Making Sense of Expropriation Offers

In Ontario, there are a number of large-scale expropriations taking place in connection with Metrolinx projects such as the Ontario Line, and potentially even more down the road with the Province confirming in its latest transportation plan, released last week, that Highway 413 and the Bradford Bypass will proceed. For those new to the expropriation process – which is most people, unless you have had multiple properties expropriated – this can be a confusing, and even scary time. There are a number of good resources available (including here ) that guide through the steps in the process, but what I want to focus on is what is known as section 25 offer. This is the offer by the expropriating authority that follows approval of the expropriation, but prior to possession of the land (the possession date is set out in something called a Notice of Possession, which precedes the section 25 offer).

A section 25 offer is usually not the first offer you will have received. Most expropriations kick-off with an informal negotiation for a voluntary sale by the landowner to the expropriating authority. This informal period can often be your best chance to negotiate a deal as painlessly as possible, but there may be stumbling blocks. Perhaps you are too far apart on the value of the compensation. Or perhaps there is too much uncertainty about how the expropriation will impact your property or your business to negotiate a transaction prior to expropriation. In any event, if the negotiations fail, and expropriation proceeds, you will receive a section 25 offer together with an appraisal report. 

Section 25 refers to the section of the Ontario Expropriations Act, R.S.O. 1990, c. E.26that mandates the offer. The section states in part:

25 (1) Where no agreement as to compensation has been made with the owner, the expropriating authority shall, within three months after the registration of a plan under section 9 and before taking possession of the land,

(a) serve upon the registered owner,

(i) an offer of an amount in full compensation for the registered owner’s interest, and

(ii) where the registered owner is not a tenant, a statement of the total compensation being offered for all interests in the land, excepting compensation for business loss for which the determination is postponed under subsection 19 (1); and

(b) offer the registered owner immediate payment of 100 per cent of the amount of the market value of the owner’s land as estimated by the expropriating authority, and the payment and receipt of that sum is without prejudice to the rights conferred by this Act in respect of the determination of compensation and is subject to adjustment in accordance with any compensation that may subsequently be determined in accordance with this Act or agreed upon.

The offer comes in two parts and Offer A and an Offer B, which correspond to section 25(1)(a) and (b) respectively. Both Offer A and Offer B are to be determined based on the appraisal report you should receive with the offers. It is useful to go over that report carefully so you can understand the rationale for the offers you have received.

The easiest way to think about the difference between the two offers is that an Offer A is a full and final settlement (except for business losses derived from the need to relocate the business which are generally postponed under section 19(1)). If you are happy with the amount, it properly reflects the market value of the taken land, and it provides the appropriate compensation in any other area of compensation you may be entitled to, you may wish to consider this offer. If accepted, you will also receive payment of any reasonable legal, appraisal and other costs you have incurred in order to obtain compensation. But a word of caution: once accepted, you will not be entitled to seek more if it turns out your compensable losses are higher than you anticipated (other than in section 19(1) postponement scenarios).

An Offer B, on the other hand is an upfront payment of what the expropriating authority has assessed is the value of your land. You are free to accept it and continue negotiating if the value is too low, or there are areas of compensation you are entitled to that have not been appropriately assessed (or cannot be determined at the time of the offer). If accepted, you will not receive payment of your reasonable legal, appraisal and other costs at the time of payment of the Offer B amount – that will be deferred until final determination of your total compensation either through further negotiation or litigation before the Ontario Land Tribunal. 

You may choose to accept neither offer, for instance if you are in the midst of negotiations that look like they will imminently conclude with a higher value than either offer, you may choose to wait a short while to see if you reach an agreement, and if not you can always accept the Offer A or B later – there is no set time for acceptance.

However, if you do want to accept an offer, there is another complication that sometimes occurs. You may have received a “joint offer.” This can occur if there is a mortgage on title. The joint offer will be made out to whomever holds the title to the property and mortgagee. The reason for this, is that both can make a claim against the expropriating authority for compensation, and the expropriating authority does not want to (and is not required to) figure out how to partition its offer between you. In other words, a joint offer is basically the expropriating authority saying this is what you are owed collectively, and you can figure it out amongst yourselves who is entitled to what.

What comes next, will depend a great deal on whether the full property is being expropriated or just a part, and if only a part how much the overall value of the property is impacted by the expropriation. Mortgages are based in part on the appraised value of a property at the time the mortgage was issued. If that is impacted by an expropriation to too great an extent, then the mortgagee may want the mortgage to be paid out in whole or part. There are provisions of the Act that cover that scenario that I will not get into here. Alternately, it is often the case in partial expropriations, that the value of the property has risen to such an extent since the mortgage was issued, that there is no impact on the mortgage – in that case the financial institutions will likely be willing to sign a release and direction that all the funds from the offer be paid to you – although how long it takes to get those signatures will vary greatly from financial institution to financial institution, and even from branch to branch.

Now for the disclaimer: this article does not constitute legal advice, should not be relied on as such and does not establish a solicitor-client relationship. While it is important for making wise decisions to be as well versed in expropriations as you can be, this a complicated area of the law, with a multitude of factors that can impact what is the best decision for you. We strongly recommend speaking an experienced expropriation lawyer if you are faced with a potential or pending expropriation. Good luck!

The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.