Real estate developers and property owners looking to take advantage of the BC government’s push to provide more housing within single-family neighbourhoods may face an unexpected hurdle in the form of old property covenants. These covenants prohibit replacing single-family homes with multi-unit dwellings, despite provincial legislation intended to allow more smaller-scale, multi-unit housing on these properties. Most of the restrictions were put in place years ago, but without an expiry date or clear way to remove them, they may cause an unintended complication for property owners and stall redevelopment of these properties.
In an effort to promote the creation of more housing density in traditional single-family home neighbourhoods, the BC Legislature has passed several pieces of legislation, such as the Housing Statutes (Residential Development) Amendment Act (the “Housing Statutes Amendment”), that change zoning bylaws and other related rules in communities. The Housing Statutes Amendment amended the Local Government Act to require local governments to update their bylaws by June 30, 2024, to accommodate small-scale, multi-unit housing, including secondary suites in single-family homes, detached units like garden suites or laneway homes, townhomes, triplexes, or other house-plexes. The goal of the legislation is to offer housing options that are more affordable than single-family dwellings, but still compatible in scale and form within established single-family neighbourhoods.
However, under the Land Title Act (“LTA”), covenants or statutory building schemes may be registered against the title of a property that restrict the use of the property to one dwelling unit. Specifically, restrictions imposed by statutory building schemes run with the land and bind future owners of the property. The Ministry of Housing has provided guidance on the conflict between the Housing Statutes Amendment and the LTA. Provided the charge is valid, an existing statutory building scheme registered on title will prevail over the unit densities prescribed through zoning updates made in accordance with the Housing Statutes Amendment. This scenario does not prevent a local government from zoning land subject to a statutory building scheme for a higher density, but the land owner will still be bound to uphold the terms of that building scheme.
The Ministry of Housing has also advised that local governments should not pursue new covenants or statutory building schemes that would prevent redevelopment under the new legislation, unless the purpose of the charge is for health, safety, or the protection of the natural environment.
What happens next?
It is unknown how many properties may be subject to these restrictions, but there may be thousands across BC. The Land Title Office cannot determine which building schemes or covenants restrict the use of the land in this manner without reviewing each individual instrument. If the building schemes do not offer a way to remove the restrictions, property owners must petition the BC Supreme Court for an order for the Land Title Office to remove the building scheme, pursuant to Section 35 of the Property Law Act.
A property owner in Burnaby recently filed a petition in the BC Supreme Court (Pon v. City of Burnaby) for an order to cancel a statutory building scheme (the “SBS”) that limits the property (the “Burnaby Property”) to a single-family residence without permission from the original construction company, which no longer exists. The SBS is also registered on the land titles of 18 surrounding properties.
There is a prospective buyer of the Burnaby Property, who intends to redevelop it into a building with four to six homes, but the purchase and sale is conditional on obtaining the court order to cancel the SBS. The petition argues that the charge is antiquated and prevents the Burnaby Property from being fully utilized to provide housing in neighbourhoods where the needs of residents have changed since these types of building schemes were put in place.
The Court must balance the requirements of the building scheme with the petition, as well as the interests of the other property owners who may wish to keep it in place. On October 29, 2024, the Court granted an order cancelling the SBS.
Previously, and on a related note, the Province addressed discriminatory covenants by passing legislation to render them universally void and unenforceable. Section 222 of the LTA states that any such covenant is of no effect and provides a mechanism for the registrar to cancel such a covenant.
