This chapter was first published by The Law Society of Ontario’s The Eight-Minute Environmental Lawyer 2026 Program
On March 26, 2026, the Divisional Court upheld the Ontario Superior Court of Justice May 22, 2025 decision granting an application for demolition of an above-grade structure constructed without a building permit. The Town of Ajax (Ajax) brought the application under section 38 of the Building Code Act, 1992 (BCA). The decision in 1940475 Ontario Inc. v. The Corporation of the Town of Ajax, 2026 ONSC 1846, confirms that provincial environmental regulatory requirements administered by the Ministry of the Environment, Conservation and Parks (MECP) can operate as binding preconditions to municipal building permits. Courts retain jurisdiction to order demolition and may exercise that discretion where compliance with the BCA is disregarded. Here, a condition of Site Plan Approval required the filing of a Record of Site Condition (RSC) with the MECP before any above-grade building permit would be issued by Ajax. The RSC was not filed and above grade permits were not issued before construction commenced. The Divisional Court considered health and safety of the public in saying in obiter that it agreed with Ajax that “in the context of a regulatory regime that engages the health and safety of the public, it is not acceptable to incentivize actors to make decisions, and take risks, to not comply with their legal obligations.”
Although the litigation arose under section 38 of the BCA, the case is fundamentally about the role of the RSC regime established under Part XV.1 of the Environmental Protection Act and Ontario Regulation 153/04. The decision demonstrates that courts are prepared to treat RSC-related requirements as substantive public safety protections rather than mere administrative hurdles. It also signals that developers who attempt to circumvent contaminated lands requirements may face extraordinary remedies, including demolition of structures. This decision is significant because it illustrates how environmental regulatory requirements may become mandatory preconditions to municipal building permits and how courts may enforce those requirements through the compliance mechanisms available under the BCA. Section 38 gives the Superior Court power to order demolition as a compliance remedy. Prior authorities include Gravenhurst (Town) v. Brunton, 2011 ONSC 1799,[1] and Smith-Ennismore-Lakefield (Township) v. Tarala, 2016 ONSC 7109.[2] The Divisional Court’s leading appellate authority is Cavan Monaghan (Township) v. Kings Custom Homes Inc., 2022 ONSC 1888.[3] However, none of these decisions turned on the failure to satisfy environmental conditions. In 1940475 Ontario Inc. v. The Corporation of the Town of Ajax, the Divisional Court confirmed that 1) an RSC requirement constituted applicable law; 2) a building permit could not be issued until applicable law was satisfied; and 3) demolition remains available where construction proceeded unlawfully.
Importantly, the Courts were not enforcing environmental remediation requirements directly under the Environmental Protection Act. Rather, the environmental requirement became enforceable through the building-permit regime because filing an RSC constituted “applicable law” under the BCA and Ontario Building Code. The decision illustrates this interplay. It confirms that courts exercising demolition powers will not be swayed by sunk costs, the extent of completed work, elapsed time, or the potential benefits of the project. The decision is equally important for the interplay of regulatory authority. The RSC requirement arises under O. Reg. 153/04, under the Environmental Protection Act, and is “applicable law” under the BCA. Where a change to a more sensitive land use is proposed, the chief building official cannot issue a building permit unless the RSC has been filed with the MECP. The municipality need not independently assess whether the environmental conditions have been met. It may rely on the MECP’s specialized process and refuse or revoke permits until that process is satisfied. This case confirms a broader municipal law principle: courts may enforce a regulatory architecture in which municipal building authority defers to a specialized regulator on matters such as environmental compliance.
I. Background
The property, located at 599 Kingston Road West in Ajax, was formerly an automotive sales and repair facility, was purchased in 2015 by 1940475 Ontario Inc., whose principal operates First Avenue Properties Inc. (collectively the Developer). The Developer intended to transform the property into a four-storey mixed-use building containing commercial space and sixty residential units. Such a conversion represented a shift from a less sensitive to a more sensitive land use, engaging the RSC process.
