by Sara Haider, winner of the 2023 Atrium Law Student Essay Contest
As urban city populations grow, the legal concept of "air rights" has become essential in determining legal ownership. This paper is divided into three sections that will explore the complexities of defining and using air rights. It will begin by providing a thorough analysis of air rights through the lens of the common law history, showcasing the mixed results in case law. Section two of the paper will explore the relationship between taxation and air rights illustrating why guidance is needed to define them. Finally, in section three, this paper will investigate how legislations shape and regulate air rights. Together, this paper aims to provide a comprehensive understanding of Canada’s current state of air rights and the notion that clear legal guidance is needed to clarify the practical aspects surrounding them.
SECTION ONE: DEFINING “AIR RIGHTS” THROUGH A COMMON LAW JURISDICTIONAL ANALYSIS
Generally, air rights are also called “air parcels,” which will be interchangeable in this paper. They refer to ownership of the space above a property.1 One can use these air rights to add to existing building structures and use them for other development projects, such as adding satellites, billboard, and more homes. In this section, case law will be examined to analyze the boundaries of air parcels.
Examining the past of air rights and their recognition in common law is essential to see how future rulings might be decided. The conversation begins with the question of the amount of airspace already included in the owner’s property rights. One of the earliest and inclusive views is expressed in the Latin phrase “cujus est solum, ejus est usque ad coelum,” which translates to “whoever owns the soil holds title all the way up to the heavens and down to the depths of the earth.” 2 This viewpoint meant that a property owner would own the space above their land all the way to the clouds, which was the most comprehensive view of air rights. However, as technology developed and airplanes entered the picture, this view eventually had to change. Property owners were not allowed unlimited rights to the airspace as there became a need to balance public rights of using the air space with private ownership rights.
The discussion of who truly owns the space above the property has become relevant in neighbour disputes where one neighbour enters another’s air space. How much freedom and control does the property owner have over the air in their possession? Historically, there have been two ways of addressing this issue in the common law. One approach is to consider air space as owned, which could result in a possible action of trespassing.3 The other view judges frequently take is that the actions of others are not an issue unless they constitute a nuisance or interfere with the use and enjoyment of the property itself.4 This distinction between these and which action is used is understood by analyzing how judges have decided these issues.
One of the earliest cases related to this topic was in 1586, a complainant who argued that his neighbour had built his land in a way that did not block his enjoyment of light.5 In the case, the court said the owner was entitled to build and block this enjoyment of light as there was no right to light (horizontally speaking).6 If we were to adjust the facts and say the neighbour had built something on top of the house that permanently blocked light, it is still being determined from this ruling alone how the case would be decided.
This situation can be seen in the next series of cases discussed; the neighbour's property extends onto the plaintiffs from the top of their home. Early cases of these situations in 1610 and 1845 typically held that there would be a remedy if it had constituted nuisance.7 This perspective, however, changed with the 1870 decision of Corbett v Hill.8 In this case, the judge allowed a trespass action and acknowledged that the air (in a vertical sense) over a building would have some ownership rights.9 The conclusion derived from these cases was that the owner had a right to restrict someone who tries to build directly above their land.10 The landmark case of Wandsworth Board of Works v. United Telephone Co. in 1884 has also heavily supported this theory. The judge said a “landowner may bring an action in trespass in relation to anything that passes over or is placed in the airspace above his property”.11 This reasoning was further agreed upon In Lacroix v R.; the Court said that the owner could “object to anyone who purports to occupy the column of air, or a part of it, which is above his land” and that you are not allowed to “prevent him from building upwards from his land.” 12
There was an unexpected issue with these previous cases. Since these were such broad statements, anyone going above someone’s land, even for a moment, could mean there was an action for trespass. This opened the gate to many cases, and soon the courts had to limit air rights. In 1974, the court in Commissioner for Railways v Valuer-General established that the right was not unlimited; the council held that it was unlikely that such a sweeping and unpractical doctrine as that ‘land’ meant the whole of the space from the centre of the earth to the heavens would appeal to the common law mind.13 The further limited ruling came from the most cited case in this field, Bernstein v Skyviews and General Ltd, a decision by the High Court in 1978.14 The defendant in the case took aerial pictures of an owner’s property, and the owner complained that these pictures had been taken without consent and thus trespassed onto his airspace.15 The judge, Griffith J, held that there needed to be some balance of property owner rights and public rights.16 Thus, in his decision, he concluded that the air rights were restricted “to such height as was necessary for the ordinary use and enjoyment of his land and the structures upon it, and to declare that above that height he had no greater rights in the airspace than any other member of the public.” 17 This case has remained the starting point for defining air rights in today’s market.
