Court of Appeal.

Where appeals are brought and disposed of in this fashion, the legal exposure is rather minimal. A process exists for adjudicating the dispute. The only real loss to the municipality will be the time, effort, and legal costs occasioned.

Not every error is subject to appeal, since the only rights of appeal which exist are those set out in the PDA.

In such cases, an aggrieved party must rely on “judicial review” to correct the error.

The first type of error subject to judicial review is a failure to act in accordance with a legal duty. In such circumstances, the aggrieved party may seek a remedy called “mandamus”, or a remedy called “prohibition”.

Consider the case where a development application is made, and the Development Officer refuses to issue that application, even though it is clearly authorized by the Bylaw.

The Development Officer is under a legal duty. The Applicant may seek an order of mandamus to compel issuance.

In this case, the application is likely to fail. The applicant has another remedy. Various provisions in the PDA provide that refusals of a Development Permit are subject to the appeal process. The Court will take the position that the appeal process ought to be invoked, rather than judicial review.

However, where there is a duty from which no appeal lies, mandamus will be granted. For instance, let us say that a rezoning application is to be heard by council without the necessary notice being given to the public. An order of mandamus will be granted, compelling notice to be given.

This order will be coupled with an order of prohibition, prohibiting the Council from proceeding until the PDA has been complied with. Prohibition is simply the reverse of mandamus. It prevents the commission of an act which is clearly unauthorized by law.

Where there is no clear duty or prohibition, however, mandamus and prohibition will not apply. For example, aggrieved applicants have often brought a mandamus application where a discretionary use is denied. The Courts will routinely reject the application, because Council has a discretion to exercise, and is not bound, in law, to grant the application.

A second form of judicial review may result in a bylaw or resolution of Council or the Development Officer being “quashed”.

Where the Development officer makes the impugned decision, this is called a “certiorari” application. Where Council makes the decision, recourse to certiorari is available, but generally, the remedy is sought pursuant to section 358 of the MA, to quash the bylaw or resolution on the basis of illegality.

The rights of appeal have been greatly expanded in the latest version of the PDA, but there will be some decisions where an appeal does not lie, and a dissenting landowner wishes to convince a judge that the decision was made incorrectly, and will accordingly rely on this remedy.

While the Court will be very deferential to the Municipality and will not interfere with the political decision-making process, an obvious error will be corrected. Accordingly, if the Court concludes that the Bylaw did not permit this discretionary use, an order will issue, quashing the approval.

Up to this point, the procedures have dealt primarily with the “correcting” of the decision. For the better part, this is where most court decisions end the matter.

Rarely, if ever, has an effected landowner sought damages from a Saskatchewan Municipality. Most are content to obtain a proper decision.

Even outside of Saskatchewan, a review of the case law shows that, for the better part, damages are rarely awarded in zoning litigation.

In the first place, individuals involved in the process (unless acting fraudulently) are generally protected from being sued personally. This results in part from section 355(1) of the MA, which provides that:

No action or proceeding lies or shall be instituted against a member of council, a member of a committee or other body established by a council, a member of a public utility board established pursuant to subsection 33(2), a member of a controlled corporation of a municipality or any municipal officer, volunteer worker or agent of the municipality for any loss or damage suffered by a person by reason of anything in good faith done, caused, permitted or authorized to be done, attempted to be done or omitted to be done by any of them pursuant to or in the exercise or supposed exercise of any power conferred by this Act or the regulations or in the carrying out or supposed carrying out of any duty imposed by this Act or the regulations.

Further protection is afforded to the municipality by section 238 of the PDA, which provides:

Notwithstanding any other Act or law, every person is deemed not to suffer any damages, and without restricting the generality of the foregoing, property is deemed not to be injuriously affected or suffer any diminution of value by reason of:

(a) the adoption of or amendment of a regional plan, a district plan, an official community plan, a subdivision bylaw or a zoning bylaw;

(b) the approval, cancellation or revocation of an approval of a proposed subdivision; or

(c) any other action taken pursuant to the authority of this Act or the regulations by the minister, the director, a municipality, a commission, a district planning authority, a regional planning authority, a northern planning authority, or any agent or person acting on his, her or its behalf.

