Summary
1255870 Ontario Limited v. Metrolinx[1] is a recent decision of the Ontario Land Tribunal with respect to the quantum of compensation payable by Metrolinx to 1255870 Ontario Limited (the “Claimant”) due to the expropriation of its property, municipally known as 68-70 Parliament Street, Toronto. In this matter the Tribunal was tasked with making a determination of the highest and best use of the property and its dollar-per-square-foot buildable value.
The Tribunal also had to tackle the issues of whether the scheme for which the property was expropriated was properly screened out in accordance with Section 14(4)(b) of the Expropriations Act and whether the lease of a separated, but related, corporation at the property should warrant a deduction in the compensation payable. This article focuses on these two issues.
Background
The Subject Property was located in downtown Toronto, at the intersection of King Street East and Parliament Street. On May 18, 2021, Metrolinx expropriated a full fee simple taking of the Subject Property for the purpose of the new Ontario Subway Line. A separate but related corporation to the Claimant had operated a Porsche car dealership as of the date of the expropriation at the Subject Property.
The Claimant took the position that after screening out the scheme for which the Subject Property was expropriated, the market value of the Subject Property was $97,127,800 based on it having a development potential of 519,400 square feet, valued at $187 per square foot.
In contrast, Metrolinx took the position that the market value of the Subject Property was $46,570,000 based on it having a development potential of 325,448 square feet, valued at $170 per square foot and certain deductions being made, including a deduction for a leasehold encumbrance.
Screening out the “Scheme”
Section 14(4)(b) of the Expropriations Act[2] prohibits the Tribunal from taking into account any “increase or decrease in the value of the land resulting from the development or the imminence of the development in respect of which the expropriation is made.” This principle, commonly referred to as the “Screening out the Scheme,” is intended to ensure that property owners are neither unfairly enriched nor penalized by the government project that triggered the expropriation.
In this case, an issue was when the “Scheme” began and what impact, if any, it had on the valuations proposed by the Claimant. The parties agreed that the Scheme must, at a minimum, include the April 10, 2019 Provincial announcement of the Ontario Line transit project. However, they strongly disagreed on the breadth and scope of the Scheme.
Metrolinx argued that the Ontario Line was a continuation of earlier transit planning, including the Downtown Relief Line, and that the long history of planning for that area, spanning over twenty years, should be treated as part of the “Scheme” to be screened out of valuation. Metrolinx further argued that the Claimant’s expert witnesses had failed to screen out the Scheme when providing their opinions on the development potential and value of the Subject Property.
The Claimant, by contrast, maintained that the Ontario Line was a distinct and more recent project that was unrelated to the Downtown Relief Line. It further argued that its proposed development concept was grounded in the site’s planning context and development potential, independent of any Scheme-related influence. The Tribunal ultimately agreed with the Claimant’s position and identified the “Scheme” as commencing upon the Ontario Line announcement in 2019.
A key aspect of the Tribunal’s analysis was the burden of proof concerning the Scheme and its potential influence on valuation. In its review of the evidence, the Tribunal noted that the Claimant’s expert witnesses had provided conclusory assertions that they had screened out the Scheme and Metrolinx’s expert witnesses had argued there was a correlation in height increases for development applications following the Ontario Line announcement.
The Tribunal clarified that there is no rigid rule assigning the burden of proof entirely to one party. Instead, both parties share a duty to assist the Tribunal in determining whether and how the Scheme affected market value.[3]
The Claimant must provide valuation evidence that, on its face, does not rely on value increases attributable to the Scheme.[4] In this case, the Claimant’s experts, including planners and appraisers, testified that the proposed development scenario was based on planning policy, site characteristics, and market precedent, not on the Downtown Relief Line or Ontario Line announcement.[5]
With respect to the expropriating authority, the Tribunal emphasized that it is not relieved of its own responsibilities by merely alleging that the Claimant failed to disprove the Scheme’s influence. Instead, it must actively present credible evidence, if it exists, on what specific “increase or decrease in value” resulted from the Expropriation.[6] This could include evidence of City approvals that explicitly relied on the Ontario Line, or expert testimony showing how and why local property values changed after the project was announced.
