9. Canadian Property Law

Interests and Scope

Owning real property carries many responsibilities, as well as the potential for great profit and great liability. It is important to learn how to protect against potential liability of property ownership. For instance, if a toxic waste site is discovered on real property, the owner may be liable for its cleanup, even if he or she did not realize that such a site was there when purchasing the land. Each buyer of real property has a duty to exercise due diligence when purchasing land. A purchaser should never agree to buy land when they have not seen it or have not hired a professional inspector to view it.

It is important to know the duties of landowners, how to limit liability associated with the ownership of land, and when severance of liability occurs.

Duties of Landowners

Landowners owe different duties to different types of people who enter their land. These responsibilities vary, depending on whether the person is a trespasser, a licensee, or an invitee. A trespasser is a person who intentionally enters the land of another without permission. A landowner has a duty to not intentionally injure a trespasser. For instance, setting traps and pitfalls for trespassers is illegal. Trespassers injured from such traps have valid claims against the landowner. However, if trespassers are injured from unknown or unforeseeable dangers, the owner is not typically liable.

However, landowners have a higher duty of care for licensees. A licensee is someone who has permission to be on the land. Examples of licensees include delivery people and utility workers. A landowner must not intentionally injure a licensee and must warn the licensee of known defects. For example, if a landowner knows that the steps to his or her porch are icy, he or she has a duty to warn a licensee that those steps are icy. Failure to do so may result in liability for the landowner.

An invitee is someone who has entered real property by invitation. For instance, a business may issue invitations to members of the public to encourage people to attend their office recruiting event. If this happens, landowners must inspect their property for defects, correct those defects when found, and warn invitees about such defects. For example, a grocery store must clean up spills as quickly as possible and put up a “caution” sign in that area.

Ownership Interests in Real Property

Real property can be subject to different kinds of interests. In some cases, real property may be owned without restriction, subject only to local, provincial, and federal laws. In other cases, ownership interests may be narrower and subject to conditions, the violation of which can lead to loss of those ownership interests.

The most complete ownership interest recognized by law is called fee simple absolute. This ownership gives the owner complete control over the land and lasts until the owner dies or conveys the property to someone else. Generally, if someone wants to buy real property, they will look to buy property in fee simple absolute. However, it is slightly constrained by the right of the government to control the use of the land. It is also constrained by civil and criminal law. So, for example, even if you own your house and land, you are not allowed to carry out illegal activities on your property. Additionally, the government, through the exercise of expropriation legislation (eminent domain), has the right to buy your house and land from you if it wants to run a highway through your property.

The power of eminent domain is derived from the concept of the Crown’s prerogative. The government has the authority to take private property for public use in exchange for reasonable compensation (referred to as expropriation). The power of eminent domain is mainly exercised by provincial governments and can be used to acquire land for public works, such as roads or utilities, or for public use, such as parks or schools. In some cases, the power of eminent domain is also granted to private corporations for specific projects, such as pipelines or electrical transmission lines. In all cases, the property owner is entitled to compensation for the taking of their land.

Ownership interest may also take the form of fee simple defeasible. This kind of interest is subject to a condition of ownership or to some future event. For instance, if an owner donates land to a city “so long as it is used as a public greenway,” then the land would be owned in defeasible fee by the city as long as it maintains it as a public greenway. Once the condition is violated, the land would revert back to either the original owner or whoever owned the reversion interest, which is a future interest in real property.

Another ownership interest is a life estate. This interest is measured by the life of the owner. For example, a person could grant ownership rights in real property to a parent for the length of his or her life, but then the property would be returned upon the parent’s death. A common investment, known as a reverse mortgage, employs the concept of life estate. A reverse mortgage is a loan that is available to Canadian homeowners aged 55 and over. It allows them to access the equity in their home without having to sell it. The homeowner can borrow a portion of their home equity, and receive this money as a lump sum, monthly payments, or a combination of both. The loan is repaid, with interest, when the borrower leaves the property, or when they pass away. The loan is secured by the home and the borrower does not have to make any payments until the loan is due. If the loan balance exceeds the value of the home, the lender will not ask for more money from the borrower or their estate.

It is important to remember that property can be owned by more than one owner. Several types of co-ownership interests are recognized in law. These ownership interests are important for matters of possession, right to transfer, right to profits from the land, and liability. For example, tenancy in common describes an ownership interest in which all owners have an equal right to possess the whole property. Compare this to joint tenancy, in which the surviving owner has the right of survivorship. If one of the owners dies, his or her property interests automatically transfers to the remaining owner(s).

These different interests are created by specific wording in the instrument of conveyance. An owner in tenancy in common may sell or transfer his or her rights without seeking permission from the other owners. This is because owners in a tenancy in common have the unilateral right to transfer their interests in property. Conversely, to transfer one’s interests in a joint tenancy, the consent and approval of the other owners is required.

Scope of Interests in Real Property

Scope of ownership determines what can and cannot be done with the land. The surface of the land and the buildings that are attached are what most people think of as ownership of real property. However, land interests also include subsurface or mineral rights, and access to light or to a view. Additionally, easements (the right to cross or otherwise use someone’s land for a specified purpose) and covenants (guides or restraints on how one may build on their land) grant certain rights to non-possessors of land.

Subsurface Rights

Subsurface or mineral rights are rights to the substances beneath the actual surface of the land. Purchasing mineral rights allows the owner to extract and sell whatever exists under the surface of the land, such as oil, natural gas, and gold.

Easements and Covenants

Easements and covenants are nonpossessory interests in real property. An easement can be express or implied and it gives people the right to use another’s land for a particular purpose.. It is a right of use that one party holds over another’s property, such as a right of way to access a road or a right to use a water source that crosses through their land. For example, a common easement is for utility companies to enter private property to maintain poles and power lines.

A covenant is a voluntary restriction on the use of land. Common covenants include rules which restrict a homeowner’s use of their land in certain ways, often for aesthetic purposes. For instance, such covenants might require houses subject to the covenant to be painted only in certain approved colors, or they might contain prohibitions against building swimming pools.

Some covenants and easements “run with the land,” which means that the restrictions will apply to subsequent owners of the property. Whether a covenant or easement runs with the land depends on the type of interest granted.


Icon for the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

Business Law and Ethics Canadian Edition Copyright © 2023 by Craig Ervine is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

Share This Book