For the better part, any action taken under the authority of the PDA is protected. If the action is not authorized by the PDA, however, there is an argument to be made that, where the Municipality or the Development Officer does not follow the PDA or Zoning Bylaw, the Municipality is liable to damages. Moreover, there is an argument to be made that while no action lies for the diminution of property values, other actions, such as in nuisance, may lie against a municipality for exercising its land use authority.

However, there are also two points which could be raised in reply:

The first is that the real remedy is to deal with the error, and have it corrected. If this is available, then little actual damage or loss is suffered.

The second reason, however, is that most errors in administering a Bylaw are of minor consequence, and do not result in an actual loss or damage.

For example, a development permit is granted allowing a building to be constructed with less than an appropriate side yard clearance. While the adjacent landowner may be unhappy about this, the question is whether it really reduces the value of the adjacent property.

However, in other jurisdictions, where Bylaws have been used for an improper purpose, substantial damages have been awarded. In certain cases, punitive damages, which are very rare in Canada, have been awarded as well.

9. Conclusion

The greatest legal risk faced by a Municipality and its Development Officer is that a decision will be appealed, or the judicial review of a decision will be sought. In these circumstances, the major impact on the municipality will be:

  • Time and expense of involving its officials in an appeal or judicial proceeding;
  • The legal cost involved in seeking to uphold the decision; and
  • Delay, embarrassment, and the possible loss of development, if the appeal or judicial process should take too long.

Damages have been rarely awarded in Canada where there has been an error made in administering zoning. However, in certain cases, where a zoning bylaw has been used for an improper purpose, damages, and potentially punitive damages, have been awarded.

The key to avoiding the lost resources occasioned by an error in administering the zoning system is to understand and apply the PDA, and the Bylaw.

In each case where a zoning issue comes up for determination, the Development Officer should have recourse to relevant legislation and Bylaws, and should ensure that the procedures adopted, decisions made, and notices sent all comply with the legislation.

Unfortunately, in zoning, unlike in horseshoes and hand grenades, close does not count.

10. Notable Law

There are some prior cases in Saskatchewan which bear some comment.

The first is that of Pevach v. La Ronge4, a decision of the Saskatchewan Court of Appeal. In that case, the opponents of a zoning amendment bylaw challenged it, in part on the basis that the Municipal Council followed the not uncommon practice of holding first and second reading of the bylaw before convening a public hearing on the matter.

This was held to be illegal, and, accordingly, on this basis, and others, the bylaw was struck down. Since that decision, the PDA was enacted, bringing with it clear guidance that the first reading may be held, but that the public hearing is to take place before the second reading.

However, the second issue in Pevach was the ruling by the Court of Appeal that the challenge brought against the bylaw was not valid. There, those opposing the bylaw had sought to have the bylaw be the subject of a plebescite. The Town had refused to hold the plebescite (as the provisions in the MA provide that they apply to decisions made pursuant to that statute (and not to the PDA). The Court of Appeal upheld the Town’s decision in that regard, a decision recently echoed in Olive v. Keys5, which cited Pevach and upheld a similarly decision by a rural municipality.

While there are other cases which clearly contemplate this situation and do not find it illegal, until there is a ruling by the Court of Appeal, there is a risk involved in holding any readings of a zoning bylaw, before the public hearing process.

The second decision of note is that in the case of Kingfisher Inns Ltd. v. Nipawin6, handed down by the Honourable Mr. Justice Gerein, in late August of 1999.

In that circumstance, the Town Council was about to give third and final reading to a rezoning bylaw. In conjunction with the rezoning bylaw, council was to also consider a discretionary use application.

Disaffected parties sought an order prohibiting the Town from holding a public hearing with respect to the rezoning bylaw, giving it third reading, and dealing with the discretionary use application.