Tribunal’s Conclusion on the Scheme
Ultimately, the Tribunal found that there was no persuasive evidence that the Claimant’s proposed highest and best use of the subject property or valuation improperly relied on the Ontario Line announcement or the Downtown Relief Line. The Tribunal accepted the Claimant’s position that the proposed development density and design were in line with prevailing planning approvals in the area and would likely have been achieved regardless of the Ontario Line.
A central theme in the Tribunal’s reasoning was the need to limit the expansiveness of what constitutes the Scheme. Metrolinx’s position that the Scheme should encompass not only the 2019 announcement of the Ontario Line, but also the decades-long history of transit planning in the area, including earlier concepts like the Downtown Relief Line, was determined to be too expansive. The Tribunal cautioned that adopting such a broad view of the Scheme would unfairly penalize the Claimant by excluding from consideration the benefits of planning trends that had long influenced development in the area. As the Tribunal, adopting the Claimant’s position, succinctly stated:
“The scheme cannot be so expansive so as to deprive the Claimant of the same benefits arising from the decades of transit planning that have accrued to all the properties in the immediate area, simply because the Claimant was the unfortunate party to suffer the consequence of the expropriation.”[7]
The Tribunal concluded that the Scheme in this case was limited to the April 2019 Ontario Line announcement. It found no basis in the evidence to support a finding that the broader history of transit planning had influenced land values in a way that would justify screening out the Claimant’s proposed valuations. By adopting a more restrained, evidence-based approach, the Tribunal reinforced the principle that the exclusionary rule in section 14(4)(b) of the Expropriations Act must be grounded in demonstrable market impacts, not speculative or retrospective planning narratives.
Impact of the Lease on the Market Value Compensation
Metrolinx had argued that approximately $14,000,000 should be deducted from the market value on account of an existing lease between the Claimant and a related tenant which operated at the Subject Property.
The basis for Metrolinx’s argument was that the lease did not contain a term that explicitly allowed for the Claimant to terminate it early and that under CUSPAP (Canadian Uniform Standards of Professional Appraisal Practice) a real estate appraiser must consider and value that encumbrance as a deduction from market value. In essence, Metrolinx’s argument was that the lease should be treated as any lease normally would, despite the fact that there was an element of common control between the Claimant and the tenant.[8]
However, in the circumstances of this case, the tenant had not made any claims and in fact released all claims against Metrolinx related to the market value compensation for the expropriation. The evidence before the Tribunal also was that the tenant and the Claimant are related, non-arms length entities. Accordingly, the Tribunal concluded that there was a basis for the Claimant’s assertion that upon execution of its own redevelopment effort – or a theoretical sale to someone else – it would be able to accomplish an orderly relocation of the Tenant at some de minimis cost (i.e. the tenant would pay the rent due until it moved out and no termination costs would be imposed on the Claimant in that event).[9]
The Tribunal concluded that to treat the lease as an encumbrance would ignore practical reality and that in this factual situation, there would be no true cost borne by the Claimant. However, it was specifically noted by the Tribunal that had the companies not been non-arms length and had the tenant been pursuing a claim pursuant to the lease, the considerations would change and it could be appropriate for there to be a deduction for the leasehold encumbrance.[10]
Conclusion
After determining all the issues raised by the parties, the Tribunal ultimately concluded that Metrolinx was liable to pay the Claimant $87,825,000 as compensation for the expropriation of the Subject Property.
Overall, some key takeaways from this decision are:
(1) If there is a live issue of whether or not the Scheme has influenced the value of the taking, the parties should attempt to empirically demonstrate whether or not there was an actual increase or decrease in value;
(2) The Scheme for which a property is expropriated should not be interpreted so as to be so expansive it deprives a claimant of the same benefits that have accrued to all the properties in the immediate area simply because the Claimant was the unfortunate party to suffer the consequence of the expropriation; and
(3) When determining whether deductions for leasehold encumbrances should be made, the practical reality of the impact (if any) of the lease must be considered and one should not blindly apply a deduction merely because a lease exists.
[1] 1255870 Ontario Limited v. Metrolinx, 2025 CanLII 50810 (ON LT)
[2] R.S.O. 1990, c. E. 26.
[3] At para 51.
[4] At para 51.
[5] At para 56.
[6] At para 51.
[7] At para 66.
[8] At para 107.
[9] At paras 104 – 107.
[10] At para 108.
Originally published in the June 2025 Toronto Law Journal.
This publication is intended for general information purposes only and should not be relied upon as legal advice.
