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Canadian property rights weakest among Western countries allowing governments to freeze use of property without compensating landowners

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Release Date: May 10, 2012

VANCOUVER, BC—Canada is far behind Europe when it comes to compensating property owners for government restrictions on private property, concludes a new book published by the Fraser Institute, Canada’s leading public policy think-tank.

"Unlike Europe, where governments of all stripes compensate private property owners when regulation acts as de facto expropriation, governments in Canada can wholly or partly freeze your property through regulation and not offer a dime in compensation," said Mark Milke, Fraser Institute director of Alberta policy research and author of Stealth Confiscation: How Governments Regulate, Freeze, and Devalue Private Property—Without Compensation.

"That’s a major policy failure and a black eye on Canada’s reputation for fairness."

In the book, Milke points out that Canada’s record of non-compensation for a loss of use from regulation sets it apart from other Western countries. A survey of 13 nations found Canada and Australia to be the most restrictive about compensating for regulatory takings. By contrast, Poland, Germany, Sweden, Israel, and the Netherlands provide the broadest compensation rights.

Milke highlights specific cases that provide examples of how Canadian governments freeze and then devalue private property:

  • Alberta, 1976: Bill Nilsson, a farmer with 160 acres near Edmonton, applied to the Ministry of the Environment for permission to build a mobile home park on part of his property. The Alberta government refused him permission and publicly asserted that his land was to be preserved for future use as a greenbelt or parkland. Because he could not develop his property, Nilsson considered selling it to the government; however, the province offered him only $2,500 per acre, compared to a government purchase price of $10,000 per acre for land adjacent to his. Nilsson refused to sell. In court proceedings, it was discovered that the original justification for the denial of the proposed trailer park development was never true: instead, the province wanted Nilsson’s land for an eventual ring road and utility corridor, facts that did not surface until evidence was presented years later. After decades of appeals, the Supreme Court in 2003 upheld a lower court judgment that awarded Nilsson $9.1 million in principal and compound interest, as well as costs. Had the province wanted Nilsson’s land for its stated purpose—a greenbelt or parkland—Nilsson would never obtained full compensation for the government-imposed regulatory loss.
  • B.C., 2000: The City of Vancouver passed a bylaw declaring a 22-kilometre-long corridor of land owned by the Canadian Pacific Railway as a public thoroughfare. CPR had owned and managed the land since 1886. The effect of the bylaw, as the Supreme Court later wrote, “was to freeze the redevelopment potential of the corridor and to confine CPR to uneconomic uses of the land.” The city offered no compensation and also made it clear that it would not purchase the land. Still, the Supreme Court of Canada ruled in the city’s favour.
  • B.C., 2005: The City of Coquitlam widened a local road, causing a nearby creek to encroach upon a 1.5-acre parcel of land owned by Barry and Linda Sheridan. The city declared a seepage ditch (which contained only mud and not flowing water) in the centre of the property to be a fish habitat (making the land subject to provincial and federal jurisdiction) and the entire parcel of land was declared "sterile" thus no development could occur. The Sheridans, who planned to subdivide the land and use the proceeds to fund their retirement, were eventually successful in reversing the city’s declaration but only after they hired their own Qualified Environmental Professional to analyze the land in question at a substantial cost to themselves.
  • Ontario, 2005: The Ontario government created a “greenbelt” around Greater Toronto, freezing 1.8 million acres of land from development but permitting prior usage to continue. Ontario’s wetlands designations go one step further, effectively prohibiting all prior and future usage in affected areas; in addition, a buffer zone of up to 120 metres severely restricts land use around designated wetlands. Tony Walker, head of the Goulbourn Landowners Group in Ottawa, calculated that his 20-hectare plot originally valued at $125,000 would be worth less than $20,000 (an 84 per cent reduction in land value) with a wetland designation.

"Private property owners in Canada, whether they are companies with deep pockets or farmers with few resources, have the odds and governments stacked against them in fights for fair compensation," Milke said.

He recommends that when governments regulate private property for public purposes, individual landowners should be compensated for the whole or partial loss of property. Compensation should occur when any regulatory action causes a decline in property values that exceeds five per cent; this would follow best practices that exist in European countries.

"When governments restrict the use of private property for public use, the public, not individual property holders, should bear the cost of private property," Milke said.

"Germany, Israel, the Netherlands, Poland, and Sweden offer substantial compensation to property owners who are negatively affected by government regulation. Why not Canada?"