Forever Means 40 Years: Court Limits Perpetual Restrictive Covenants in Ontario Real Estate

Restrictive covenants registered on title to real property in Ontario that are stated to survive indefinitely will no longer survive forever. In a recent precedent-setting decision, Andrews v. Rago (Andrews), the Ontario Superior Court of Justice stated that restrictive covenants registered on title to real property in Ontario stated to survive indefinitely are deemed to have expired 40 years after their registration, in the same manner as a restrictive covenant similarly registered with no fixed expiry date.

What began as a neighbourly dispute has led to a decision that has significant and immediate implications for all landowners with registered restrictive covenants that are intended to exist in perpetuity.

Buyers and sellers of real property with existing registered restrictive covenants should exercise caution if such covenants are stated to survive indefinitely, as such covenants will expire or may already have expired unless updated to state a specific expiry date in the future. Those intending to register a new restrictive covenant should fix a defined length of time to avoid deemed expiry.

BACKGROUND

The applicant and respondents in Andrews owned adjoining parcels of land with municipal addresses No. 99 and No. 97, respectively. In 1966, in connection with a rezoning application, the respondents’ predecessor in title at No. 97 was required to convey a three-foot strip of land to the applicant’s predecessor in title at No. 99, subject to restrictive covenants in favour of No. 97. These covenants restricted the owner of No. 99 from altering or removing any structures or vegetation on the three-foot strip, reserved a right-of-way in favour of the owners of No. 97 and prohibited the owners of No. 99 from interfering with the right-of-way by blocking or otherwise impeding it. The conveyance of the three-foot strip was a grant of fee simple title in the land to “[the then-owner of No. 99], its heirs and assigns to and for its sole and only use forever” (emphasis added). In 1967, this parcel was registered under the Land Titles Act with explicit references to the right-of-way and the restrictive covenants.

In subsequent years, a neighbourly dispute developed between the applicant and the respondents. In 2009 or 2010, the applicant at No. 99 performed work that disturbed the existing concrete path on the land between No. 99 and 97. In response to this disturbance, the respondents at No. 97 installed a concrete curb and walkway along the three-foot strip covering the part of the applicant’s property at No. 99 referenced in the covenants and the right-of-way. The applicant objected to the respondents treating the three-foot strip conveyed to the owner of No. 99 in 1967 as the property of the respondents at No. 97. The applicant did not object to the existence of the right-of-way; however, she took the position that the restrictive covenants registered in 1967 had expired and that the respondents’ installations on the three-foot strip constituted trespass on her land at No. 99.

In 2018, the applicant submitted an application to the land registrar to delete the restrictive covenants from title to her property at No. 99 pursuant to Section 119(9) of the Land Titles Act, which deems a restrictive covenant to have expired 40 years after it is registered “if no period or date was fixed for its expiry.” Since over 40 years had passed since the initial registration of the restrictive covenants in 1967, the registrar approved the application and deleted the covenants from title to No. 99.

After the restrictive covenants were deleted from title to No. 99, the applicant sought an order from the Superior Court of Justice for the respondents at No. 97 to remove the encroachments from the applicant’s property at No. 99 and to clarify that the only remaining encumbrance on the applicant’s property at No. 99 was the right-of-way for ingress and egress only. The respondents’ reply sought an order for the land registrar to restore the restrictive covenants to the registry on No. 99, arguing that they had been improperly deleted. The respondents’ position was that the inclusion of the word “forever” in the original conveyance was sufficient to specify a period of time and thereby avoid the application of section 119(9) of the Land Titles Act.

DECISION

The present case was the first time an Ontario court has been required to interpret section 119(9) of the Land Titles Act. The court’s discussion focused on the meaning of the term “expiry” in section 119(9), ultimately deciding that “expiry” connotes the end of a right or obligation by the passage of time, resulting in section 119(9) properly applying if no fixed passage of time was expressed in the conveyance in order to determine an expiry date for the covenant, which was the situation for the restrictive covenants in this case. The court rejected the respondents’ assertion that the use of the term “forever” in the original conveyance represented an applicable period of time for the purposes of section 119(9), instead determining that the use of the term “forever” contemplated perpetual existence, which could not, by definition, provide an expiry date for the covenants. As a result, the covenants were deemed to have expired in 2006 by operation of section 119(9), 40 years after the original conveyance. The court granted the application, ordering the respondents to remove all encroachments on the applicant’s property at No. 99 and confirming that the applicant’s property was burdened solely by a right-of-way for ingress and egress in favour of the respondents over the originally conveyed three-foot strip.

IMPLICATIONS

This decision has important and immediate practical consequences for any party benefiting from, or bound by, a registered condition, restriction, or covenant in Ontario that does not have a fixed time period set for its expiry, including provisions that are intended to exist permanently using terms such as “perpetual”, “forever” or “indefinite”. Provisions using language that does not set a fixed date for expiry can now be presumed to have expired if they have been registered on title for over 40 years. Landowners contemplating new registration of restrictive covenants, as well as parties to a transaction involving land with registered restrictive covenants, should be aware of the time limitations imposed by this decision.

A possible workaround for parties seeking to impose a long-term covenant would be to set a defined period for the existence of the covenant at the time of the initial registration. Setting even a distant expiry date would avoid the direct application of section 119(9). The court in Andrews did not discuss or place any restrictions on the validity of setting long, fixed-term periods for a registered restrictive covenant. Furthermore, we are not aware of any case law in Ontario invalidating a long, fixed-term (i.e., 999-year) restrictive covenant based solely on the length of time set for its existence, although we are also not aware of any case law in Ontario validating the term of a long, fixed-term restrictive covenant.

However, courts have historically been willing to invalidate certain restrictive covenants for statutory and/or public policy reasons, which would potentially apply to a long, fixed-term restrictive covenant. Section 61 of the Conveyancing and Law of Property Act (Ontario) allows for the modification or discharge of a restrictive covenant where it is spent, or so unsuitable as to be of no value, and under circumstances when its assertion would be clearly vexatious. This suggests that a long, fixed-term restrictive covenant may be susceptible to being ordered to be discharged by a court at a future date if, for example, land use has changed to an extent that the registered covenant no longer serves its original purpose. Courts also retain a broad discretion to invalidate covenants and other conditions for public policy reasons to the extent that they act as an impermissible restraint on trade, and section 22 of the Conveyancing and Law of Property Act invalidates covenants made after March 24, 1950 that restrict the use of land based on race, creed, colour, nationality, ancestry, or place of origin.

CONCLUSION

Landowners seeking to control the use of land in perpetuity using restrictive covenants may find that courts are not receptive to their intent. A party desiring to impose a restrictive covenant for longer than 40 years would be well-advised to fix a specific time for its expiry and to bear in mind the possibility that setting a long, fixed-term restrictive covenant with no nexus between the time period for the covenant and the purpose of the covenant may be susceptible to future court challenges, although we are not aware of any such challenges having been successful to date.

In addition, parties conducting due diligence on real property should be aware of the deemed 40-year expiry period for restrictive covenants granted in perpetuity and may consider seeking to deregister or re-register existing covenants granted in perpetuity if more than 40 years have passed since the initial registration, depending on whether the property in question benefits from, or is burdened by, the historical restrictive covenant.

For further information, please contact:

Patrick Gordon              416-863-3276

or any other member of our Commercial Real Estate group.