As the property owners’ rights were established up to a reasonable height, the next question for the caselaw to answer was what was reasonable enough to be included. More understanding came in 1988 from the Alberta Court of Appeal case; Didow and Knox v Alberta Power Ltd.18 In this case, power line wires crossed a property owner’s airspace.19 These were only about 6 feet over the plaintiff’s property, impacting his ability to use his property for various farming activities.20 The court held that “the low-level intrusion interfered with the landowners’ potential if not actual, use and enjoyment and therefore constituted a trespass.”21 This case is one of the first to see this type of judgement being accepted and a more substantial acceptance of air rights. Recently, the British Columbia Supreme Court revisited the decision in 2016 in Skyviews in Vancouver Sea to Sky Region Assessor, Area No. 09 v Amacon Group and went a step further to say that it was not only based on the interference of the current needs of the landowner like needing it for farming but could mean the “potential future use.”22 These cases show us that some courts have relaxed their interpretation of the restrictions to air space use. There is still no clear guidance on what this potential future use could look like and how we will determine the limits of it.
Over time, specific issues have risen within the air rights discussion, such as airplanes, drone usage, and swinging cranes during construction. These issues have been at the front of many air rights discussions to analyze if they would impact the enjoyment of property. In the following sections, this paper will discuss these sub-issues and their implications for air rights.
A) AIRPLANES
If we were to go solely based on the common law definition of airspace, one might conclude that an airplane taking off close to home is trespassing. Property owners can also argue that the noise and pollution of airplanes flying over their land are a nuisance. They can argue that this noise often interferes with their ability to enjoy their property. On the other hand, government officials may say that they have a legitimate right to use airspace for the benefit of the public. This balance of public rights and private property rights can be seen in these situations.
The first limit to air rights from legislation comes from the Air Navigation Act, which excludes a right-of-action flight at a reasonable height or its ordinary incidents.23 This legislation solved the issue of when airplanes were already in the sky, but sometimes airplane takeoffs happen very close to property owners’ homes. There was still the question of whether this could constitute trespassing if it were close to the owner’s home or at an unreasonable height. This was clarified to say that if the plane is simply flying over another person’s property, this is not a trespass.24 Fournier, J gave the reasoning for this. “I need to go only so far as to say that the owner of the land is not and cannot be the owner of the unlimited air space over his land.”25
Around twenty years later, in 1973, a similar case reached the Federal Court of Canada. In this case, the plaintiff bought a farm near the airport and alleged that the planes from a flying school were flying over a very low altitude over his property.26 The evidence should have been more substantial to prove nuisance, as most planes did not fly over the plaintiff’s property.27 The judge, in this case, was very reluctant to consider this nuisance and said that “If the plaintiffs and their family were not oversensitive, they would not, in my view, in any way be disturbed or inconvenienced by what they now consider to be a nuisance.”28 It is clear from this case that the bar for nuisance is very high, and simply flying over airspace and making noise does not constitute a cause of action against flyers.
With our population density in Toronto, it would be impossible if planes were not flying over people’s homes. With the major airport Pearson Airport, residents nearby can be concerned about the impact of aircraft noise on their quality of life. These airports have a contractual obligation with Transport Canada to have a noise management program that tries to balance and mitigate the noise from aircraft.29 Even with these precautions, it is inevitable that planes will fly over homes and create noise.
To address this issue, the City of Toronto has implemented zoning regulations that inform the buyers of properties around the airports.30 Under these regulations, the properties impacted surrounding the airports have a notice registered in the Land Registry System. This process ensures that potential buyers know that their property will be near a flight path and that planes will fly over their homes regularly. This registration aims to alert buyers of the property so they can make an informed decision before purchasing it. It is important to note that buyers who purchase a property in this area cannot argue that they were unaware of the aircraft noise, as they have been notified before purchasing the property. After the fact, it would be difficult for them to argue that the aircraft noise was a nuisance as they were aware of the potential impact.
B) DRONES
Whether a drone flying over someone’s house would constitute a nuisance is relatively new. There has not been a clear answer to this question – Will flying a drone interrupt the reasonable enjoyment of property people expect to have? What is the limit? The City of Toronto, through their statement in 2020 on drone safety, have ultimately dismissed it as an issue as they say, “the City’s complaint data does not suggest that drone use is a major issue for residents.”31 This response does not give us the legal answer to those situations where it is an issue for the property owner, and nuisance from the drone appears to be a problem. Is it reasonable to say that a drone prevents an owner from enjoying their house? It is still being determined how the courts would answer this question, but given the caselaw with airplane routes, the estimate is that this is likely not a great enough disturbance to be classified as a nuisance.
