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Sale of Municipal
Property
How Land Selling Policies Work
John Mascarin & Jody Johnson
June 11, 2013
Introduction
• Municipalities are large landowners
• Municipal property inventory is comprised of lands
for:
• highways; parks; recreational, cultural &
entertainment facilities; municipal offices; trails;
open spaces; environmental protection; water
and waste water facilities; industrial parks;
airports; transportation facilities, etc.
• Like a natural person, a municipality is entitled to
dispose of its landholdings
2
3
Legislation
• Subsection 270(1) of the Municipal Act, 2001:
A municipality shall adopt and maintain policies
with respect to the following matters:
1. Its sale and other disposition of land.
• Subsection 270(2) of the Municipal Act, 2001:
A local board shall adopt and maintain policies
with respect to the following matters:
1. Its sale and other disposition of land.
History
• previous Municipal Acts had required municipalities
to pass by-laws establishing procedures governing
the sale of land
• before selling any land, municipalities were required
to:
• make a declaration that the land was surplus
• obtain at least one appraisal
• give public notice of the proposed sale
• municipalities were also required to establish and
maintain a public registry listing and describing the
land owned or leased by the municipality
4
Today
• under section 270 of the current Municipal Act,
2001, each municipality is entitled to determine its
own policies and procedures for the sale of land
• policies must be adopted by by-law
• see s. 5(3) of Municipal Act, 2001
• adoption of policies is mandatory
• content of policies is left to the discretion of
individual councils
5
Today
• nothing in Municipal Act, 2001 specifically provides
that the adoption of a policy is a prerequisite for any
municipal action
• despite the removal of restrictive statutory
requirements, many municipalities have re-adopted
their previous surplus land disposal schemes
• not necessarily the best approach
• prior disposal framework was prescriptive and
detailed
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Advantages of Current Scheme
• a municipality can act more quickly when divesting
itself of property
• different types of land can be treated differently
• flexibility in determining the price of land
• all in keeping with the greater autonomy and
independence promised to municipalities under
the Municipal Act, 2001
• less strictures, less prescriptive detail from top-
down
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Developing a Policy
• caution: land dealings must be authorized by by-law
• create a process for identifying property that the
municipality wishes to make available for disposal:
• some municipalities (e.g. Chatham-Kent) have
moved away from a focus on “surplus” lands,
acknowledging that there are many reasons land
is sold by municipalities (e.g. economic growth,
income, job creation, community development,
etc.)
• determine who is responsible for identifying land to
be disposed of
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Developing a Policy
• consider whether there are there any special
legislative or policy provisions applicable to the
land
• determine who should participate in the process of
making recommendations to council
• determine the method by which council will declare
lands to be available for disposal (e.g. resolution
passed at an open meeting / formal by-law)
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Developing a Policy
10
• determine nature and interest of land:
• fee simple interest:
• general market demand or limited market
demand
• easements
• typically regarded as a disposal of surplus
property in that the municipality no longer
enjoys full use of its property interest
Developing a Policy
• determine circumstances or types of land exempt
from requirements of the policy:
• industrial land
• closed highways, road and road allowances
• cemetery plots
• land being 0.3 metres or less in width acquired in
connection with an approval or decision under the
Planning Act
• etc.
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Developing a Policy
• determine if there are any parties that should be
given priority in terms of purchasing the land:
• school boards
• other local boards
• conservation authorities
• Crown
• local agencies
• determine if exclusive notice should be provided to
certain parties
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Developing a Policy
• determine notice requirements including the form
and duration of notice
• potential forms of notice:
• publication in a local newspaper
• publication on the corporation's website
• posting a “for sale” or “for lease” sign on the
land
• publication on professional realty websites
• determine appraisal requirements including the
number of appraisals required
• determine a method for pricing the land
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Developing a Policy
• determine potential methods of sale:
• public auction
• tender process
• direct negotiation with an abutting property
owner
• other direct negotiations
• direct advertising
• listing with a licensed relator
• determine who is responsible for determining what
method of sale should be used in particular
circumstances
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Developing a Policy
• determine specific procedures for each method of
sale including:
• notice requirements
• how to deal with offers to purchase
• setting out the market value of the land
• any commission requirements
• deposit requirements
• reporting requirements
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Developing a Policy
• develop a communication plan to determine
how policies will be communicated to various
stakeholders:
• municipal website
• brochures,
• public notice in newspapers
• develop any reporting requirements.
