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Buyer Beware: SCC Decision a Warning to Property Purchasers

Buyer Beware: SCC Decision a Warning to Property Purchasers

Last month, the Supreme Court was tasked with deciding whether acquisitive prescription may operate in the absence of a judicial declaration, and notwithstanding another party’s registration of rights. The majority’s answer in Ostiguy c. Allie, 2017 SCC 22, perhaps surprisingly, was yes.

The parties to the litigation owned adjacent lots on which they had their respective chalets. The respondent Hélène Allie and her family had been using a parking space on their then-neighbour’s property between 1994 and 2011. It is uncontested that during this period, the family’s possession of the parking space was peaceful, continuous, public and unequivocal: the previous owners of the adjacent lot had not objected to this use.

However, in 2011, the appellants Alain Ostiguy and Valérie Savard purchased the lot adjacent to Allie’s. A few months later, they applied for an injunction to stop the respondent from using the parking space. Allie argued that she had acquired the parking space by prescription – even though she had never obtained a judicial declaration to that effect before the new owners’ title was recorded in the land register.

Gascon J., writing for the majority, first confirms that all parties had legitimate rights to assert: while the appellants had acquired their title legally by act of sale, the respondent’s effective possession of the parking space was just as legitimate. He proceeds into a general discussion of the effects of possession on the operation of acquisitive prescription in Quebec civil law. Specifically he notes that, while art. 2918 CCQ requires an individual to obtain a judgment in order to confirm a right acquired by prescription, there remains a certain degree of controversy as to whether this judgment recognizes a right that already exists, or creates this right (para. 48). That question becomes important to the weight that the majority grants to the effects of registering a right.

Gascon J. then undertakes a historical analysis of the dispositions of the Civil Code relating to the publication of land rights and title. He ultimately concludes that, after attempting to give the publication of rights a significant probative value equal to an irrefutable presumption of the existence of a right, the legislator had conceded that doing so would be too difficult. The legislator consequently reverted to the publication regime that had been in place under the Civil Code of Lower Canada—namely, one in which publication plays a more limited role in confirming the existence of a right.

Thus, where registration of a right creates a simple (and refutable) presumption of the existence of that right, this presumption may be rebutted by proof to the contrary—including proof that the right does not exist, for example if the conditions of acquisitive prescription have been met by another party.

Under this more limited role of the publication of rights, then, “les droits validement acquis par prescription opèrent sans égard aux droits inscrits au registre foncier” (para. 40).

Notably, the existence of rights acquired by prescription does not depend on the existence of a judgment confirming that prescription—despite the requirement, at art. 2918 CCQ, that a person may acquire ownership of an immovable they have possessed for 10 years only upon a judicial application.  Gascon J. concludes that, regardless of the meaning of art. 2918, “l’intimée peut se voir attribuer le droit de propriété qu’elle convoite malgré la publication du titre des appelants, puisque sa possession remplit les critères établis par le Code et que la prescription acquisitive opère sans égard aux droits inscrits au registre foncier” (para. 71).

Gascon J. does go on to express the view that a judgment under art. 2918 does not create a right of acquired ownership but is simply declarative in nature, retroactively confirming the existence of a right that already existed (para. 86). However, he also makes it clear that he is not formally opining on the interpretation of this article, as doing so is not necessary to resolve the appeal.

Yet while the majority downplays art. 2918, focusing primarily on the interpretation of the Civil Code’s provisions concerning the publication of rights, we should not understate the importance of the Code’s rules on prescription. Côté J.’s dissenting opinion focuses almost entirely on the interpretation of art. 2918 CCQ. She views the shift from a 30 years prescriptive period under the CCLC, to a 10 year period under the CCQ, as indicative of an expansion of possessors’ rights, which is simultaneously coupled with a novel condition that the right of ownership upon the expiry of 10 years may only be acquired upon a judicial application (para. 126)

On a practical level, Côté J.’s proposed interpretation of art. 2918 CCQ is attractive. The stance adopted by the majority has the potential to lead to significant uncertainty in transactions involving property, since purchasers of large areas of land will have to live with an ongoing risk that a part of that land has been acquired by prescription without even the prior owner’s knowledge.

Indeed, in light of the majority’s (non-conclusive) opinion on the interpretation of art. 2918 CCQ, an acquirer of property by prescription has no real incentive to seek out a judgment confirming that ownership! As Côté J. rightly points out, on a reading of art. 2918 as declarative and retroactive,

… a prudent possessor who has met the requirements of arts. 2918, 2966(1), and 2968(1) and has registered a judicial application in advance would be worse off than a possessor who has not, since the latter would benefit from his or her inaction through the retroactivity of the judgment. Incentivizing this inaction permits title to remain precarious indefinitely — the subject of some future dispute. (para. 153)

In such situations, in light of the majority’s decision in this appeal, the only recourse for a purchaser who is ultimately found to be without title is a personal action against a seller who was aware of the encroachment on the land (art. 1724, para. 2 CCQ). This, of course, is likely to be cold comfort to a purchaser who may have to go through a lengthy judicial process to establish ownership, only to discover at the end that he or she does not actually own the title to the property in question.

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