Consider the possibility of a drone “trespassed” onto your property. Under the Trespass to Property Act, trespassing is defined in s2(1) as every person who enters on premises when entry is prohibited under this Act.32 Premises is defined under the Act as “land and structures.”33 As discussed in future sections, the Ontario Superior Court has acknowledged that air rights are “land” for purposes of the Assessment Act.34 Using this logic, one may argue that If air rights can be land for that legislation, it may also qualify as land under the definition of premises. One step further would be to look at when this entry to the land is prohibited. Section 3(1) says that entry to premises Is prohibited with notice to the effect.35 Following this, consider a fenced property with signs labelled “No drones allowed to fly over my property.” Would this situation warrant a cause of trespass should a drone owner choose to fly over their house? This question and similar scenarios will likely be addressed in future court cases. It is a fascinating issue, as the law has yet to provide a clear answer. While the City of Toronto claims that drone use is not a significant issue for residents, individual property owners may have different experiences and concerns.
C) CRANES USED FOR CONSTRUCTION
The pattern of cases suggests that the brief passing of items such as drones and airplanes into an owner’s airspace is not considered trespassing. This result changes when the item in the airspace is a crane tower hovering near and over your property. This type of intrusion into airspace has historically been viewed as impacting the owners’ enjoyment of the property. For example, in the 1971 and 1981 cases of Wollerton & Wilson Ltd. v Richard Costain Ltd. and Lewvest Ltd. v Scotia Towers Ltd, the courts held that the swinging crane used in the construction of a building trespassed a property owner’s air space.36 This predicted result has allowed property owners to bargain air rights agreements where they are compensated in exchange for their permission to utilize their air space. This is typical because the crane users/developers have feared automatic trespassing when using the crane. However, recently in a British Columbia Supreme Court case, the issue of crane trespassing was challenged. In this judgement, this trespassing bar had been lowered significantly. The judge decided to take the approach citing Kingsbridge Development Inc. v Hanson Needler Corp. that there should be a more modern view of airspace rights and that “there is not an automatic trespass.”37 This means it will be difficult to prove that a trespass occurred. The only other remedy for property owners in such cases would be a nuisance. This is not ideal news for property owners as this would make it harder to prove with such facts. This update suggests that crane users would not need to seek permission when crossing a property owner’s airspace.
There has, however, recently been an exception to this thinking by another judgement in British Columbia because it was clear that the enjoyment of the property owners or its tenants was interfered with; the court concluded that an action of trespass be allowed. In this 2020 decision, the applicant owned a hotel that provided office and residential space to tenants.38 The defendant, F inc, was newly constructing a hotel neighbouring the plaintiff’s property.39 The two parties entered a crane swinging agreement where F Inc. was to operate during certain hours.40 F Inc. began operating a crane through the plaintiff’s air space without regard to the licensed hours.41 In this case, the judge allowed the application and concluded that it was clear evidence of trespass onto the air space of the plaintiff’s patio.42 After analyzing case law, the court said it is wrong to leave the sole option of a nuisance for property owners.43 The court estimated this was only done for practical reasons to keep construction from pausing.44 This is because the damage must be proved in a nuisance finding, and an injunction is not automatic: construction can continue.45 Meanwhile, with trespass issues, there would have been an automatic need to stop the crane and, thus, the construction.46 The judge argues, however, that “it is analytically inconsistent and practically unwise to compromise the cause of action to achieve a desired remedial outcome.”47 Although this was a British Columbia case, this argument is very influential as the Ontario Court of Appeal can also support this conclusion to rei1465152 Ontario Ltd. v Amexon Development Incntroduce the action for trespass. In , it was said that when the “plaintiff complains of an interference with property rights, injunctive relief is strongly favoured, and this is especially so in the case of direct infringement in the nature of trespass.”48 There needs to be more clarity on how Ontario cases would dispose of such an issue. With the rapid development and construction of Toronto and surrounding areas, inevitably, cases similar to these will further test the law in Ontario.
PART 2: Air Rights and Property Taxation: An Analysis of the Legal and Economic Considerations
The concept of air rights and their tax implications is vital to how it will be framed and used in developmental projects. The legal question in tax cases has historically asked whether air rights are classified as “land” under the Assessment Act.