The disaffected parties complained that the proceedings underlying the Rezoning Bylaw were taken in bad faith and were illegal.

Ultimately, the chambers judge considered the following issues.

1. It was suggested that there was a lack of openness in the process, that being a sign of bad faith. The judge disagreed.

2. The opponents suggested that the Town was seeking to advance private interests. The judge disagreed.

3. The opponents said that the selling price of the land involved was inadequate but did not present any evidence to this effect. The Judge disagreed.

4. The opponents suggested that the Town had made a commitment to rezone, even before passing the requisite resolutions. The judge disagreed. He indicated that he did not believe that an unconditional commitment had been made by the Town. While Councilors were in favor of the project, they were entitled to be, provided they did not utterly close their minds to any other point of view.

5. Some of the members of Council had a pecuniary interest in the impugned Rezoning Bylaw and did not absent themselves from all consideration of the matter.

It was the last complaint which was fatal.

His Lordship found that, while neither individual participated in the discussion or the reading of the bylaw itself, they had been present and voted on an earlier version of the bylaw.

While his Lordship found that neither had participated in discussions intentionally or dishonestly, he found that the participation of the Councilors in the earlier bylaw “tainted” the process. The second bylaw and all proceedings relating thereto were set aside for “illegality”.

Based on the facts set forth in the decision, it would appear that the remainder of Council was in favor of the proposal. Ultimately, the proposal did proceed.

Accordingly, even if the affected Councilors had removed themselves, it is likely that Council would have passed the bylaw. The decision, therefore, did nothing more than simply extend the rezoning process, and cause additional delay. On the other hand, there would be those who suggest that by revisiting the process, the public need to see a fair and just result was safeguarded.

In the end, the matter was revisited, and the passage of time cured the earlier error.7

11. Contacting a Lawyer on this Subject

For more information on this subject or specific legal advice, contact M. Kim Anderson at (306) 933-1344.

mk.anderson@rslaw.com

1 Hoffman v Regina Beach (Town) (1993), 114 Sask R 226 (Sask QB).

2 Kingfisher Inns Ltd. v. Nipawin, 1999 SKQB 29, 184 Sask R 19.

3 R v Vanguard Hutterian Brethren Inc. (1979), 5 Sask R 376 (Sask DC).

4 Pevach v La Ronge (Town) (1996), 148 Sask R 319 (Sask CA).

5 Olive v Administrator of the Rural Municipality of Keys No. 303, 2020 SKQB 146.

6 Kingfisher Inns Ltd. . Nipawin (Town), 1999 SKQB 29.

Commercial Leases and the Impact of COVID-19

The novel coronavirus (COVID-19) continues to affect the day-to-day lives of millions of Canadians. As a result, businesses continue to face issues regarding cash flow, which in turn forces those businesses into difficult decisions as to which obligations they will pay, and which obligations will need to be deferred.

One of the consequences of these difficult decisions is that commercial landlords are now faced with tenants who either cannot pay their rent, do not wish to pay rent or have abandoned or are contemplating the abandonment of leased property. While COVID-19 gives rise to new business considerations, as will be seen below, the rights of the commercial landlord remain relatively unchanged.

This article, originally posted to our website in May, 2020, was amended on June 15, 2020 to reflect the emergency order issued by the Government of Saskatchewan in relation to the eviction of commercial tenants. This moratorium was issued pursuant to the provisions of The Emergency Planning Act.

It should be noted that the moratorium issued only applies to landlord who were eligible, but declined to apply, for the Canada Emergency Commercial Rent Assistance program (“CECRA”). This moratorium was issued in large part to assist new businesses in reopening during COVID-19.

Your Tenant Cannot (or Will Not) Pay Rent

 

As was the case before COVID-19, where a tenant fails to pay rent in a timely fashion the landlord, who has applied under the CECRA, is able to demand the rent and as permitted under the lease, takes steps to distrain or evict the tenant and take possession of the property. The Saskatchewan Legislature has, at this time, not taken any steps to alter the rights and remedies of the commercial landlord.