In April 2021, Ajax approved a Site Plan subject to conditions, including condition 31 of the Site Plan Agreement (“SPA”), which required the filing of an RSC with the MECP before any above-grade building permit could be issued. A conditional building permit was issued permitting only below-grade construction, including foundations, footings, and site servicing. Despite these conditions, the Developer constructed virtually the entire first floor without a building permit for above-grade work and without an RSC. Under the Environmental Protection Act, filing an RSC may be required where a property is subject to a change from a less sensitive use to a more sensitive use, including certain industrial or commercial use to residential or parkland, and other uses specified by the regulation.[4]
The Developer’s attempts to obtain an RSC were unsuccessful. Submissions in November 2021 and June 2022 contained deficiencies, and the MECP rejected a proposed “dual track” remediation approach in December 2022, where the Developer proposed to first submit an RSC covering only the footprint of the building itself, then pursue a risk assessment for the remainder of the property. Ajax set a final deadline of September 19, 2024 for RSC compliance. When the Developer failed to meet it, the Town brought an application under section 38(1) of BCA for demolition of the construction. On September 18, 2025, Justice A.A. Casullo granted the demolition order (2025 ONSC 5325). The Developer appealed as of right to the Divisional Court under subsection 38(3) of the Act.
II. Overview of the Relevant Law
Ontario’s contaminated lands framework is primarily governed by Part XV.1 of the Environmental Protection Act and Ontario Regulation 153/04. An RSC is a document filed on the Environmental Site Registry that summarizes a property’s environmental condition and, where necessary, confirms remediation to applicable standards before a change to a more sensitive land use occurs. The policy objective is straightforward. Where a property historically used for industrial or commercial purposes is proposed to be converted to residential or other sensitive uses, regulators require confirmation that contamination risks have been adequately assessed and managed before occupancy and use. The filing of an RSC is frequently a prerequisite to municipal approvals and building permits where a change in land use sensitivity is contemplated. The subject lands exemplified the very circumstances for which the RSC regime was designed.
Section 38 of the BCA provides the Superior Court of Justice with broad enforcement authority. Under subsection 38(1), the court may make any order it considers necessary to ensure compliance with the Act. This includes ordering the demolition of structures built without valid permits. Subsection 38(3) grants an appeal as of right to the Divisional Court from such orders. The BCA prescribes applicable legal requirements for construction, including the requirement that an RSC be filed when a property’s use is changing to a more sensitive use such as residential or parkland use. An RSC confirms that environmental remediation of contaminated land has been completed or that a risk assessment demonstrates the property is safe for the proposed use. The RSC requirement under O. Reg. 153/04 is “applicable law” for the purposes of subsection 8(2) of the BCA. Where a regulated change to a more sensitive land use is proposed, a building permit cannot be issued unless the environmental conditions, including filing the required RSC with the MECP, have been satisfied. This creates a direct link between provincial environmental regulation and municipal building-permit authority. The municipality’s role is not to duplicate the MECP’s technical assessment. It is to ensure that the applicable-law precondition has been met. In this case, the Developer secured a conditional building permit from Ajax for below-grade construction. Conditional building permits allow only the specific scope of work described. Mandatory inspections must occur before further construction stages may begin.
