What is a "Regulatory" or "Constructive" Taking?

A public authority pursuant to its statutory powers may regulate the use of land or restrict other property rights of the owner, and although title to the land is unaffected, the landowner may feel the impact of the regulation as acutely as if the land had been expropriated. In the United States and some European countries, the law recognizes a compensable “regulatory taking” where the regulations strip the land of all economic value, or force the owner to suffer a physical intrusion into the land, or are said simply to go “too far”.

This is not the law in Canada. Instead, the principle that the right to compensation must be based in statute means that an owner is not entitled to compensation unless the restrictions of the owner’s rights are so drastic that they should properly be regarded as an effective taking of the land within the meaning of the Expropriation Act. This is known as “de facto” or “constructive” taking of land.

The traditional view in Canada, however, has been that there is no expropriation unless the government acquires the title to the land from its owner. The Supreme Court reiterated this view in its 2006 decision in Canadian Pacific Railway Co. v Vancouver (City). In that case it held that a de facto taking requires first, “an acquisition of a beneficial interest in the property or flowing from it”, and second, “removal of all reasonable uses of the property”. The decision leaves the law uncertain as to whether owners must be compensated for a de facto taking. The door may be open, in theory, for successful claims in the future, but the threshold is very high and will not be met in the ordinary case.