In Smith v. Clearwater Park GP Inc., 2025 BCSC 1239, the BC Supreme Court heard two petitions related to the proposed construction of a four-unit townhouse on a property in Squamish (the “Property”).  The Property was subject to a common law building scheme and restrictive covenant in favour of the original developer each restricting construction on the Property to a single-family dwelling (the “Charges”).  The Court declared both of the Charges as obsolete and cancelled each of them pursuant to section 35 of the Property Law Act, RSBC 1996, c. 377, allowing for the construction of the four-unit townhouse to proceed.

Notably, the Court declined the request, made by neighbours who opposed the development of the four-unit townhouse, to exercise its discretion to refuse to cancel the Charges (despite being satisfied that the Charges were obsolete) based on, among other factors, the public interest in increasing housing supply.

Background

A “common law” building scheme refers to a scheme submitted for registration prior to the enactment of the Land Title Act, RSBC 1996 c. 250 (which expressly allows for the creation of statutory building schemes).  Building schemes function similarly to restrictive covenants, in that they are registered on title, run with the land, and may restrict or prohibit future development. Restrictions of use under a building scheme are to the benefit of all of the lots within the scheme, meaning the owners of other lots may enforce those restrictions on other owners within the scheme.

In the case at hand, the building scheme was registered by the original developer of the parent parcel of the Property (the “Original Developer”) in 1959 and applied to approximately 200 properties in the area including the Property (the “Building Scheme”).  The Building Scheme provided that future construction in the subject area was restricted to single-family homes unless the Original Developer or its appointed “approving officer” authorized multiple dwellings.  The Building Scheme was also registered in the form of a restrictive covenant on title to some of the 200 properties, including the property at issue.

The developer Clearwater Park GP Inc. (“Clearwater”) purchased the Property in 2024, with the intention of constructing a four-unit townhouse.  The District of Squamish (“Squamish”) granted Clearwater a development permit for the construction.  Squamish’s zoning bylaws for the subject area allowed for the proposed construction, and the objectives and policies of Squamish’s Official Community Plan (“OCP”) supported the development of higher-density housing.

The owners of a neighbouring property (the “Smiths”) brought a petition seeking an injunction preventing the construction on the basis of the Building Scheme.  The Smiths raised a host of concerns with respect to the proposed development on the Property, opposing any increase in density to their “private, safe, quiet and tree-lined neighbourhood.” 

Clearwater, in turn, brought a petition seeking the cancellation or modification of the  Building Scheme and restrictive covenant.  Verhoeven J. heard the petitions together and released a single set of reasons.

The Test for Cancelling a Building Scheme or Restrictive Covenant

Section 35 of the Property Law Act provides a mechanism whereby a “person interested in land” may apply to the court to modify or cancel a building scheme or restrictive covenant.  The court may make such an order in the following circumstances:

1. Because of changes in the character of the land, the neighbourhood, or other circumstances the court considers material, the registered charge or interest is obsolete,

2. The reasonable use of the land will be impeded, without practical benefit to others, if the registered charge or interest is not modified or cancelled,

3. The persons who are or have been entitled to the benefit of the registered charge or interest have expressly or impliedly agreed to it being modified or cancelled,

4. Modification or cancellation will not injure the person entitled to the benefit of the registered charge or interest, or

5. The registered instrument is invalid, unenforceable or has expired, and its registration should be cancelled.

The Court noted as follows with respect to the Court’s powers under this section (at para. 43):

Section 35 is a comprehensive code permitting modification or cancellation of registered charges.  The authority of the court to cancel or modify an easement is constrained by the specific grounds set out in s. 35(2) of the PLA.  Sections 35(2)(a) to (e) are to be read disjunctively; in exercising its discretion under s. 35(2) the court may make an order to modify or cancel a charge against an interest in land if it is satisfied that the conditions in at least one of subparagraphs (a) to (e) have been met: Vandenberg v. Olson, 2010 BCCA 204 at paras. 23–25; Tri-X Timber Corporation v. Rutherford, 2012 BCCA 71 at para. 29.

Verhoeven J. decided the case on the basis of the first statutory ground of consideration (i.e. obsolescence).  “Obsolete” in this context is defined in accordance with its dictionary definition: “no longer practised or used; discarded; out of date.”

The Court noted that the test of whether a charge is obsolete is not satisfied on the basis of balancing the rights of the parties, but rather by a consideration of the nature and purpose of the charge itself in the circumstances of the proposed conflicting use.  

The Court’s analysis

The Court accepted the Smiths’ position that one apparent objective of the Building Scheme was to limit construction to single family residences.  However, the Building Scheme specifically provided that the Original Developer retained discretion to allow the construction of other types of housing.  Moreover, the Building Scheme required the Original Developer’s approval for construction of any kind.  As a result, the Court found that the Building Scheme’s primary purpose was allowing the Original Developer to retain control and general authority as to the development of the neighbourhood. 

A key fact for the Court was that the Original Developer ceased to exist in 1983 and never appointed an “approving officer” to exercise approval discretion following the developer’s dissolution.  Numerous aspects of the Building Scheme that required developer approval were therefore ignored or unenforceable as of that date.  The Court held that as a result the Building Scheme was obsolete within the meaning of the Property Law Act due to “other circumstances the court considers material” (s. 35(2)(a)).

The courts retain discretion under the Property Law Act to refuse cancellation of a charge despite such relief under section 35 of the Property Act being made out on the facts (Watermark Developments Ltd. v Kelowna (City), 2024 BCSC 2188).  The Smiths argued that the court should exercise its discretion to refuse cancellation of the Charges in this case because cancellation would be “inequitable,” arguing that “they bought their home with the expectation that the neighbourhood characteristics they value would be preserved.”  In rejecting this argument, the Court noted as follows (at para. 78):

I am not without sympathy for the desire of the Smiths and other property owners and residents of the area to preserve their neighbourhood as it is, including in particular its single family, low-density nature.  However, in relation to the exercise of the court’s residual discretion, the need of the community for additional housing is also relevant. Squamish’s 2021 population was 23,819.  Its population grew by 22.2% from 2016 to 2021. It is one of Canada’s 10 fastest-growing communities. It forecasts that its population will exceed 40,000 by 2040.  Consideration of the public interest does not favour the position of the Smiths that the court should refuse to cancel the building scheme.

The Court went on to dismiss the orders sought by the Smiths and cancel the Building Scheme, with costs to Clearwater.

Takeaways for Local Governments

Local governments are increasingly called upon to facilitate the construction of additional and higher-density housing in their communities.  Restrictive covenants and building schemes may interfere with such development, especially where neighbouring property owners entitled to the benefits of such schemes or covenants oppose construction. 

Smith v. Clearwater stands for the proposition that, where a local government’s zoning bylaws and OCP support high density development in a subject area, the public interest in increasing housing supply may be a factor for the court in determining whether to exercise its discretion to cancel a building scheme or restrictive covenant, provided the applicant has satisfied the court that the scheme or restrictive covenant is obsolete. 

Jacob Gehlen

Jacob Gehlen is an associate in SMS Law’s litigation group. Jacob has extensive litigation experience across diverse areas of practice, including insurance defence, environmental law, commercial litigation, regulatory law, construction law, and defamation. He has appeared as lead counsel at all levels of court in British Columbia.