Subdivision Requirements And The Enforcement Of Long Term Leases

Section 73(1) of the Land Title Act provides that in order to lease a part of a parcel of land for a term exceeding three years, the land to be leased must be subdivided in compliance with the requirements of Part 7 of the Act.

In a 1996 decision (International Paper Industries Ltd. v Top Line Industries Inc.) the British Columbia Court of Appeal ruled that because of this statutory provision, a lease of a part of a parcel of land for a term in excess of three years was void and unenforceable, even between the original parties to the lease, unless the subdivision requirements of the Land Title Act were complied with. In rendering that decision, the Court noted that one of the fundamental purposes behind the subdivision requirements of the Land Title Act was to ensure that municipal authorities maintained their control over subdivision, as a means of enforcing zoning and land development regulations, as well as ensuring the protection of the public interest in subdivision matters.

It should be noted that in the Top Line case, the parties had prepared their own lease and were unaware of the subdivision requirements of the Land Title Act.

Over ten years later, the Legislature has responded to the Top Line decision by adding the following section 73.1 to the Land Title Act:

	73.1	(1)	A lease or an agreement for lease of a part of a parcel of land is not unenforceable between the parties to the lease or agreement for lease by reason only that:
			(a)	the lease or agreement for lease does not comply with this Part, or
			(b)	an application for the registration of the lease or agreement for lease may be refused or rejected.
			(2)	This section does not apply to an airport lease, as defined in section 41 of the Municipalities Enabling and Validating Act (No. 2).

Property owners should not view section 73.1 as an invitation to deliberately avoid the subdivision requirements of the Land Title Act. Section 73(1) continues to prohibit the subdivision of land into smaller parcels for the purpose of leasing it, or agreeing to lease it, for life or for a term exceeding three years, except in accordance with Part 7 of the Land Title Act. Property owners who enter into such lease arrangements without following the subdivision requirements of the Land Title Act may find themselves in violation of local government zoning regulations (regulations regarding minimum parcel size, as one example), and as a further result may be unable to obtain other forms of local government approvals, such as building permits.

Under the Land Title Act, the failure to comply with Part 7 subdivision requirements does not give rise to an “offence” that is subject to prosecution. After the Top Line decision was rendered, the significant consequence for parties that failed to follow the subdivision requirements of the Land Title Act was that their lease or agreement to lease was unenforceable. Now, section 73.1 of the Land Title Act seems to avoid that consequence.

However, the integrity of the land title system, and its relationship with local government land use regulations, continues to depend on the subdivision requirements of the Land Title Act being followed in a consistent manner. It remains to be seen what type of remedy the courts will grant to protect the interests of parties who have not complied with the subdivision requirements of the legislation, especially if the lease that the court is asked to enforce runs afoul of local government subdivision or land use regulations.

In summary, section 73.1 is a welcome amendment to the Land Title Act, as it allows a party to a lease that does not comply with the subdivision requirements of the legislation to seek a remedy. However, it should not be seen as an invitation to knowingly disregard those requirements. Landowners and tenants who desire certainty should continue to comply with the subdivision requirements of Part 7.

Peter Johnson

This article was published in Winter 2007/2008 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.