Law Times

Page 12 OctOber 27, 2014 • Law Times www.lawtimesnews.com Stranded properties Tiny strips 'a stone in the shoe of real estate lawyers' by arshy mann Law Times A tiny strip of land can prove to be a major headache for real es- tate lawyers. In one case, Mark McMackin was representing a major labour organization that wanted to de- velop a piece of property it had purchased in the 1960s. But the organization found a less than two-metre strip of land on the property didn't belong to it, which left a cloud on title. Instead, it was still registered to the corporation it had bought the land from despite the fact the company had dissolved long ago. With the company dissolved, the land had escheated to the Crown. In order to clear the cloud on title, McMackin had to try to get a hold of the family that had owned the company and get them to sign an affidavit stating they had no further involvement with the piece of property. By this point, the former own- ers were quite elderly and were reluctant to sign any lengthy af- fidavits. McMackin was eventually able to get them to sign off so his client could go to court and get a vesting order. But the process took a long time and incurred about $20,000 in costs for his client. "It pushed the closing along quite significantly but not for lack of trying," says McMackin. "We busted our gut trying to compel people to deal with it." McMackin says leaving a small parcel of land out of a deal is a trick sometimes used by de- velopers. "They would leave something on the property that would per- haps hinder the future develop- ment of the property and that would be a bit of a nail you catch someone's sweater on and hold them for ransom," he says. But while the process was cumbersome, it could have been much worse. If he hadn't been able to locate the former owners or get them to sign an affidavit, McMackin would have had to get a private member's bill passed through the Ontario legislature to revive the corporation. That's the only way to reanimate a corporation if it's been dead for longer than 20 years. Minutes from the standing committee on regulations and private bills include various long-dead corporations looking to revive themselves. The Ministry of Infrastruc- ture manages land escheated to the Crown. But as there's cur- rently no mechanism by which to notify the Crown about transfers of property to it, lots of escheated land still appears as being regis- tered to the previous owners. It often only comes to the at- tention of the government when health and safety concerns arise or when someone launches legal proceedings. For a number of years, the Ontario government has con- sidered changing the system to make it less onerous. A 2012 paper by the Ministry of Infra- structure proposed a number of changes, including a way to deal with stranded property. The paper proposed that in those sorts of situations, title to the land should transfer to mu- nicipalities, conservation au- thorities or adjacent landowners. Even with those changes, however, it would still be neces- sary to get a private member's bill passed in order to revive any corporations that had voluntarily dissolved as well as those that had done so more than 20 years ago. In its response to the paper, the Ontario Bar Association pushed to change that aspect. "Passing private acts is expen- sive for the applicant and a waste of legislative time and resourc- es," wrote the OBA. The OBA recommended re- vising the Ontario Business Cor- porations Act to "adopt a con- sistent approach and reduce the administrative/legislative burden by providing that, in all cases, a dissolved corporation can be re- vived with retrospective effect by filing articles of amendment." Despite the initial moves from the Ministry of Infrastruc- ture, the system remains the same for now. There are some signs the changes are still in the works, however. The Ontario Ministry of Infrastructure sent a letter to Industry Canada about the pro- posed changes in May asking for feedback. McMackin hopes the govern- ment will implement some of the changes eventually. "This is a stone in the shoe of real estate lawyers from time to time," he says. LT FOCUS DEALING WITH THE LEASE: STATE OF THE UNION! TODAY'S TOP TEN LEASE ISSUES PLUS THE FRANCHISE TRIANGLE COURSE CHAIR Stephen J. 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