Phased Development Agreements – The Land Use Contract Returns?
Bill 11, the Community Services Statues Amendment Act 2007, has introduced what may prove to be the most significant land use and planning law tool for development projects in British Columbia in over a decade – the "phased development agreement" – by adding new sections 905.1 to 905.5 and subsection (8.1) of section 911 of the Local Government Act (LGA).

At this point, we can only speculate about the reasons for this initiative, but strongly suspect that in large part the phased development agreement is the legislature's response to

1.	the legal uncertainties surrounding amenity zoning in British Columbia, particularly in light of the Supreme Court of Canada's decision in PNI v. City of Victoria, and
2.	the development community's desire for greater certainty to protect long term investments, as the makeup and direction of councils change from election to election.

Some of the features of this new planning and development tool recall the land use contract regime of the 1970s, but there are some significant differences.

What is a Phased Development Agreement?
Essentially, the proposed legislation establishes a framework whereby an owner of land and a local government may enter into a comprehensive development agreement concerning, among other things:

• the inclusion of specific features in the development of the owner's land
• the provision of amenities
• the phasing and timing of the development, and of other matters covered by the agreement

"Downzoning Free" Period
The most significant aspect of the legislation is that the agreement must specify certain provisions of a zoning bylaw, defined as “specified zoning bylaw provisions”. These provisions will remain applicable to the development while the agreement is in effect, unless the owner consents in writing to change them, despite zoning bylaw amendments or repeal.

The intention appears to be to provide local governments with the flexibility to negotiate, on a site specific basis, for amenities and other development features outside of the somewhat limited density bonus provisions of s. 904 of the LGA. At the same time, the legislation addresses the development community's legitimate concern that, having provided amenities and other benefits to the community in conjunction with a development application, their development rights could be taken away by a future council's exercise of its legislative discretion to downzone the land.

Of course, this scenario was at the heart of both of the Supreme Court of Canada decisions in PNI v. Victoria, from which two important principles emerged:

1.	In the absence of express statutory authority, a municipal council's discretion to downzone land cannot be fettered by agreement with a developer (PNI No. 1).
2.	If a developer has provided works, services or community amenities in excess of the amenities a local government is entitled to require by statute, and then loses development rights as a result of downzoning, the developer may have a claim against the local government for unjust enrichment, and may therefore be able to recover the cost of the "excess services" it has provided (PNI No. 2).

The phased development agreement seems designed to strike some form of balance by providing a "downzoning free" period during which developers may crystallize their development rights without fear of downzoning.

Exceptions
There are a few statutory exceptions to the "downsizing free period". Zoning changes which are made to enable the local government to comply with an enactment of BC or Canada, or to comply with the order of a court or arbitrator, or changes that are necessary to address hazardous conditions the local government was not aware of when it entered into the agreement, will all apply even where the developer refuses to agree to their application.

Other Key Features
The phased development agreement may provide for a number of other matters. These may include, but are not limited to, the phasing and timing of the development, registration of restrictive covenants, and provisions for minor amendments, dispute resolution, and early termination.

The proposed legislation does not define what a "phased development" is. Presumably this is intentional, so as to provide some flexibility. Arguably, any development that takes time to build out (and that could be virtually any development) could be the subject of a phased development agreement.

The term of a phased development agreement is limited to ten years or, with the approval of the Inspector of Municipalities, up to twenty years. The agreement may be renewed or extended, as long as the renewal or extension would not have the effect of extending the agreement beyond the maximum term permitted by statute. The agreement may be assigned with the local government's consent, or the agreement itself may define the person or classes of persons to whom the agreement may be assigned.

The agreement must be authorized by bylaw and a public hearing must be held before the bylaw is adopted. The agreement may be amended by resolution of Council, and the agreement of the owner, if it is a "minor amendment" as defined by the agreement.

Certain key provisions of the agreement must not be dealt with as minor amendments, and must be authorized by bylaw. These provisions include a “specified zoning bylaw provision” that is protected from changes while the agreement is in effect (unless the developer agrees to the changes in writing) and the agreement's term and its renewal.

The public hearing requirement applies to a bylaw authorizing an amendment to the agreement.

Development permit provisions to vary a specified zoning bylaw provision that regulates the siting, size or dimensions of a building or use under subsection 903(1)(c)(iii) of the LGAdo not apply without the developer's written agreement. There is one exception: where land is designated under subsections 919.1(1)(a) to (c) of the LGA, namely areas designated as development permit areas for protection of the natural environment, protection of development from hazardous conditions and protection of farming.

Not Quite a Land Use Contract
There are some obvious differences between the phased development agreement and the former land use contract system. The phased development agreement, unlike a land use contract, is not intended as a tool to override or vary existing zoning regulations. It protects development rights, in that it provides the basis for contracts that will prevent a local government from changing the specified zoning bylaw provisions of land for a fixed period of time. Also in contrast to the land use contract regime, the zoning bylaw need not designate development areas for the purpose of these agreements. Indeed, this new planning tool appears flexible enough to be used on a site-by-site or ad hoc basis.

An Upside for Local Government
Even though the primary intent of the legislation appears to be to preserve development rights, the phased development agreement offers some advantages to local governments.

The decision in PNI v. Victoria (No. 2) introduced an additional element of uncertainty in relation to amenity agreements, particularly the prospect of claims for unjust enrichment where amenities are provided in excess of statutory requirements. The existing density bonus scheme under section 904 of the LGA has its limitations. It does not provide a sufficient framework for amenity agreements where a bona fide density bonus scheme is not included as part of the zoning bylaw. Also, it may not be entirely suitable for site specific development initiatives. In fact, the legal basis for amenity agreements in British Columbia, outside of the limited statutory framework of section 904, has been the subject of some uncertainty.

To date, in order to secure amenities to mitigate the less desirable aspects of certain development proposals, or to secure the promises developers make, some local governments have tried to make the best of the density bonusing provisions of the legislation. Others have required, or received, section 219 Land Title Act restrictive covenants in connection with rezoning applications. Others enter into "Master Development Agreements". Each approach has its benefits and challenges.

The phased development agreement gives explicit authority for this type of arrangement. It may therefore prove to be a planning and development tool that is as beneficial to local governments as it may be to developers, in that it provides much needed certainty for both sides.

Although this tool may have been intended for "large" development projects, phased development agreements may be adaptable to "smaller" projects, too.

Dealing with the Potential Downside
An important cautionary note: the insertion into Part 26 of the LGA of explicit authority for phased development agreements may be used to argue that other, non-statutory approaches currently being used are unlawful since an implied authority for these other approaches cannot be relied upon where an explicit power to enter into phased development agreements exists.

Bill 11 has been given 3rd reading by the Legislature and has received Royal Assent. It will be brought into force at a later date by regulation. Therefore, consideration should be given by local governments to take advantage of this new tool, after Bill 11 comes into force, to ensure that the potential drawbacks of other approaches are avoided for future rezonings, covenants or development agreements.

Peter Johnson and Lui Carvello, MCIP
Spring 2007

This article was published in Spring 2007 and may be superseded by changes in the law at a later date. It is for general information only. Specific legal advice should be obtained from a qualified lawyer.