Development Schemes

Executive Summary

A. Introduction

This Report considers amendments to The Real Property Act (the RPA) to make it easier to create and record a development scheme on title of land, (traditionally called a common building scheme). A development scheme is established when agreements between a vendor and the respective purchasers of lots, which contain building restrictions, are recorded on title. This somewhat piecemeal approach is not only inconvenient for the vendor but it may also limit the effect of the scheme, potentially frustrating the reasonable expectations of purchasers. In Manitoba, section 76 of the RPA allows an owner of land to create party wall obligations, easements and rights-of-way unilaterally and this report considers whether to extend the same privilege for development schemes.

B. The Law Relating to Building Schemes

At common law, the burden of a restrictive covenant affecting land binds only the original parties to the covenant and not their successors in title. Equitable rules were developed in the late 19th century to allow the burden of a certain restrictive covenants to run with the land followed by further rules to enforce development schemes. Both the common law and rules of equity ("the general law") continue to apply in Canada but have been widely acknowledged as confusing and complex. As well as meeting the requirements of the general law, a development scheme must be recorded on title to be enforceable against subsequent owners.

C. Recommendations for Reform

It is the Commission's view that allowing owners of land to create and record a development scheme by unilateral declaration as well by agreement facilitates economic activity involving land and protects the reasonable expectations of purchasers. The Commission therefore recommends the addition to the RPA of a provision similar to section 76 and modeled on British Columbia's statutory building scheme provisions.

In order to avoid confusion, the Commission suggests a statutory definition of building restriction to be used consistently in all legislation. As well, the Commission expresses a preference for the term "development scheme' rather than the traditional "building scheme" as the former is more descriptive of the broad range of matters covered in such schemes.

Due to the complexity of the law, the Commission does not recommend a complete codification of the general law relating to development schemes but instead suggests incorporation of key elements into the legislation with modifications appropriate to modern circumstances. A development scheme must clearly identify all lands included or exempted from the restrictions and these lands must be reasonably proximate to each other. The restrictions in the scheme must be negative in effect, set out in clear language and apply uniformly and consistently to the affected lands. Lastly, the instrument creating the scheme must state that the restrictions are intended to attach to and run with the land.

The Commission recommends variation of two aspects of the general law. Firstly, a developer should not be permitted to exempt unsold lots from the application of the scheme as this would defeat the reasonable expectation of purchasers. Secondly, it recommends that the common vendor rule, which no longer applies in England, be expressly abrogated. This would allow continuation of a scheme despite a change of vendor and would allow a group of owners to create a scheme for their mutual benefit. The Commission does not recommend any change to the rules relating to positive covenants as such change requires extensive study and careful consideration. The Commission does note the harshness of the existing law and the desirability of reform in this area.

In addition to the suggested pre-requisites to validity of a development scheme, the Commission also recommends certain formal pre-requisites to recording of the scheme on title. A development scheme should meet such formal requirements as are determined by the district registrar and should be executed in accordance with section 72(1) of the RPA. In order to provide assistance to drafters, the district registrar should create a statutory form, similar to that used in British Columbia, but its use should not be made mandatory. A scheme must affect at least two separate parcels of land which are registered under the RPA and are clearly identified by their legal description. It must contain one or more restrictions which appear to be negative in effect and must also clearly state that the restrictions attach to and run with the land. Finally, all persons whose names appear on the register as having a claim or interest before the date of the development scheme instrument must consent to its registration on title.

The Commission further recommends that a development scheme be terminated or varied in the same way that a building restriction may be; by unanimous agreement or by order of the Manitoba Municipal Board. Although it does not agree with the automatic expiry of such schemes after 50 years, for the sake of consistency, the Commission does not recommend a different rule for development schemes.

Finally, the Commission recommends minor amendments to ensure that provisions affecting building restrictions or restrictive covenants also apply to development schemes including survival following tax sale, mortgage sale or foreclosure proceedings, compatibility with municipal zoning by-laws and town planning schemes and exemptions from compliance for school boards.

The Report also contains draft legislation which implements the recommendations of the Commission.

Report #113,
June, 2006