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When Can Redistricting End Up Costing the Municipality? A Look at Three Sisters Mountain Village Properties Ltd. v. Canmore (Town)

By: John Gescher, Lawyer; and Curtis Auch, Lawyer

Can landowners demand compensation from municipalities as a consequence of an amendment to the land use bylaw? Generally the answer is no, but a recent decision of the Court of King’s Bench reminds us that there is some nuance to that issue.

In general, municipalities are protected by sections 529 and 621 of the Municipal Government Act, which state as follows:

Exercise of discretion
529   A municipality that has the discretion to do something is not liable for deciding not to do that thing in good faith or for not doing that thing.

…

Compensation
621(1)  Except as provided in this Part and in section 28 of the Historical Resources Act, nothing in this Part or the regulations or bylaws under this Part gives a person a right to compensation.

 (2)  Subsection (1) applies only to this Part and does not create, extinguish or affect rights created, extinguished or affected by the rest of this Act.

The Courts have applied these provisions to prevent claims for compensation as a result of land use bylaw changes or development approvals on a neighbouring parcel. Generally, so long as a municipality acts in good faith with respect to its planning decisions, a landowner cannot require payment from a municipality simply because a particular planning decision limited the available uses for their property or resulted in a decrease in their property’s value. The rationale for this lack of compensation is that a municipality will make various planning decisions, in the public interest, and should not be exposed to liability when doing so.

Consider the following: in any land use bylaw repeal and replacement, there will be landowners whose lands increase in value, and those whose lands decrease in value.  Nevertheless, this does not mean that the municipality has been negligent or engaged in wrongful conduct. As the Court of Appeal noted in the 2015 case of RVB Managements Ltd. v. Rocky Mountain House, in reference to a lower court decision it upheld:

Mindful of the statutory defences in ss. 529 and 621 of the MGA, the trial judge recognized that immunity is provided when an act is undertaken in good faith in the intended exercise or in the exercise of a power under the legislation. She took into account that a person is not entitled to compensation except as provided for under the planning and development provisions of the MGA pursuant to s. 621. She was of the view that these provisions codify the common law principle “that government bodies, like municipalities, are protected from liability for discretionary decisions made in good faith.”[1]

However, the Court of King’s Bench has recently issued a decision that will be of significant interest to Alberta municipalities, as it addresses a section of the Municipal Government Act that provides an exception to this principle – section 644. The case is Three Sisters Mountain Village Properties Ltd. v. Canmore (Town), 2022 ABQB 511 (“Three Sisters”), and deals with whether a municipality must acquire lands districted (in the land use bylaw) for public park purposes. It is the only Alberta court decision since the 1984 case of Hartel Holdings to consider section 644 of the Municipal Government Act in significant detail.

Section 644 of the MGA, while not necessarily a section that comes up regularly for municipalities, is an important section to be aware of. It provides as follows:

Acquisition of land designated for public use

644(1)  If land is designated under a land use bylaw for use or intended use as a municipal public building, school facility, park or recreation facility and the municipality does not own the land, the municipality must within 6 months from the date the land is designated do one of the following:

(a) acquire the land or require the land to be provided as reserve land;

(b) commence proceedings to acquire the land or to require the land to be provided as reserve land and then acquire that land within a reasonable time;

(c) amend the land use bylaw to designate the land for another use or intended use.

 (2) Subsection (1) does not apply if the Crown in right of Canada, the Crown in right of Alberta, an irrigation district, a board of a drainage district or a local authority, within 6 months from the date the land is designated under that subsection,

(a) acquires that land, or

(b) commences proceedings to acquire that land or requires that land to be provided as reserve land and then acquires it within a reasonable time.

 (3) Subsection (1) does not apply to land designated by the municipality as conservation reserve.

Generally, what this means is that if, under a land use bylaw, a municipality designates land that it does not own as intended for use as a municipal public building, school facility, park, or recreation facility, then the municipality has a time-limited choice to make: either acquire the land (by purchase or expropriation) or redistrict it to allow for other viable uses. The apparent goal of the section is to place limits on the extent to which a municipality can require private land to be used for public interests – at a certain point, the municipality is required to actually acquire the land and pay the landowner for it.

Before Three Sisters, all we had to go on as to the scope of section 644 was the case of Hartel Holdings Co. Ltd. v. City of Calgary, [1984] 1 SCR 337. In that case, the Supreme Court of Canada considered a predecessor provision, section 70 of the Planning Act, which had substantially identical wording to the modern section 644 of the MGA. The Supreme Court held that the section did not apply when the City of Calgary adopted a statutory plan that designated a particular property as land for a park (the statutory plan was call the general municipal plan, which is now called a municipal development plan).  Merely specifying this in the statutory plan was not enough to trigger the obligation to acquire the land, as the designation was not set out in the land use bylaw itself (which classified the land as agricultural, and still allowed for a number of private uses).

In Three Sisters, the situation was quite different than in Hartel Holdings. Under its land use bylaw, the municipality designated a particular area of privately owned land as “Natural Park District”. This District provided for five permitted uses – open space, trail, sign, wildlife habitat patch, and wildlife corridor – and one discretionary use – accessory building. The owner, relying on section 644 of the MGA, applied to the Court of King’s Bench for an order of mandamus, requiring the municipality to either acquire the property or designate it for a different use.

The Court held that, unlike in Hartel Holdings, section 644 was triggered in this case.

The municipality argued that the land at issue had not been designated as a “park” within the meaning of section 644. The Court disagreed, holding that the specified permitted uses of “open space, trail, sign, wildlife habitat patch, wildlife corridor” were sufficient to signify an intention for use as a park, particularly given the district name “Natural Park District”.

The municipality also argued that, since only an area within the land – not the entire parcel – was designated as “Natural Park District”, section 644 should not apply. The Court disagreed, noting that section 644 only describes “land” rather than “a parcel”. In the Court’s view, the fact that a parcel has split zoning does not mean that section 644 cannot apply to the relevant portion of the parcel.

Having dismissed these arguments, the Court determined that by designating the area of land as Natural Park District, the municipality had limited that area’s use to that of a park which must remain mainly in a natural condition, and accessible to the public for recreation. In other words, the owner had been required to use its private land only for the purposes of a public park, bringing the situation squarely within the scope of what section 644 was intended to address.

A number of important lessons arise from this case, including:

• Municipalities should be wary when amending its land use bylaw so as to limit the possible uses of private land for public purposes, as doing so can potentially trigger section 644 and the obligation to either acquire the land or revert the zoning of the land. Because of these and other potential issues that can arise, it is a good idea to obtain legal advice before adopting a new land use bylaw or amending an existing one.
• To reduce the likelihood of triggering section 644, municipalities should ensure that viable private uses are still listed as permitted or discretionary uses in the applicable district. It was significant in Three Sisters that the only permitted uses related to the public park (and the only discretionary use was an accessory building), making the situation a fairly obvious infringement of the landowner’s rights as a private owner. Had a number of private uses also been specified, as in Hartel Holdings, such as for a golf course or a private campground, this may have helped the municipality’s case.
• In applying section 644 of the Municipal Government Act, the Court will examine different areas of land within a parcel that have different land use designations – it is not obligated to consider the whole parcel together. If one part of a parcel is districted for the purposes of a park and triggers section 644, the fact that the remainder of the parcel has a different zoning that allows for private uses will not assist the municipality.

[1] 2015 ABCA 188 at para 11.