Before concluding that the tenant is offside their obligations by way of non-payment of rent, consideration should be given to whether the lease has a force majeure clause and if so, what effect that clause may have on the tenant’s position. For more information on this subject, Marinko Jelovic has prepared an article, Force Majeure and the Doctrine of Frustration – COVID-19, which addresses this issue with more specificity. https://www.rslaw.com/2020/03/18/force-majeure-doctrine-of-frustration-covid-19/

Before deciding on a course of action, a landlord may wish to give consideration to their existing relationship with the tenant and the current economic climate. A tenant who has occupied the same property for an extended period of time or is in the midst of a long-term lease, and who has not voluntarily defaulted on payment may still be better than the alternative. When the time arises for the preventative restrictions imposed by the Government of Saskatchewan to be lifted, prospective new tenants may be a rare commodity. If you consider the business foundation for a long-term tenant to be sound you may prefer having your existing tenant when business resumes, rather looking for a new occupant. Short term pain may be balanced by long term gain.

On the other hand, if the tenant is in default and the history of the landlord-tenant relationship is not happy one, this may be an opportunity to end the relationship, with a view to attracting a more desirable tenant.

Much will turn on the landlord’s view of the value of its relationship with the tenant.

To the contrary, where a landlord has failed or otherwise declined to take part on the CECRA program, the landlord is now prevented from re-entering the property, terminating the lease or exercising the right of distraint. The Government of Saskatchewan has, at this time, limited the remedies available to a commercial landlord who has elected not to participate in CECRA.

Your Tenant Abandons Their Lease

 

In Saskatchewan the legislature has declined to, at this time, amend or enact new legislation that would affect a commercial landlord’s rights. As such, the provisions of The Landlord and Tenant Act continue to apply, as do the provisions of the lease itself.

Under The Landlord and Tenant Act, if the tenant abandons their lease leaving rent unpaid a landlord may exercise its right of distress. In doing so, the landlord is permitted to retain and sell personal property left on the premises by the tenant. However, given the current economic climate a landlord may wish to consider whether or not exercising their right of distress makes financial sense.

While The Landlord and Tenant Act permits the landlord to recover the costs of the seizure and sale of abandoned or seized property, the practical reality is that the property may not be worth the cost and effort of sale. Much will turn on the nature of the tenant’s business and the type of property present in the leased space. As businesses continue to attempt to cut down and reduce overhead costs, depending on the nature of the tenant’s business there may be a reduced, or non-existent, resale market for the goods due to COVID-19. Attempting to seize and sell the property may result in substantial costs being incurred, with little net recovery, if any, toward the unpaid rent.

However, if the decision is to move to terminate, or to accept abandonment, the landlord can proceed in the usual way. The landlord’s rights are largely governed by the lease. Most provide that the landlord may bring action to recover unpaid rent, as well as rent for the remainder of the term of the lease, should a tenant abandon its lease (subject of course to the duty to mitigate and find a new tenant as soon as reasonably possible, though depending on the short and mid-term commercial leasing market it may be of little moment). For more information on the subject, please see the following article on enforcing the landlord’s rights: https://www.rslaw.com/wp-content/uploads/2011/12/1226000394Enforcement-of-Commercial-Leases-A-Practical-Guide.pdf

It should be noted that nothing in the in the June 5 moratorium impacts the landlords rights in the event the tenant has abandon their lease. Similarly, the landlords right remain unaffected if the lease expired on or before June 4, 2020.

