Casual Legal: Status of a franchisor in an expropriation

By Shauna Finlay
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider

The Court of Appeal recently addressed the question of whether a franchisor who neither owns the property nor leases the land is an “owner” by virtue of possessing or occupying expropriated land under the Expropriation Act.

A franchisor is the party who owns and operates the brand and a franchisee contracts with the franchisor to operate the branded business. In this case, the franchisor leased the premises for the franchisee and the franchisee sublet the premises from the franchisor.

The municipality executed a section 30 agreement (where the interest in land is acquired by the municipality but compensation is to be addressed later) with the franchisee and franchisor and, therefore, became the lessee pursuant to the assignment of the sublease. Once this transaction was completed and the franchisee vacated the space, the franchisor ceased to earn income from that location. Further, the landlord continued to demand rent from the franchisor.

The Land and Property Rights Tribunal (“LPRT”) found the franchisor was an owner under the Expropriation Act and the municipality appealed this determination to the Court of Appeal. The LPRT found the franchisor had exercised control over the property by virtue of the sublease and had a right to occupy the premises in certain circumstances. The municipality argued the “control” over the premises had to be more substantial. 

Ultimately, the Court of Appeal found the decision by the LPRT, that there had been sufficient control to consider the franchisor an owner, was reasonable.

This decision highlights the broad manner in which “owner” is defined in the Expropriation Act which municipalities should keep in mind when expropriating property. The number of “owners” with claims to compensation can materially impact the estimated cost to acquire a property through an expropriation.  

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or send an casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or send an riskcontrol [at] abmunis.ca (email) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.