The first authority in this direction to classify air rights as land and thus taxable comes from the 1971 Toronto Transit Commission v. Toronto (City) case.49 There is no clear explanation or mention of air rights in the case, but it can be seen that the judge implies that air rights were some real property. The issue, in this case, was whether the commercial tenant Davisville “occupied” the air rights attached to a parcel of land.50 In this case, the judge decided he had this right.51 This case is essential because without assuming that these air rights formed part of the land, it would not logically flow for the judge to come to that conclusion. At the very least, an argument could be formed that air rights are similar to land. This argument was later used in the Ontario Superior Court of Justice in 2012 for Exchange Tower Ltd. v Municipal Property Assessment Corp., Region No. 9.52 The facts of this case include two parking lots in downtown Toronto.53 These parking lots were severed in terms of their ownerships meaning that the underground portion was owned by someone separate then the air above them.54 The primary concerning legislation discussed in the case was the Assessments Act. In this case, the developer wanted their air rights classified as land under this Act.55 If these air rights were land, they could be further classified under the tax system as vacant land, reducing the developer’s tax payable.56 The judge did not look at the common law definition of the land but rather what the Assessment Act meant in section 1(1) of the definition of land. 57 The judge concluded that the definition in the Act is much broader than the definition in common law.58 Yet, the judge saw the examples listed in the Act as not being an exhaustive definition, so he concluded that air rights were not land for the purposes of this Act.59
Years later, the issue was addressed in 2010 at the Ontario Assessment Review Board in McGrath v. Municipal Property Assessment Corp (MPAC).60 This case was meant as a classification case to decide where the “air rights” would fit. The issue was of four parking lots in the City of Toronto.61 MPAC wanted the air rights to be considered part of the land attached to it and thus that the properties be classified in the Commercial Property Class.62 MPAC thus wanted the court to declare that the air rights alone were not land; they were just connected to the land below them. On the other hand, the appellants wanted to say that although the parking lot was in the Commercial Property Class, the “air rights” above the parking lot surfaces should be classified in the Vacant Land Subclass provided for in section 8 of the Act.63 The issue was to see if air rights fit under the regulation defining vacant land. In this definition, there were references to “land that has no building on it.” 64 The Board first looked at whether the air rights are even considered “land” to be able to classify it further.65 The Board found that the undeveloped air space above the property was NOT “land” within the meaning of the Act.66 In this case, MPAC successfully showcased that the air rights were not land, and thus the taxpayer should be required to pay more property tax. The decisions in Exchange Tower and McGrath have based conclusions on the particular facts of the individual cases. In these cases, the boundaries of air rights needed to be clarified. It was still left up to the courts and legislation to decide what would happen if these air rights were described in “strata plans” and thus had clear boundaries.67 Years later, this question is addressed in the 2022 Ontario Superior Court decision of Craft Kingsman Rail Corp v MPAC.68
Craft Kingsman is now a landmark case in Ontario real estate law that dealt with whether air rights should be considered land for property taxation.69 In this case, the developer purchased $50 million worth of air parcels with intentions to develop it in the future.70 The central issue was whether this empty space was considered land before anything was built. Following the logic from Exchange Tower, where the judge had decided the air rights were not land in themselves, one would have expected this to have the clear answer of no.71 This case, however, was different; there was a strata plan which defined the air space.72 Theoretically, if the judge decided that the air rights were land with the facts of Craft Kingsman, the two decisions would not conflict as the facts of the cases had been distinct. The Municipal Property Assessment Corporation (MPAC) argued the opposite of their position in McGrath this time; they argued that the existence of the defined airspace for these parcels should mean that the air rights were land.73 They revisited a similar old argument – that the definition of land in the Assessment Act was only a guideline and not an exhaustive list. The court looked at the case of Northern Broadcasting Co. v District of Mountjoy, where it was decided that trailers would be assessed as land.74 They looked to the legislative intent to tax items that had sufficiently been affixed to the land.75 This argument fell weak as the court followed the expected reasoning and concluded that air parcels would not be assessable for property tax.76 The judge concluded that nothing in the common law or the Assessment Act mentions air rights, even if they were defined in a strata plan.77 The Act only says that once the developer builds a deck and it becomes fixed to the ground that new “land” will be created under the definition.78 The developer agreed that when they developed their airspace, they would have to pay taxes on it, but in the meantime, their situation was not fitting under the Act. 79 Superior Court judge agreed that because the legislation is silent on the specific matter, the courts could not extrapolate and add air parcels to be considered land.80 Ultimately the court urged the legislators to act upon this and decide if they wanted to tax air parcels to draft new sections or words.81
The implications of this decision at the time were significant. If the air rights were considered not land, such as in this case, it would have allowed large amounts of taxes to slip out of the system. The potential $50 million of air rights could avoid paying any property tax year after year. This would create a significant tax loophole that developers could exploit. The MPAC argued that if the future decisions said these were not land, it would also create a floodgate of these cases.82 Many transactions would take place to lower the value of people’s land for taxation purposes. For instance, it would incentivize transactions where developers would sever their properties for the sole tax purpose of reducing their property’s value. For example, they would be able to sever and sell the air rights above their building, and then when it came time to calculate the building’s value, they could argue it was significantly lower without that air space. Although not based on the legal history of air rights, this policy reasoning could have played a significant role in future decision-making. The City of Toronto and MPAC appealed this 2022 decision which led to where we are going forward from 2023.
