Lease for More Than Three Years – Illegal? #32

By Gerry Neely
B.A. LL.B.

The Land Title Act requires a tenant with a long-term lease who wishes to register it, to follow the same procedure as does an owner who wants to divide his land into a number of parcels. Specifically, Section 73 provides that unless there is compliance with the subdivision requirements of the Act, "no person shall subdivide land into smaller parcels than those of which he is the owner for the purpose of leasing. . . for a term exceeding three years."

Compliance with the subdivision requirements means that the approving officer who is responsible for the approval or the rejection of subdivision plans, must approve the subdivision which will be created by the long-term lease. Until recently, the principal problem created for the tenant who had an unregistered lease of this kind, was that the tenancy might be abruptly ended by the landlord's sale of the property. A recent decision appears to raise for the first time the question of whether a lease of land for a term in excess of three years is illegal and, as such, incapable of creating contractual rights between the landlord and the tenant.

The leases in question were of waterfront lots on Okanagan Lake, which were too small to meet the requirements of the zoning regulations. The leases contained a clause which made it apparent to the parties that the parcel could not be subdivided and that the leases could not be registered. The purchaser from the landlord took title with notice of the unregistered leases, but decided to develop the property and gave the tenants notice to vacate. The question asked of the Court was whether the leasehold interests created legally enforceable interests, or were they void from the beginning because they were unregistrable documents which were incapable of creating a charge or interest in land and, in particular, a charge against the property described in the leases.

The tenants argued that all this did was prohibit the registration of their interests and the enforcements of those interests through registration. The Court raised the question as to whether the prohibition against subdivision meant that a lease of "what is known to be an unsubdividable portion of a parcel of land is an illegal act." If that were so, it could not create any contractual rights which the parties could sue upon. The Judge decided, however, that he need not answer this question but only the question as to whether the documents created an interest in land. He concluded that they did not and that they were incapable of creating a charge against the property described in the leases. Although it must be emphasized that the decision is limited to its facts, the discussion of whether or not an unregistrable long-term lease is illegal must cause concern to any one entering into an unregistrable lease of land for more than three years.

It should be noted that the prohibition referred to above does not apply where only a building or part of a building is being leased on a long-term lease. It should also be noted that the definition of a lease for a term not exceeding three years means that if there is an option or covenant for renewal in the lease, the option or covenant must not extend the total lease periods beyond three years.

1.

Nesrallah, Harrower and Nicholson v. Pagonis,38 B.C.L.R. p. 112.

To subscribe to receive BCREA publications such as this one, or to update your email address or current subscriptions, click here.

Without limiting the Terms of Use applicable to your use of BCREA's website and the information contained thereon, the information contained in BCREA’s Legally Speaking publications is prepared by external third-party contributors and provided for general informational purposes only. The information in BCREA’s Legally Speaking publications should not be considered legal advice, and BCREA does not intend for it to amount to advice on which you should rely. You should not, in any circumstances, rely on the legal information without first consulting with your lawyer about its accuracy and applicability. BCREA makes no representation about and has no responsibility to you or any other person for the accuracy, reliability or timeliness of the information supplied by any external third-party contributors.