British Columbia Court Finds Proprietary Estoppel in Not-for-Profit Leasing Dispute

By Adriel N. Clayton and Nancy E. Claridge

Feb 2024 Charity & NFP Law Update
Published on February 29, 2024



The Supreme Court of British Columbia considered a pair of petitions by not-for-profits concerning a dispute over the use of a meeting hall in the decision, Royal Canadian Legion (Shalom Branch No. 178) v Maple Crest Housing Society, released on February 9, 2024. In the early 1970s, the Royal Canadian Legion, Shalom Branch #178 (the “Shalom Branch”) purchased property and constructed an apartment building for low-income seniors, including Jewish war veterans. It then incorporated the Maple Crest Housing Society (the “Society”) to hold title to the property, obtain financing, oversee construction, and manage the apartment building. A meeting hall was later constructed by the Society on its lands adjacent to the apartment building, and the Shalom Branch began to use the meeting hall for its functions without any written agreement.

Relations between the two parties began to deteriorate in early 2018, largely as a result of the Society’s increased rent demands and Shalom Branch’s cessation of payments to the Society, resulting in the Society sending two notices of termination to the Shalom Branch.

At court, the Society sought a declaration that the Shalom Branch was a licensee or tenant of the meeting hall. Conversely, the Shalom Branch sought a declaration that the it was a trustee that held a beneficial interest in the meeting hall, which was held in trust by the Society for the Shalom Branch.

The court found that the Shalom Branch had historically paid a modest fee, which the court held to be “payments towards the cost of utilities rather than occupational rent underlying some form of tenancy.” The Shalom Branch also donated money to the Society from time to time, and maintained insurance on the meeting hall and paid for repairs and upkeep. On this basis, the court determined that the parties had a “handshake deal” for the Shalom Branch to use the meeting hall for a low, recurring rent. However, the Society could not prove on a balance of probabilities that its relationship with the Shalom Branch was one of a landlord and tenant.

The court next considered whether a trust existed to support the Shalom Branch against eviction, ultimately concluding that there was no trust, but the doctrine of proprietary estoppel (explained below) was found to be a more flexible equitable remedy for the Shalom Branch.

In determining proprietary estoppel, the court applied the three-part test set out in Cowper-Smith v Morgan, requiring:

(1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word.

The court was satisfied that the three-part test had been met in this case – (1) the Society assured the Shalom Branch that it could use the meeting hall for a low recurring rent; (2) Shalom Branch relied on the Society’s assurance by paying low rent; and (3) the Shalom Branch suffered detriment by paying for repairs and upkeep on the belief that it could use the space and was responsible for its upkeep. It therefore held that the Shalom Branch was entitled to obtain an equitable remedy on this basis, and ordered, among other things, that the Shalom Branch be allowed to continue using meeting hall for an annual rent of $1,200, and that the Society could adjust the rent annually in line with inflation.

This case is an example to charities and not-for-profits of the courts’ willingness to search for equitable remedies to properly reflect the intended arrangements between parties. As well, as this dispute could have potentially been avoided in light of an agreement, this case is also a helpful reminder to ensure that the relationship and arrangements between parties are clearly documented in writing.


Read the February 2024 Charity & NFP Law Update