On appeal in 2023, the court held that air parcels qualified as "land" under the Assessment Act and that the application judge erred in his interpretation of the law.83 The court held that the air space was part of the real property and that the common law concept of property included as much space above the ground as the owner could potentially occupy or use.84 The judge thus adopted the old common law definition as previously discussed and concluded that air rights could be taxed.
With this recent decision, we can revisit fact cases similar to McGrath’s and predict that the outcome would now be different. Now that it has been established that the air rights in the case had been land, we only need to see if this fits the definition of vacant land. Section 1 of the Assessment Act defines vacant land as “land that has no buildings or structures on it.85 The taxpayer could divide the property for its assessment as the “Air rights” section remained undeveloped. This division would result in half of the property being designated as commercial vacant land while the other half would be deemed commercial property. This innovative concept allows taxpayers to utilize the division of air rights as “land” to showcase their currently owned land valued as less.
However, the situation is more complex than it may appear. Although MPAC may have won the legal battle concerning the taxation of solely air rights parcels, the issue of mixed land and air rights remains unresolved. Taxing such mixed-use properties remains a topic of debate, and there are differing opinions regarding how these should be taxed. One perspective suggests that such properties should be assessed as a whole, with the value of the land and air rights considered together.86 This approach would require a detailed analysis of the market value of the land and the air rights and their contribution to the property’s overall value. Another perspective proposes that the taxation of mixed-use properties should be based on a formula that considers the percentage of land and air rights present in the property.87 Under this approach, the taxpayer must pay tax on the land and air rights value separately, based on their respective contributions to the overall property value.
The decision to levy taxes on air rights transactions will also have significant implications for future deals that involve only the sale of air rights. Developers must factor these taxes into their budget before beginning the development projects, which could affect their decision to purchase air rights. On the other hand, the new tax regulations could encourage property owners not utilizing their air space to sell it, potentially causing a shift in the supply of air rights. These sales could also lower the value of properties when assessing their value for property taxes, which could further incentivize others to do the same. Overall, the new tax regulations have the potential to significantly impact the air rights market and the decisions of buyers and sellers in this space.
A) INCOME TAX OR CAPITAL GAIN
One interesting implication of these recent air taxing deals is how air rights sales will be taxed. The tax treatment of air rights largely depends on whether they are capital assets or income. If air rights are classified as capital assets, any gain from their sale would be subject to capital gains tax. However, the gain would be subject to income tax if considered income.
Considering the recent developments, where air rights have been redefined as land and placed under the real property category, the guidelines for how other real property is taxed in Canada would apply. For instance, if a developer intends to hold the land as a source of income, or if the airspace is used in a business, then the sale of the air rights would be treated as an investment and, thus, subject to capital gains tax. On the other hand, if the owner of the air rights purchases them intending to sell them at a profit (short-term), this would be categorized as an adventure in the nature of trade and, thus, considered as property income.
B) LAND TRANSFER TAX
As air rights are to be treated as land under the tax for yearly valuations, sellers/buyers will have to consider the impact of land transfer tax during the transactions. Under the Land Transfer Tax Act, every person who conveys land has to pay tax depending on the consideration paid.88 It will take time to understand where air rights fall under these categories. If we follow the exact definition of land under Assessment Act, air rights would be considered land and, thus, tax payable. In this section, however, there is its own definition of land. The definition of “land” includes “lands, tenements and hereditaments and any estate, right or interest therein, a structure to be constructed on land as part of an arrangement relating to a conveyance of land, a leasehold interest or estate, the interest of an optionee, the interest of a purchaser under an agreement to sell land, or goodwill attributable to the location of land or the existence thereon of any building or fixture, and fixtures.”89 With this unclarity, we look to the common law definition of land, and courts may conclude that air rights fall under this category as it is a right given to use the airspace.
