Bill 22: New Approaches to Compensation for Expropriated Property Owners

This article first appeared in French in the April 2024 issue of the Journal des Parcs industriels de la Corporation des parcs industriels du Québec.

On May 25, 2023, Ms. Geneviève Guilbault, Quebec’s Minister of Transport and Sustainable Mobility, tabled Bill 22, An Act respecting expropriation, which was adopted and came into force on December 29, 2023 (the “New Act”). It replaces in its entirety the Expropriation Act (CQLR, c. E-24) (the “Old Act”).

The powers of the Administrative Tribunal of Québec in determining compensation

Until now, the principles to guide the determination of compensation payable in the event of expropriation were set out in article 952 of the Civil Code of Québec (CQLR, c. CCQ-1991) and in sections 58 and following of the Old Act. The legislation previously in force provided that the compensation paid to an expropriated owner had to be fair, taking into account the value of the expropriated property and the harm directly caused by the expropriation. The Administrative Tribunal of Québec (the “ATQ”) had broad latitude in determining what represented fair compensation for an expropriated owner based on its assessment of the facts and circumstances presented.

The New Act establishes a new legal framework that rather more strictly governs the principles that must be applied by the ATQ in determining and calculating the expropriation indemnity. Section 75 of the New Act sets out six compensation approaches to be used in determining this indemnity, while sections 76 to 81 of the New Act set out the manner and specific circumstances in which each of these compensation approaches must be used and applied by the ATQ. Following the adoption of the New Act, it should be noted that the ATQ’s flexibility in the process of determining the indemnity and its discretionary powers are greatly limited compared to what was provided for in the Old Act.

The components of the final indemnity and the use of market value

Once the applicable indemnification approach has been identified by the ATQ, the New Act sets out the various components of the final indemnity to be paid to an expropriated owner. Section 82 of the New Law provides that the final indemnity shall consist of (i) the immovable indemnity, (ii) the indemnity in reparation for injuries, (iii) the indemnity for loss of suitability value, and (iv) the indemnity for trouble, nuisance and inconvenience.

In addition, in the New Act, the legislator uses the concept of “market value”, in particular in sections 84 and 85 of the New Act, which reads as follows:

85. The market value of a right corresponds to the sum of the value of the right established in accordance with section 86 and of the surplus in value added to the right by the land improvements and landscaping present on the date of expropriation, but not considered in the establishment of the value of that right.

Under the Old Act, the case law recognized the use of the “value to the expropriated” as a principle to guide the calculation of the amount of compensation:

Montréal (Ville) c. Benjamin, 2004 CanLII 44591 (QC CA), para. 79:

“[TRANSLATION] [79] In expropriation matters, it has always been recognized that the immovable property must be valued from the angle most advantageous to the expropriated party. This principle of ‘value to the expropriated’ has been applied consistently for nearly a century […].¹”

The “value to the expropriated” differs from the “market value” of the immovable in that it takes into account the future development potential of the expropriated property. The courts have already recognized and applied this principle:

“[TRANSLATION] In seeking the ‘value to the expropriated’, the judge considered the potential future value of the expropriated land. The potential future value is but one application of the search for the best use. In such cases, the Court may take into consideration a use that does not exist at the date of the expropriation, but which would have represented for the expropriated party a future potential to increase the value of the immovable and which it loses as a result of dispossession. The case law has confirmed the application of this principle on several occasions. As in this case, the courts have often had to set aside the zoning in effect at the time of the valuation in order to determine the true value to the expropriated person.²”

However, the use of market value under the New Law takes into account the immediate reality of the real estate market, valuing the property based on criteria such as demand, supply, and market conditions at a specific point in time. This can have a significant impact on the final amount of the indemnity, which reflects the value of the property at the exact time of expropriation. However, in the context of an expropriation, the owner concerned did not choose to sell, but rather was forced to give up his property, when he would potentially have preferred to wait for a different market situation.

Conclusion

In conclusion, the New Act represents a major overhaul of the expropriation process in Quebec, bringing significant changes to the rights of owners and the powers of public authorities. The introduction of new compensation approaches in the New Act reflects a clear desire on the part of the legislator to move from a flexible legislative framework, which allowed the ATQ to take into consideration the particularities of each situation, to a stricter legislative framework that dictates how to proceed.

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¹ Montréal (Ville) c. Benjamin, 2004 CanLII 44591 (QC CA), para. 79.
² Saint-Eustache (Ville) c. Lorrain, 1996 CanLII 6311 (QC CA), p. 7.