Real Estate Law Blog

The British Columbia Supreme Court’s recent decision in Atco Lumber Ltd. v. Kootenay Boundary (Regional District) has raised questions about the validity of statutory rights of way (SRWs) that aim to impose positive obligations on property owners.  The Atco decision is particularly important to municipalities, public utilities and other entities that regularly rely on the benefit of SRWs in order to operate their undertakings.

Overview

An SRW is a right in the nature of an easement that is available to certain authorized entities pursuant to the Land Title Act (LTA).  SRWs are generally used by government agencies to permit access over private lands for the purposes of facilitating the construction and/or maintenance of public works.

In this decision, the Court considered the legal principles underpinning SRWs in the context of a proposed expropriation by the Regional District.  Specifically, the Regional District sought to expropriate 2 separate SRWs over portions of Atco’s lands for the following purposes:

(1)               for the operation and maintenance of an existing water utility pipeline; and

(2)               for access and egress over an existing private access road.

Only the access road SRW was at issue in this case. Atco argued amongst other things, that the Regional District’s expropriation of the access road SRW was not valid, and sought to have the expropriation set aside on the basis that, the agreement establishing the SRW imposed impermissible obligations on Atco as a property owner.

Common Law Requirements

The Court found that in order for a valid SRW to be created it must comply with the common law rules relating to easements, except for the rule requiring that there be both a dominant tenement and servient tenement, which is not applicable to SRWs pursuant to the LTA.

One of the established common law rules relating to easements is that they must be negative in nature, meaning that an easement must not impose an obligation on the owner of the servient tenement to do anything (rather than refraining from doing something).  Atco’s argument was that the Regional District’s form of SRW Agreement obligated the property owner to undertake certain positive actions, and was therefore invalid.

Ruling of the Supreme Court

After examining the applicable SRW agreement, the Court held that the Regional District’s access road SRW was invalid because it attempted to impose the following terms and conditions:

(1)               requiring Atco to indemnify the Regional District from any and all causes of action arising out of any act by Atco on the access road and any breach by Atco of any provisions of the SRW agreement;

(2)               requiring Atco to pay as additional property taxes any amount incurred by the Regional District to correct a default of the SRW Agreement by Atco;

(3)               prohibiting Atco from obstructing the access road whatsoever;

(4)               requiring Atco to execute all other required documents and agreements relating to the SRW; and

(5)               giving the Regional District the right, but not the obligation, to improve and maintain the access road.

The above clauses in the SRW agreement were all found to impose positive obligations on Atco, either on their own or in combination with other clauses.   On that basis, the Court concluded that the Regional District’s access road SRW was invalid and had the expropriation set aside.

Analysis and Recommendation

While some of the impugned clauses in the Regional District’s SRW agreement were plainly positive covenants, such as the obligation to indemnify the Regional District, others were less clearly positive in nature.  Take for instance the proviso in the SRW agreement that Atco must not obstruct the access road.  On its face this is a negative obligation, but the Court held that it was a positive covenant because it would require Atco to remove or leave open an existing gate on the road, and therefore take a positive step.

In light of the Court’s broad characterization of what constitutes a positive obligation for the purposes of an SRW, we suggest that all entities relying on SRWs review their standard form of agreement to determine if potentially problematic positive covenants are included.  If so, then legal advice should be obtained to evaluate the available solutions and alternatives to ensure that the objectives of a given SRW are achieved.