The question of how much consideration air rights deals would have to pay tax on is a complex and evolving issue. In cases where a construction contract is entered into as part of the arrangement relating to the purchase of a vacant lot or lots, the value of the consideration is calculated on the total cost of the lot plus the cost of the construction contract.90 It is unclear whether air right contractual contracts would fall under the “vacant lot with a construction contract” category for tax purposes. However, in the case of an air right parcel bought for $2 million with a contract already in place to build the deck for $3 million, it is unclear whether the consideration would be placed at the $2 million or whether this air space would be considered a “vacant lot” such that tax would need to be paid on the $5 million.
Another argument could be made to treat air rights similarly to mineral rights for the purpose of Land Transfer Tax. Currently, the law only allows for an exemption on the transfer of mineral rights.91 This exemption applies when a person separates the ownership of the minerals below the surface from the ownership of the surface, resulting in two distinct titles – one for the surface and another for the minerals.92 This can be seen as analogous to air rights as they, too, can be separated into two titles. This argument could strengthen the case for treating air rights tax-free, especially if they are the only transferred rights. It is a proposal that may be considered in the future.
The lack of clarity around these issues means that future decisions and conflicts will likely test out these hypotheticals. It will be necessary for Ontario lawmakers and regulators to provide more guidance and clarity around the taxation of air rights and related contracts to ensure that taxpayers and investors understand their obligations to pay taxes.
PART 3: Sky-High Impact: Exploring the Intersection of Air Rights, Regulating Legislation, and Urban Development
In Toronto, where land is scarce and property values are rising, it is beneficial that our space is used efficiently. This is partially why the concept of air rights is gaining traction in the real estate investment industry. However, there are many issues to consider, and this section will discuss the practical elements of air rights. It will look at concepts such as purchasing and selling air rights in Canada, the legislation that regulates air rights and various urban development considerations. It will show that similar to other provinces, Ontario could have specific guiding legislation to regulate airspace.
One of the earliest indications that air rights can be treated just like the land is the creation of easements in air space. An easement is a right to use someone else’s land for a specific purpose. As recognized in the case of Suffteld v Brown, the court allowed an easement to “be established in space.”93 When the courts allowed an easement, they introduced the concept that legal rights can be associated with just the air space. This recognition led to further developments and, eventually, transactions selling and purchasing air parcels.
In our current law, where provinces are silent on the issue of creating these air parcels, we can adopt the previously discussed common law definition of air rights. The case law is still determining whether they could buy or sell the air rights separate from the land. However, in Ontario and British Columbia, there are mentions in the statute of air parcels and their treatment as their own separate parcel that can be bought, sold, and mortgaged just like any other piece of land. For example, In British Columbia, the Land Title Act says that “air space constitutes land and lies in grant”.94 This means it will be treated similarly to land, and there is no need for a lengthy common law analysis of whether the air rights are land.
One of the most significant difficulties surrounding using and selling air rights is the financial difficulties along the way.95 It can be costly to determine the value of the potential rights. It would involve consulting with experts as well as getting a property survey.96 There can also be debate about the actual value of it based on how the price is calculated. We can look to New York for an example of calculating air right values. Air rights in (New York City) range from $200 to $400 per square foot.97 A similar approach could be taken in Ontario. However, various developers continue to make their calculations based on the value of the surrounding land, the cost of construction, and the value of the proposed use. Similar uncertainty of this also causes difficulties when trying to finance the projects. Since this field is so new, only a few experts and banks would understand the project, and it may be costly to get their advice. Financial institutions may be less likely to support these projects due to their unconventional nature and the lack of precedents within a city.98 Overall, as much as it is appealing to start utilizing the space above one home to sell it, there are various financial barriers to cross.
The two main acts that currently govern the regulation of air rights in Ontario are the Planning Act and the Land Titles Act.99
Under the Planning Act, municipalities in Ontario have the authority to regulate the use and development of land, including the creation of air space parcels.100 Any subdivision of air rights would also have to comply with the subdivision rules, and thus, developers may need permission before being created into their parcel. British Columbia has more clear legislation on the subdivision process. Though their Land Title Act allows property owners, by “by the deposit of an air space plan, to create one or more air space parcels separated by surfaces and obtain indefeasible titles for them”.101 It further explains that an air space can be further subdivided following the Strata Property Act.102 The review process in British Columbia is also straightforward, as they outline what is required for the approval process. They request an application fee, a title summary report with a lawyer’s opinion on the subdivision impacts, a 3D site plan, architectural drawings, and a code report prepared by a code consultant or certified professional on how the air space parcel will comply with building codes.103 It is expected that as air rights gain popularity, the Ontario government will follow British Columbia by drafting new sections to address the current uncertainties within the law.