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Additional Considerations
• local boards also have to adopt and maintain
policies
• clerks can work in co-operation with local boards
• determine whether it is desirable to include a policy
statement outlining the purpose of the policy
• transparency, fair disposal, consistency,
appropriate standards
• determine whether it is desirable to highlight any
municipal priorities
• identification of potential use of property for
affordable housing (City of London)
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Additional Considerations
• identify who is responsible for certain costs:
• legal
• survey
• appraisal
• removal of encumbrances
• relief of easements
• environmental testing and remediation
• demolition
• planning and administration
• due diligence research
• provision that municipality may undertake activities
to increase the value of real property prior to sale
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How To Create a Policy
• questions to ask:
• how much time does it take?
• who should be involved?
• what resources are necessary?
• should public be consulted?
• how much municipal control is desirable?
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Components of a Strategy
• Application:
• “This policy applies to the sale or other disposal of
land by The Corporation of the Municipality of X.”
• Policy Statement:
• “The Municipality will dispose of surplus land in an
open and transparent process to ensure that the
consideration for such disposal is fair, reasonable and
in the best interest of the Municipality.”
• Purpose:
• “The Municipal Act, 2001 requires that the Municipality
adopt and maintain a policy to govern the sale and
other disposition of land. The purpose of this policy is
to set out the principles governing these transactions
and the procedures to be followed.”
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Components of a Strategy
• Definitions:
• “appraisal”, “disposition”, “land”, etc.
• Description:
• “The procedures set out in this policy will ensure that
the disposal of any municipal [surplus] property is
conducted in a consistent and transparent manner and
the policy will achieve this objective.”
• Procedures:
• outline the steps to be taken and who is responsible
• Schedules:
• price of land, real estate commission, etc.
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Enforcement
• what happens if a policy is not followed?
• municipalities do not need to be in specific technical
compliance with “policies”
• under s. 440 of the Municipal Act, 2001, a taxpayer
may seek to enforce a by-law (the self-help remedy)
• could a taxpayer impeach a transaction relating
to the sale of municipal land if not in compliance
with the land disposal policy?
22
Sale of Highways
• previous Municipal Acts set out strict requirements
for municipalities that wished to dispose of closed
highways
• required a by-law to close the highway
• required municipalities to first offer to sell the land
to the owner abutting the land to be sold
• the municipality could only sell the land to
another person when the abutting land owner
failed to purchase the closed highway within
the prescribed time.
• this is no longer required under Municipal
Act, 2001
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Sale of Highways
• by-law to close a private road being used as a
person’s sole means of motor vehicle access to
the highway was not valid unless that person
agreed to the by-law (s. 38 of former Municipal
Act)
• this is no longer required under Municipal Act,
2001
24
Sale of Highways
• current Municipal Act, 2001 still contains additional
provisions regarding the sale of highways (although
less restrictive than former framework)
• municipality required to pass a by-law in order to
close a highway:
Highway closing procedures
34 (1) A by-law permanently closing a highway does not
take effect until a certified copy of the by-law is
registered in the proper land registry office.
• although not explicit, Municipal Act, 2001 arguably
requires municipality to close highway before
selling it
25
Sale of Highways
• Municipal Act, 2001 also requires consent from
federal and provincial governments in certain cases:
Consent
34 (2) A by-law permanently closing a highway shall not be
passed without the consent of the Government of Canada if
the highway,
(a) abuts on land, including land covered by water,
owned by the Crown in right of Canada; or
(b) leads to or abuts on a bridge, wharf, dock, quay or
other work owned by the Crown in right of Canada.
43 A municipality that permanently closes a highway shall
not convey the land forming the highway if it is covered with
water without consent of the Ministry of Natural Resources.
26
Sale of Highways
• Under current Municipal Act, 2001, a by-law
for the sale of land may affect an abutting
landowner’s common light right of access:
Restricting common law right of passage
35 Without limiting sections 9, 10 and 11, a
municipality may pass by-laws removing or
restricting the common law right of passage by
the public over a highway and the common law
right of access to the highway by an owner of
land abutting a highway
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Sale of Highways
• Simek v. Gravenhurst (Town), 2012 ONSC 6314: a road
located on the defendants’ property, which was the
plaintiffs’ only means of access to their properties,
constituted a public highway
• barricades existing on the road were found to offend the
Road Access Act in the absence of a closing order
• court determined that the plaintiff was not entitled to a
conveyance from the Town of Gravenhurst.
