This report considers different approaches to compensation for expropriated land which is subject to one or more security interests, especially mortgages. Current to the publication of the report (May 1984), compensation in these cases was regulated by s 49 of the Expropriation Act, RSA 1980, c E-16. This compensation was based on the “market value” theory, under which the security holder was paid market value of the security interest attached to the land, and the landowner was paid the market value of the ownership interest.
The report objects to the use of the “market value” theory on two grounds, namely: that the theory is “fatally defective” and can lead to unavoidable injustice; and that attempts to find the “market value” of security interests in land impose unacceptable costs on the parties to the expropriation.
After considering the disadvantages of the “market value” theory, the report then considers other approaches to compensation in these cases, and recommends an “outstanding balance” approach under which the security holder is first paid the outstanding amount secured by the interest, up to the market value of the expropriated property, and the landowner paid the remaining balance, if any.