Municipalities are also allowed to create bylaws and zoning regulations impacting the height and density limits of the property and its use. In Toronto, typically, any sale would require approval from the City of Toronto as the City would want to verify that the proposed transaction will be consistent with the surrounding neighbourhood. This may also mean that property owners must enter into agreements with municipalities. For example, in Vancouver, the City requires owners who want to subdivide their air parcel to grant a covenant to the City, where the owners “release and indemnify the City of all liability from treating the building as a single entity, and owners agree to maintain common safety and maintenance systems and exits.”104
Zoning restrictions are sometimes seen to limit developers based on the maximum height/density. Purchasing the neighbouring air rights could increase the maximum restrictions for developers, which is why air rights pose such an attractive option. This additional density for buildings could also be more remarkable for the public. This is because it would allow additional residential housing in certain areas, which could help with the low supply of affordable housing. The Residences of College Park in Toronto is an example of this in Ontario. These consist of two residential buildings constructed on the College Park Mall air rights.
The other act that governs air space parcels is the Land Titles Act. It allows similar treatment to land in that air space parcels can be registered with their PINs and their legal descriptions. This is necessary to sell these air space parcels separately from the land underneath them. Practical Law has also released resources on how to understand air space parcels.105 They warn lawyers that searching titles for air parcels may be confusing.106 This is because the PINs given to these parcels look analogous to the ones given to other pieces of land.107 The key is to look at the reference plan and find more information before understanding that the sale is simply one of the air rights.108
Overall, the law surrounding air rights is developing through case law. It is becoming increasingly crucial for legislative authorities to clarify the law and how property owners should treat their air rights. Based on the treatment of air rights in Canada, it is clear that air rights do exist in the country. Ontario, in particular, needs legal frameworks to govern air rights’ sale, transfer, and taxation. This will help facilitate the development of dense urban areas while protecting property owners’ interests.
BIBLIOGRAPHY
LEGISLATION
Trespass to Property Act, R.S.O. 1990, c. T.21
Assessment Act, R.S.O. 1990, c. A.31.
Land Transfer Tax Act, R.S.O. 1990, c. L.6 at s. 2 (1).
Land Title Act, RSBC 1996, c. 250.
Planning Act, R.S.O. 1990, c. P.13.
Toronto/Lester B. Pearson International Airport Zoning Regulations, SOR/99-123.
JURISPRUDENCE
McGrath v. Municipal Property Assessment Corp., Region No. 14, 2010 CarswellOnt 4378.
Bury v Pope, Cro. Eliz., or 1 Cro., 118 (Croke’s Engl. K. B. Reports tempore Eliz.), 1586. 78 Ene. Rep. 375 (Moak’s E.R.), 1587.
Baten’s case (1610) 77 E.R. 810m.
Pickering v.Rudd (1815) 171 E.R. 70.
Fay v Prentice (1845) 135 E.R. 769).
Corbett v Hill (1870) L.R. 9 Eq. 671.
Lacroix v. R. (1953), [1954] 4 D.L.R. 470 (Can. Ex. Ct.).
Wandsworth Board of Works v. United Telephone Co (1870) L.R. 9 Eq. 671.
Commissioner for Railways v Valuer-General (1974) AC 328 Provy Council.
Bernstein v Skyviews and General Ltd. (1978) QB 479; (1977) 3 WLR 136.
Didow and Knox v Alberta Power Ltd. (1988) 88 AR 250; (1988) ABCA 257.
Vancouver Sea to Sky Region Assessor, Area No. 09 v Amacon Group 2016 BCSC 146 at para 56.
Lacroix v. The Queen, 1953 CarswellNat 272, [1954] 4 D.L.R. 470.
Harcourt v. Canada (Minister of Transport), 1973 CarswellNat 93, 1973 CarswellNat 93F.
Toronto (City) v Craft Kingsmen Rail Corp, 2023 ONSC 292.
Wollerton & Wilson Ltd. v. Richard Costain Ltd. and Lewvest Ltd. v. Scotia Towers Ltd, (1970) 1 W.L.R. 411, [1970] 1 All E.R. 483; (1981), 19 R.P.R. 192, 10 C.E.L.R. 139.
Kingsbridge Development Inc. v. Hanson Needler Corp (1990) OJ 1070.
