Expropriation is a process through which the government or other public bodies have the ability to acquire land that is privately owned without the permission of the property owner. Expropriation takes place when the government requires private land for public purposes, such as construction or expansion of roadways, transit projects, or improvements to infrastructure and utilities.

Government agencies will often try to acquire land required for public projects by way of a purchase and sale agreement that is negotiated with landowners. This can provide a speedy, cost-effective way for public bodies to obtain the land they need. At the same time, owners may be able to quickly resolve their compensation entitlements through amicable negotiations. At this stage, however, landowners are under no obligation to reach an agreement to sell their land to the public agency. Negotiated transactions are entirely voluntary. If a government wants to acquire land without the landowner’s consent, it must do so in accordance with the Expropriations Act. The Expropriations Act sets out the rights of a landowner to compensation when property is acquired involuntarily. It is intended to ensure that the rights of private property owners are protected and that they are afforded full and fair compensation when their property is expropriated. A copy of the Expropriations Act is available at Ontario’s e-Laws website.

While landowners might be informed in advance that their property will be expropriated, the formal process of expropriation, according to the Expropriations Act, does not begin until the landowner receives a Notice of Application for Approval to Expropriate. Once this Notice has been delivered to the landowner, rights and obligations exist for both the government and the landowner under the Expropriations Act. The Notice of Application for Approval to Expropriate is the first formal step government takes to get permission and approval to carry out a formal expropriation. Before this approval can be given, certain requirements under the Expropriations Act have to be completed.

This Notice formally brings both the landowner and the public agency under the authority of the Expropriations Act. It means that an application has been made by a public body to expropriate all or a portion of private property. When owners are given this notice they have the right to request a Hearing of Necessity at which an Inquiry Officer hears evidence and determines if the expropriation is fair, sound and reasonably necessary to achieve the objectives of the expropriating authority.

Upon receiving a Notice of Application, a landowner usually has the option to request a Hearing of Necessity, which requires the “expropriating authority” to demonstrate that the proposed expropriation is “fair, sound and reasonably necessary” to advance the proposed project. The hearing is conducted by an Inquiry Officer, who is appointed by the government and issues a report to the “approving authority” as to whether the proposed expropriation is “fair, sound and reasonably necessary”. This report is a recommendation and is not binding on the “approving authority.” Once the “approving authority” has considered the report of the inquiry officer, or if no Hearing of Necessity is requested, the “approving authority” will issue a decision to approve or deny the Application for Approval of Expropriation, and may also provide its reasons for doing so. Once the “expropriating authority” has obtained approval to expropriate, it may take ownership of the land in question by filing a Plan of Expropriation on the property’s title. The landowner must be notified that a Plan of Expropriation has been filed within thirty days of the filing (this is a “Notice of Expropriation”). The landowner is entitled to receive an offer of compensation within ninety days of a Plan of Expropriation being filed. The “expropriating authority” may require vacant possession of the expropriated property within ninety days after serving the Notice of Expropriation. A flow chart showing the expropriation process and the timing under this process can be found here. The procedural requirements under this chart are governed by the Expropriations Act.

The avenues through which an expropriation can be challenged are limited. The Inquiry Officer’s report following a Hearing of Necessity, as described above, is not binding on the “approving authority”. Even if the expropriation is determined not to be “fair, sound and reasonably necessary”, it still may be approved. A landowner may challenge an expropriation if the “expropriating authority” or the “approving authority” does not have jurisdiction to expropriate or approve the expropriation of the property in question, but this situation rarely arises. Finally, a landowner can apply to a court to extend or vary the date on which the “expropriating authority” takes possession of the expropriated property. This will not prevent the expropriation from taking place, but may extend or vary the terms under which the authority may take physical possession of the expropriated property.

The intent of the Expropriations Act is to make all owners impacted by expropriation economically whole by providing full and fair compensation. In other words, it seeks to put owners in the same economic position they would have been in had the expropriation not taken place. The Expropriations Act requires a landowner to be paid an amount equal to the market value of the expropriated property as if it were sold on the open market between a willing buyer and a willing seller. Market value is based on the highest and best use of the property, without considering the impact of the proposed project on value. Additionally, landowners are entitled to receive damages for disturbance, moving costs if they are forced to move, out-of-pocket expenses arising from the expropriation and allowances for inconvenience related to finding a new residence. Where only a portion of a property is expropriated, an owner is to be compensated for any reduction in the land value of the remaining (non-expropriated) land caused by the expropriation and associated works. This is called “injurious affection”. Where a business is impacted as a result of an expropriation, the business owner might be entitled to relocation expenses and/or compensation for business losses incurred as a result of the expropriation.

