Expectation of materialization not a factor in determining contingent interest in land: court

It is the nature of contingent interests that they may never materialize, Ontario appellate court rules

Expectation of materialization not a factor in determining contingent interest in land: court
The parties wanted the land to be used for open spaces through the use of a golf course

The Court of Appeal for Ontario has ruled that an expectation that a contingency would materialize is not a factor in determining contingent interest in land since it is the nature of all contingent interests that they may never materialize.

In Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847, ClubLink Corporation ULC (ClubLink) acquired property subject to land agreements between Campeau Corporation (Campeau) and the former City of Kanata. The 1981 agreement contained a condition that ClubLink, as Campeau’s successor, must operate a golf course on the property in perpetuity. If it can’t, the lands would be conveyed at no cost to Kanata – now the City of Ottawa.

After operating the golf course for 24 years, the declining membership forced ClubLink to explore new possibilities. In October 2019, ClubLink submitted planning applications to alter the golf course lands. Because of this, Ottawa sought an order requiring ClubLink to either withdraw its applications or convey the land at no cost pursuant to the agreement. In rebuttal, ClubLink claimed that since the right to call the conveyance had not vested within 21 years following the 1981 Agreement, the provisions on perpetuity were void pursuant to the rule against perpetuities.

The rule against perpetuities, said the Court of Appeal, “applies to extinguish an interest in land if the interest does not vest within 21 years. The rule does not apply to a contractual right that does not create an interest in land. It serves only to invalidate contingent interests in land that vest too remotely.”

The application judge ruled that the provisions in the 1981 agreement were mere contractual provisions and thus not subject to the rule against perpetuities. Being merely “an ’off-ramp’ to ensure the true intention of the agreement,” he concluded that the parties did not intend to create an interest in land because they never intended for the conveyances to materialize.

The Court of Appeal disagreed.

“A contingent interest in land can be created without the intention that it will one day ‘crystallize,’” said the court. Nevertheless, the provision on the automatic transfer of ownership upon violation of the condition created a contingent property interest, said the court. These rights expressly run with the land and were registered on the title, and when interpreted as a whole, the provisions were intended to restrict the use of the property, said the court.

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