Janda Group Holdings Inc. v Concost Management Inc. 2016 BCSC 1503.
OSED Howe Street Vancouver Leaseholds Inc v FS Property Inc, 2020 BCSC 1066.
1465152 Ontario Ltd. v Amexon Development In, 2015 ONCA 86.
Toronto Transit Commission v. Toronto (City,) (1971) 18 D.L.R.
Exchange Tower Ltd. v Municipal Property Assessment Corp., Region No. 9, 2012 ONSC 415.
Craft Kingsman Rail Corp v Municipal Property Assessment Corporation, 2022 ONSC 2222.
Northern Broadcasting Co. v District of Mountjoy, (1950) S.C.R. 502.
Toronto (City) v Craft Kingsmen Rail Corp, 2023 ONSC 292.
Suffteld v Brown, (1864), 33 L.J. Ch. 249.
SECONDARY MATERIALS
Toronto Pearson, “Our Noise Management Program” (2023), online
Jack Richardson, “Private Property Rights in the Air Space at Common Law” (1953) 31:2 Can. B. Rev.
Mansion Global, “Air Rights”, Sept. 15 2022 accessed Mar. 22 2023.
City of Toronto, “Response to Administrative Inquiry regarding drone safety in the City of Toronto” (September 29, 2020), online at p. 5.
Chris Humfries, “Appraisal of air rights: an introduction”, online
Ministry of Finance, “Calculating Land Transfer Tax”, online
Nathan Bunio, “Air Rights Development and Public Assets: An Implementation Handbook for Public Entities” (April 2016), online
Sonja Gosine, “How Do Air Rights Work in NYC Real Estate?” (April 2022), online.
“Practical Law Canada Commercial Real Estate, Ontario Superior Court Confirms That Air Parcels Are Not Assessable for Property Tax”, (June 2022), online.
Endnotes
2 McGrath v. Municipal Property Assessment Corp., Region No. 14, 2010 CarswellOnt 4378 at para 84 [McGrath].
3 Jack Richardson, “Private Property Rights in the Air Space at Common Law” (1953) 31:2 Can. B. Rev.
5 Bury v Pope Cro. Eliz., or 1 Cro., 118 (Croke’s Engl. K. B. Reports tempore Eliz.), 1586. 78 Ene. Rep. 375 (Moak’s E.R.), 1587.
7 Baten’s case (1610) 77 E.R. 810m;
Pickering v.Rudd (1815) 171 E.R. 70;
Fay v Prentice (1845) 135 E.R. 769).
12 (1953), [1954] 4 D.L.R. 470 (Can. Ex. Ct.), at para 474).
13 (1974) AC 328 Provy Council.
14 (1978) QB 479; (1977) 3 WLR 136 [Skyviews].
18 (1988) 88 AR 250; (1988) ABCA 257.
22 2016 BCSC 146 at para 56.
24 Lacroix v. The Queen, 1953 CarswellNat 272, [1954] 4 D.L.R. 470.
26 Harcourt v. Canada (Minister of Transport), 1973 CarswellNat 93, 1973 CarswellNat 93F.
30 Toronto/Lester B. Pearson International Airport Zoning Regulations, SOR/99-123.
32 Trespass to Property Act, R.S.O. 1990, c. T.21
34 Toronto (City) v Craft Kingsmen Rail Corp, 2023 ONSC 292.
36 (1970) 1 W.L.R. 411, [1970] 1 All E.R. 483; (1981), 19 R.P.R. 192, 10 C.E.L.R. 139.
37 (1990) OJ 1070;
Janda Group Holdings Inc. v Concost Management Inc. 2016 BCSC 1503 at para 23.
38 OSED Howe Street Vancouver Leaseholds Inc v FS Property Inc, 2020 BCSC 1066.
48 2015 ONCA 86 at para 23.
52 2012 ONSC 415 [Exchange Tower].
67 Supra note 52 at para 23.
68 2022 ONSC 2222 [Craft Kingsman].
83 Toronto (City) v Craft Kingsmen Rail Corp, 2023 ONSC 292.
85 O. Reg. 282/98: GENERAL under
Assessment Act, R.S.O. 1990, c. A.31.
88 Land Transfer Tax Act, R.S.O. 1990, c. L.6 at s. 2 (1).
93 (1864), 33 L.J. Ch. 249.
94 RSBC 1996, c. 250 at s. 139.
99 Planning Act, R.S.O. 1990, c. P.13;
Land Titles Act, R.S.O. 1990, c. L.5.