Supreme Court

Sale of Land

Covenants for title
Section 29 of the Historical Resources Act (Alta.) limits positive covenants that may run with land

Lougheed owned building designated Municipal Historical Resource. To compensate Lougheed for any decrease in value and rehabilitation expenses, City agreed to pay Lougheed $3.4 million in 15 annual installments (Incentive Payments). “Incentive Agreement” imposed restrictions on Lougheed and registered by caveat on title. Lougheed borrowed money from Equitable Trust. Loan was secured by, inter alia, assignment of Incentive Agreement. Lougheed subsequently obtained additional financing from Heritage Capital, assigning its right to Incentive Payments as security. When Lougheed defaulted on Equitable Trust’s loan, Equitable Trust commenced action to enforce its security. Building advertised for judicial sale. Lougheed applied for declaration that Incentive Payments were not an interest in land and not included in assets being sold in judicial sale. Master issued requested declaration and chambers judge upheld master’s declaration, finding that s. 29(3) of Historical Resources Act (Alta.) did not operate such that Incentive Payments could run with land as positive covenant. Majority of Court of Appeal allowed Equitable Trust’s appeal, finding that Act creates sui generis covenants that displace common law rule that positive covenants do not run with land. Heritage Capital Corporation’s appeal allowed. Section 29 of Act does not completely displace common law rule that positive covenants do not run with land but rather limits positive covenants that may run with land to those that are in favour of person or organizations listed at s. 29(1), namely: Minister, council of municipality in which land is located, Alberta Historical Resources Foundation or historical organization approved by Minister. Exception to common law rule should be limited by precise language of provision and underlying purpose of Act. Chambers judge properly interpreted Act. Although City fell within s. 29(1) list of organizations, covenant to pay Incentive Payments was not in its favour. As result, Incentive Payments did not become an interest that runs with land by virtue of Act. Nor did Incentive Agreement reveal intention that Incentive Payments would run with land. There was no basis on which to disturb chambers judge’s findings with respect to contractual interpretation of Incentive Agreement. Chambers judge’s conclusion that Incentive Payments were not sold in judicial sale was supported by evidence. No indication in any sale documents that court intended to sell, or purchaser intended to buy, Incentive Payments.

Heritage Capital Corp. v. Equitable Trust Co. (May. 6, 2016, S.C.C., McLachlin C.J.C., Abella J., Cromwell J., Moldaver J., Karakatsanis J., Wagner J., Gascon J., Côté J., and Brown J., 36301) Decision at 248 A.C.W.S. (3d) 224 was reversed. 265 A.C.W.S. (3d) 254.

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