Proposed Legislation Addresses Multi-Phased Developments

March 30, 2007

The Provincial government has announced an amendment to the Local Government Act which will permit a developer and a local government to enter into “phased development agreements”. Under such an agreement, a local government will agree that amendments to any zoning bylaws listed in the agreement will not apply to the development during the agreement’s term, unless the developer expressly agrees that it should apply.

At this point, phased development agreements will not be possible with the City of Vancouver, but it will be possible for developers to make such agreements with all other local governments in B.C.

The idea of protecting developments from changing zoning is not new. Until 1978, local governments were permitted to enter into land use contracts which, when registered against the title to the land, effectively froze the zoning. Since 1978, longer term projects have faced the risk of political climate change and new zoning restrictions being placed on successive phases of a development.

Currently, developers are only protected from new land use regulations passed in the 12 months after the developer submits an application for subdivision approval (see section943 of the Local Government Act).

The risk that subsequent zoning changes pose to multi-phased developments under our current framework was illustrated in a profound way in the 2000 Supreme Court of Canada decision in Pacific National Investments.

In that case, PNI had planned to develop five parcels of land on Victoria’s harbour front in two phases. To obtain the necessary permits and approvals for phase one and to ensure that phase two would go ahead under its current zoning, PNI invested considerable funds in public roads, parkland, walkways and a new seawall. PNI developed phase one and applied for a development permit for phase two. Residents (including the residents of phase one) objected. The City responded by down-zoning the phase two lands, rendering any financially viable or practical utilization uneconomic. While PNI’s court challenge ultimately resulted in some compensation for the excess public amenities PNI front-ended, it was not permitted to realize the potential of its phase two lands and it took years of litigation and a remarkable three trips to the Supreme Court of Canada to obtain even that.

The Supreme Court’s reasoning was that without express legislation permitting it to do so, a local government cannot be bound by an agreement which fetters its legislative power. The proposed amendment to the Local Government Act appears to be the province’s belated response to the consequences of the PNI case. Phased development agreements will provide a stable platform from which a developer can confidently expend funds on infrastructure and related costs on a long term project, without the risk of having the zoning change before it is complete.

The amendment has been passed by the legislature, but there is no indication when it will be formally implemented. When it is implemented, developers that successfully negotiate a phased development agreement can be assured that the developments subject to the agreement will not be affected by amendments to or the repeal of zoning bylaws governing the use, siting, size and dimensions of buildings and other structures. Nor can a board of variance impose changes upon such matters without the developer’s express approval.

Unfortunately, phased development agreements will remain somewhat limited in scope. Only zoning bylaws may be listed in the agreements, leaving the developer vulnerable to varying development cost charges, subdivision costs and other bylaws of general application.

Local governments may designate areas as development permit areas for the purpose of protecting the natural environment, protecting developments from hazardous conditions and protecting farming. In these areas, notwithstanding a phased development agreement, the local government may impose additional requirements and changes through the development permit process.

As well, zoning changes made in order to comply with provincial or federal laws, court orders and binding arbitration awards, or to address hazardous conditions, will be binding upon the development, notwithstanding an existing phased development agreement.

The maximum term of the phased development agreement will be 10 years, which, with additional approval, may be extended to 20 years. Council cannot agree in advance to renew the agreement. Approving or amending a phased development agreement will require a bylaw, with all of the public scrutiny and delay that entails.

Local governments have a well established appetite for requiring developers to front-end infrastructure and related costs and public amenities. The proposed phased development agreement scheme does not supplement the current tools that developers have for recovering excess capital and infrastructure development costs incurred at the behest of the local government. This new form of agreement does promise a long term solution for those developers who seek to avoid being blindsided during the course of development by subsequent zoning amendments. Ironically and perhaps typically, phased development agreements may become a carrot that local governments will offer in return for greater “voluntary” contributions.

The amendments to the Local Government Act to permit phased development agreements were brought into force on June 21, 2007. Keep up-to-date with BCRElinks.com, where we will post the reaction of the development community to this exciting development.

Stu Wells and Michal Jaworski

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