The British Columbia Court of Appeal dismissed Metro Vancouver’s attempt to reduce compensation for expropriated waterfront industrial land by $450,000. The Court rejected the argument that the assessed value of a tenant’s leasehold interest must automatically be deducted from the market value of the landowner’s interest.
In Greater Vancouver Sewerage and Drainage District v. S & R Sawmills Ltd., 2026 BCCA 422, the Court upheld the trial judge’s valuation approach, leaving intact a property valuation reported at approximately $39.54 million.
The decision clarifies how existing leases affect compensation for expropriated commercial and industrial property, particularly where ownership and leasehold interests are held by different parties.
Industrial Land Expropriated for Wastewater Infrastructure
On March 12, 2021, the Greater Vancouver Sewerage and Drainage District expropriated a 15.05-acre property owned by S & R Sawmills Ltd. near the Golden Ears Bridge. The land was required for construction and expansion of the Northwest Langley Wastewater Treatment Plant.
Part of the property was leased to Mainland Sand and Gravel, which used the site to store, process and ship sand and gravel dredged from the Fraser River.
At the expropriation date, the lease had approximately nine and a half months remaining. It was non-assignable, provided no right of renewal and generated more than $700,000 annually in rental income, plus triple-net cost recovery. The parties could nevertheless negotiate an extension by mutual agreement.
The District had paid Mainland approximately $490,000 for its leasehold interest. It argued that $450,000, representing the assessed value of the tenant’s rental advantage, should be deducted from compensation payable to S & R.
The trial judge rejected that deduction, and the District appealed.
Why the Lease Value Was Not Automatically Deducted
Under sections 31 and 32 of British Columbia’s Expropriation Act, compensation is determined by reference to the market value of the owner’s estate or interest in the expropriated land. Where multiple interests exist, their values must be established separately if practical.
The District argued that this required the tenant’s leasehold value to be calculated and subtracted from the owner’s compensation.
The Court of Appeal disagreed.
The proper question was what a willing purchaser would have paid for S & R’s ownership interest, subject to the lease, on the expropriation date. The tenant’s leasehold value was relevant only to the extent that the lease affected the market value of the owner’s interest.
A lease could increase, decrease or have no material effect on that value, depending on its terms and the property’s characteristics.
Why the Court Accepted the Appraisal Evidence
The competing appraisals assessed the property’s highest and best use as industrial development land. Both relied on comparable property sales to establish a value per acre rather than primarily using rental income.
None of the comparable properties was leased, making the effect of Mainland’s tenancy a separate valuation question.
S & R’s appraiser considered the remaining lease income potentially beneficial but did not increase the valuation because of it. Instead, the appraiser treated the lease as neutral, finding that the property’s industrial development value was the principal determinant of market value.
The trial judge accepted that evidence, and the Court of Appeal found no legal error in doing so.
The Court also clarified that a non-assignable lease can still have market value.
Implications for Expropriated Commercial Property
The decision confirms that compensation for leased property cannot be calculated simply by subtracting a tenant’s separately assessed leasehold value from the owner’s interest.
For commercial and industrial landowners, valuation evidence should address the actual effect of a lease on market value, including its remaining term, rental income, renewal and assignment rights, and the property’s highest and best use.
The central question is how those characteristics would influence a purchaser’s assessment of the owner’s interest, rather than the independent value attributed to the tenant’s lease.
ATAC LAW represents commercial and industrial property owners, landlords and businesses in British Columbia expropriation and compensation disputes, including contested valuations and infrastructure-related land acquisitions.