The Expropriations Act requires landowners to be paid market value for expropriated land on a “willing buyer / willing seller” basis. This means that landowners are presumed to be willing to sell their land, and the “expropriating authority” is willing to purchase the land, for a price reflecting current market value. The fact that a landowner would not otherwise sell the expropriated property cannot be considered in determining market value, nor can sentimentality or attachment be considered or compensated for. Compensation arising from the expropriation of land is assessed as of a particular date, determined by the owner. Within thirty days of receiving the authority’s Notice of Expropriation, the owner may designate the valuation date for compensation by returning a Notice of Election to the authority. The owner may elect to have the valuation date be the date the Plan of Expropriation was registered by the authority, or the date of service of the Notice of Expropriation, or, in cases where a Hearing of Necessity is conducted, the date on which the Notice of Hearing was served. Compensation is also to be based on the “highest and best use” of the property. This means that the property will be valued based on the possible legal use of the property that would result in it having the highest value. For example, if an owner is using a property for a farm in an urban area that is being redeveloped for residential subdivisions, the property will likely be valued as development land, as opposed to being valued as farmland. This reflects the fact that if the property were sold on the open market, a “willing buyer and willing seller” would negotiate a price based on the most profitable use for the property. Expropriated owners are also entitled to the payment of interest, and the reimbursement of reasonable legal, appraisal and other costs, as discussed below.

If a landowner finds the offer of compensation received from an expropriating authority unacceptable, several options are available, even if the government has already taken the owner’s land. Under the Expropriations Act, the property owner and the expropriating authority are to attend a mediation before the Ontario Land Tribunal, if they cannot agree to final compensation. Mediations before the Ontario Land Tribunal are attended by both parties (and at times their experts) and are facilitated by two members of the Ontario Land Tribunal, who are representatives appointed by the Province of Ontario with experience in expropriation matters. The Ontario Land Tribunal cannot give a binding decision with respect to compensation at this stage, but can encourage negotiations and the facilitation of a settlement that both parties are prepared to accept. Additional information about expropriation mediations before the Ontario Land Tribunal can be found on the Tribunal's website. If owners and government are still unable to agree on fair compensation, an arbitration proceeding can be brought before the Ontario Land Tribunal to have fair compensation determined in accordance with the Expropriations Act. Additional information about the Ontario Land Tribunal is available at its website. A landowner is entitled to interest in the amount of six percent per year on all outstanding amounts relating to Expropriations Act compensation for market value and injurious affection from the date the landowner ceases to make productive use of the expropriated land.

In the event that the property owner and the expropriating authority are unable to agree on compensation, a hearing takes before the Ontario Land Tribunal to have compensation determined under the Expropriations Act. A hearing before the Ontario Land Tribunal is similar to a trial before a court and involves the presentation of evidence and a formal decision by the presiding member of the Ontario Land Tribunal. Owners and expropriating authorities usually rely upon experts to determine fair compensation. This includes using professional appraisers to value expropriated land and using expert accountants to determine disturbance damages relating to a business. After expert reports are considered, the property owner and the expropriating authority try to work towards an agreeable resolution whereby full and fair compensation is paid. Before property is taken by the expropriating authority, it is obligated to provide an expropriated owner with an appraisal report estimating the market value of the land expropriated and any injurious affection that would apply. The expropriating authority also has to offer to pay 100% of the authority’s estimate of fair market value, based on its report. This advance can be accepted by the owner without prejudice to the owner’s rights to pursue additional compensation in accordance with the Expropriations Act.

The Expropriations Act prescribes the legal framework surrounding the acquisition of land for public purposes. Legal advice is often helpful to allow the landowner to ensure that full compensation and damages are paid and that the landowner’s rights and obligations under the Expropriations Act are protected. Owners can seek the assistance of lawyers, such as those at Rayman Harris LLP. Owners may also consult the website of the Ontario Expropriation Association, which includes a section listing lawyers and other professionals with experience in this area. The Expropriations Act has provisions relating to costs that are intended to ensure that expropriated owners have access to justice and fair treatment.

One of the areas of compensation under the Expropriations Act is payment by the “expropriating authority” of all reasonable professional costs incurred by a landowner in determining the compensation owed for the expropriated land. This includes legal, appraisal, and any other professional work reasonably required to determine the compensation payable to the landowner. It should be noted that full payment of reasonable costs by the authority will only occur where the final compensation paid to the landowner is at least 85% of the offer of compensation made by the “expropriating authority”. Additionally, costs are only payable by an authority when the matter is resolved, rather than on an ongoing basis. The purpose of the costs provision under the Expropriations Act is to ensure that ownersare made whole and have access to justice when property is expropriated.

In most instances, property owners are not familiar with the expropriation process. On the other hand, real estate officers who work for government have experience with this process and often have the resources to ensure that the rights of the government are protected. We recommend that owners who may have their property acquired by government do not do the following without the assistance of professional advice:

• Have discussions concerning the value of your property or meaningful negotiations;

• Permit entry or testing on your property by government;

• Try to place a value on your own property without the assistance of a real estate appraiser with experience in the area of expropriation;

• Apply for rezoning or tax assessment appeals;

• Provide documents such as leases or financial records to government; or

• Sign agreements for the sale of their property.