• even if the court could direct Town to close the road, the
abutting owners no longer enjoy the “right of first refusal”
under the amended Municipal Act, 2001
• court ordered the removal of the barriers to permit free
and unimpeded access along the road
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Street, Alley, and Walkway Closings
• the Street and Alley Technical Advisory Committee
of the City of Windsor has developed a process for
closing streets, alleys and walkways
• allows individuals to apply to purchase closed
alleys in order to add the land to existing property
29
“Disposition” - Meaning?
• Niagara River Coalition v. Niagara-on-the-Lake (Town),
2010 ONCA 173: court considered (among other issues)
whether a licence agreement between the Town and a jet
boat tour operator constituted disposition of municipal
property under the new Municipal Act, 2001
• court found that the granting of a licence providing non-
exclusive use of municipal property, with both defined
termination and escalating rent provisions, did not
amount to a sale or disposition of land for the purpose of
s. 270
• not an indicia of a “disposition” under any definition
• moreover, a licence is an agreement to enter upon and
occupy land. It is not a transfer of an interest in land
30
“Sale” - Meaning?
• Liberatore v. St. Thomas (City), [1995] O.J. No.
1570 (Gen. Div.): the conveyance by a municipality
of parking lands to a developer for the stated
consideration of $1.00 was held to be a sale of land
within the meaning of the previous Municipal Act,
rather than an illegal gift or donation of land by the
municipality.
• The word "sell" clearly denotes a sale or
transaction having a commercial character. It
must mean an exchange for value and excludes
a clear gift. The balance of the phrase "or
otherwise dispose of the same" allows for flexible
commercial exchanges.
31
“Sale” – Meaning?
• 2015429 Ontario Inc. v. Dynasty Homes (Wasaga
Hills) Ltd., [2006] O.J. No. 2772, the Court of
Appeal also considered the meaning of the word
“sale”:
• may refer to an entire course of dealings
between the municipality and the developer
• according to both its ordinary and usual legal
meaning, the word enjoys a wide ambit unless
the context in which it is used indicates a
contrary intention
32
By-law Requirement
• a decision to sell or transfer municipal land must
be authorized by a by-law
• 2015429 Ontario Inc. v. Dynasty Homes
(Wasaga Hills) Ltd., [2006] O.J. No. 2772 (C.A.)
• Tanner v Brockton (Municipality), 2012 ONSC
6329 (S.C.J.)
• resolution of council may not be sufficient
33
Freedom of Information
• certain information relating to a municipal land sale
may be subject to disclosure to the public under s.
4(1) of the Municipal Freedom of Information and
Protection of Privacy Act
• a draft by-law and the substance of the
deliberations of a closed meeting may be protected
• a report or other correspondence relating to the
disposition of land is not necessarily protected and
may be subject to disclosure
34
Open Meeting Rule
• Municipal Act, 2001 provides an exception to the
“open meeting rule” relating to the sale of municipal
lands
• s. 239(2)(c) of the Municipal Act, 2001 allows for a
meeting (or part of a meeting) of a municipal council
or committee to be closed to the public if the subject
matter being considered is “a proposed or
pending acquisition or disposition of land by the
municipality.”
35
Municipal Bonusing Prohibition
• a municipality is expressly prohibited from providing
“assistance” to various entities under s. 106(1) of the
Municipal Act, 2001
• “assistance” includes “leasing or selling any property
of the municipality at below fair market value”
• prohibition applies to assistance given to a
manufacturing business or other industrial or
commercial enterprise
• prohibition does not apply to an institution or an
individual
• contravention of the bonusing provision could
potentially void a transaction
36
Power to Make Grants
General power to make grants
107 (1) …a municipality may make grants, on such
terms as to security and otherwise as the council
considers appropriate, to any person, group or body,
including a fund, within or outside the boundaries of the
municipality for any purpose that council considers to be
in the interests of the municipality.
Loans, guarantees, etc.
(2) The power to make a grant includes the power,
…
(b) to sell or lease land for nominal consideration or
to make a grant of land.
37
Municipal Capital Facilities
Agreements for municipal capital facilities
110 (1) This section applies to an agreement entered into
by a municipality for the provision of municipal capital
facilities by any person, including another municipality, if
the agreement provides for one or more of the following:
…
2. Assistance as provided for in subsection (3).
(3) …a municipality may provide financial or other
assistance at less than fair market value or at no cost to
any person who has entered into an agreement to provide
facilities under this section and such assistance may
include,
(b) giving, lending, leasing or selling property.
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John Mascarin
Partner
T 1.416.865.7721
Jody Johnson
Associate
T 1.416.865.3438
~ Fin ~