Legal Update – Unsightly Properties and Third Parties
Municipal Law Newsletter – January 2018
Municipalities often struggle when dealing with properties which are dangerous and unsightly. The costs of remediating these properties are difficult to assess and can be significant. The Supreme Court of Nova Scotia recently addressed the interest of third parties with respect to recouping the costs incurred for repairing dangerous and unsightly properties.
The Municipal Government Act (the “MGA“) allows municipalities to issue orders against a property owner if a property is deemed to be dangerous or unsightly. If the property owner does not comply with this order, a municipality may conduct any necessary repairs and recoup the cost of the repairs as a first charge on the property by adding the costs to the property tax bill. However, when it comes to issuing these orders, municipalities must be aware that parties other than the property owner may have interest to challenge any additions to a property tax bill.
The Supreme Court of Nova Scotia addressed this issue in Harbouredge Mortgage Investment Corporation v. Amherst (Town), 2016 NSSC 337.
A property in downtown Amherst was destroyed by fire in 2012 (the “Property”). The owners of the Property took preliminary steps to secure the site by installing a temporary fence. However, in September 2012, the Town of Amherst (the “Town”) notified the owners that the Property was dangerous and unsightly. While additional fencing was installed, the Property was otherwise not touched. Eight months later, the Town ordered that the Property be redeveloped or the foundation be filled. No further actions were taken by the property owner.
In August 2013, the Town had the Property backfilled and graded. Additional remediation costs were incurred after a leaking oil tank was discovered during the repair work. Two months later, the Town advised the owners that the full costs of the remediation – over $90,000 – was added to the tax bill for the Property.
Harbouredge Mortgage Investment Corporation (“Harbouredge”), which held a mortgage on the Property, was notified in March 2014 of the tax arrears for the Property when the Town issued notice that it intended to proceed to a tax sale. Harbouredge paid the property tax owing in May 2014 except for the remediation costs. In November 2016, Harbouredge filed an action against the Town in order to preserve its interest as a mortgage holder.
The Town challenged Harbouredge’s actions claiming that Harbouredge did not have standing to bring the action, that the action was barred by the limitation period in the MGA, and that the Town had statutory immunity.
The Court found that Harbouredge, as mortgage holder, had real and non-speculative interests at stake. Harbouredge’s security interest in the Property would be reduced if the remediation costs were added as part of the Property’s tax bill.
The Town argued that Harbouredge was outside the limitation period as the remediation work was completed in August 2013. Section 512 of the MGA sets a twelve month limitation period for certain claims against a municipality.
Limitation periods start when the material facts of a case are known, or ought to be known, by a party. While Harbouredge was aware of the destruction of the Property, it was not aware of the remediation work or any taxes owing until it received the Notice of Tax Sale in March 2014. This was said to be the point from which the limitation period began. Harbouredge was found to have filed its claim within the limitation period.
The Town also argued that the MGA provides immunity from certain claims and that the Town was protected from Harbouredge’s action that challenged the tax bill for the Property. Justice Hunt dismissed this argument and held that, as a matter of common sense, it would not be appropriate “to create a situation where parties had no right to challenge charges being added to tax bills”. Harbouredge was able to maintain its claim against the Town.
When taking steps to repair dangerous and unsightly properties, municipalities must proceed cautiously, particularly when third parties such as mortgagees have interests in a property.
While the MGA provides certain immunity against legal suits for municipalities, immunity is not absolute. Municipalities should be alert to the fact that parties such as mortgagees have a right to challenge the charges of a property tax bill. It remains to be seen whether Harbouredge is successful in their action.
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