Where the lease expires after June 4, 2020, and the landlord has elected not to sign up for or participated in the CECRA

Conclusion

 

As the consequences of COVID-19 continue to be felt in the business community, and with no timeline as to when the government imposed restrictions will be softened or lifted, landlords will continue to face business decisions on how to deal with tenants who do not pay their rent. Consideration must be given to the risk of evicting a tenant and attempting to recover unpaid rent versus the cost and time spent attracting a new tenant. Landlords will know that when the Government of Saskatchewan lifts social distancing restrictions, it may still be several months before new tenants can be found, as the economy slowly recovers from the economic downturn. As such, maintaining strong business relationships during this pandemic may best serve to provide a practical benefit down the road. Where the relationship is not so strong, different considerations may apply, and ending the landlord-tenant relationship may be the best outcome.

For more information, please contact:

 

M Kim Anderson, Q.C.

306.933.1344

Email: mk.anderson@rslaw.com

 

Travis K. Kusch

306.933.1373

Email: t.kusch@rslaw.com

Robertson Stromberg Well-Represented as Best Lawyers

Best Lawyers™ recognizes extraordinary lawyers in private practice through an exhaustive peer-review process. Today, Best Lawyers™, published the 14th Edition of The Best Lawyers in Canada and we are pleased to announce that twelve lawyers from the firm have been honoured by their peers with the designation of Best Lawyer.

Lawyers named to The Best Lawyers in Canada publication were recognized for their professional excellence in their practice areas. In addition, elite individuals are recognized as “Lawyer of the Year” recipients. “Lawyer of the Year” honorees receive this award based on their extremely high overall feedback within specific practice areas and regions. We are particularly pleased to announce that Melvin Gerspacher Q.C. has been recognized as Lawyer of the Year in Tax Law.

Congratulations to the following RS Best Lawyers:

Misty Alexandre in Construction Law

M. Kim Anderson Q.C. in Banking and Finance Law as well as Insolvency and Financial Restructuring Law

Chris Donald Q.C. in Corporate Law

Melvin Gerspacher Q.C. in Tax Law.

Al Haubrich Q.C. in Trusts and Estates

Tiffany Paulsen Q.C. in Family Law

Jennifer Pereira Q.C. in Insurance Law

Les Prosser Q.C. in Corporate Law, Mining Law as well as Natural Resources Law

Reynold Robertson, Q.C. in Education Law

Scott Waters in Banking and Finance Law as well as Corporate Governance Law

Gary Young Q.C. in Corporation and Commercial Litigation as well as Insurance Law

Ken Ziegler Q.C. in Immigration Law

 

 

Benchmark Litigation Canada Lists RS as Recommended Firm in Saskatchewan

Benchmark Litigation Canada has published its guide to the leading litigation teams in the country.

The guide’s results are the culmination of a four-month research period during which time extensive interviews are conducted with litigators and their clients.  The researchers examine casework handled by the firms and seek opinions on litigators practicing within their province or practice area. Using this client and peer-review methodology, Benchmark strives to provide the most accurate and comprehensive coverage of the Canadian litigation market.

Robertson Stromberg is pleased to see that the firm is ranked as a Recommended Firm for the province of Saskatchewan. Lawyers singled out as “local litigation stars” include M. Kim Anderson in the area of Insolvency Law and Gary Young in the areas of Class Action, Commercial, Insurance, and Intellectual Property.   This designation reflects individuals who were recommended consistently as reputable and effective litigators by clients and peers.

Benchmark also lists Jennifer Pereira and Sean Sinclair as “future stars”.  This designation is given to “ones to watch”, lawyers who are rapidly building their reputations in the market.

 

 

Anderson and Steele Present to SUMA Members

Struggling with a complex tax enforcement issue? Want to avoid taking a property?

The Saskatchewan Urban Municipalities Association (SUMA) is offering the webinar How to Make Tax Collection Less Taxing.  Robertson Stromberg’s Kim Anderson, QC, and James Steele will talk about how to collect on those hard cases and options beyond The Tax Enforcement Act.

The webinar will be from 10:00 a.m. – 11:00 a.m. on January 22, 2019 and will include a 15 minute question and answer period.

For more information about SUMA or to register for this webinar, click here.

 

 

 

Lawyers M Kim Anderson