In the Superior Court decision (2025 ONSC 5325), Justice Casullo granted the Town’s application under section 38(1) of the BCA, ordering the Developer to demolish and remove all above-grade construction carried out without a building permit. The Superior Court found that the Developer, an experienced developer with over thirty years in the industry, made a “calculated decision” to construct virtually the entire ground floor beyond the scope of its conditional permit. The Developer ignored an Order to Comply, a Stop Work Order, and a mandatory injunction, in what the court described as operating by the adage “it is better to seek forgiveness than ask permission.” The Superior Court emphasized the lengthy non-compliance (almost four years without an RSC) and the Developer’s repeated inability to satisfy the MECP’s requirements, including two deficient RSC submissions, a rejected dual-track Risk Assessment proposal and the destruction of 14 of 19 monitoring wells during the unpermitted construction itself. Balancing prejudice to the Developer against the public interest, Justice Casullo rejected the argument that demolition was punitive, finding at paragraph 66 that the Developer was in its predicament “solely of its own accord” and that Ajax was fulfilling its statutory duty to its constituents. Citing Cavan Monaghan (Township) v. Kings Custom Homes Incorporated, 2022 ONSC 1888, the court held at paragraph 50 that sunk costs and community benefits are “legally irrelevant” once unlawful construction is established, and that permitting an unpermitted structure to stand “would encourage disobedience of, and promote disrespect for, the law.” Demolition was “the only just and appropriate remedy in the circumstances.” (paragraph 76)
On appeal, the Developer argued that demolition was excessive and that it should instead be permitted to continue pursuing an RSC and eventual permit approval. The Divisional Court rejected this.
A notable feature of the decision is the Superior and Divisional Courts’ emphasis on the interconnected nature of environmental approval requirements and building regulation. The Courts did not regard the absence of an RSC as a technical or procedural defect. Rather, the RSC requirement formed an essential component of the regulatory framework governing the redevelopment of contaminated land. Justice Casullo characterized the developer’s actions as a calculated decision to build first and seek regulatory approval later. In those circumstances, the Superior Court concluded that permitting the unlawful construction to remain would undermine the integrity of the legislative scheme and encourage non-compliance by other developers. Demolition was found to be an appropriate remedy.
III. The decision on Appeal
The Divisional Court unanimously dismissed the appeal made by the Developer. The appellants raised three grounds: (1) error of fact materially affecting the outcome, (2) an internally inconsistent finding that there has been no material change in circumstances since 2021 that made it necessary or equitable to order demolition, and (3) incorrect application of the objectives of the BCA.
The Developer argued that the application judge had misapprehended the evidence and improperly exercised discretion in ordering demolition. The Divisional Court rejected these arguments, finding no palpable and overriding error in the factual findings and no basis to interfere with the exercise of discretion.
(1) Error of fact
The Developer’s core submission was that the Superior Court erred in accepting a factual proposition that the Developer agreed to remediate the property prior to any above-grade construction. The Divisional Court agreed with Ajax that Justice Casullo did not make an error of fact that materially affected the outcome. The Divisional Court noted that the state of remediation, whether by full remediation or by risk assessment, was not completed in November 2021 when the above-grade work was performed. This is material because the municipal building permit process only allows construction which complies with applicable law. In this case, the BCA prescribes a list of applicable legal requirements which included the requirement to have an RSC because the use of the property was changing to a more sensitive use.
The Divisional Court concluded that the only relevant fact regarding the Developer’s efforts to obtain an RSC was that the Developer did not have one, and still did not have one at the time of the appeal hearing. The Divisional Court found that submissions regarding the state of remediation did not represent the “heart” of the lower court’s decision. The Divisional Court noted that at paragraph 70 of the Superior Court’s decision, the application judge was not making findings concerning the state of remediation or the reasons for the Developer’s chosen approach.
(2) Internally inconsistent finding on material change in circumstances
The Developer pointed to paragraph 47 of Justice Casullo’s decision, in which she stated: “There has been no material change in circumstances since the [2021 Consent Order] that make it necessary or equitable to demolish the above-grade construction that was built without a permit.” The Developer argued that this finding was internally inconsistent with the ultimate order requiring demolition of the above-grade work.
The Divisional Court rejected this argument. The Divisional Court found that in reading the decision as a whole, the exercise of discretion was motivated by the Developer’s conduct resulting in unlawful construction before the initial return of the application and the making of the consent order in November 2021. The Divisional Court indicated that the statement at paragraph 47 did not contradict the demolition order. Rather, Justice Casullo was explaining that no new circumstances arising after the consent order independently justified demolition, the unlawful construction itself, which preceded the consent order, was the basis for the remedy. Her decision addressed why the demolition order was not punitive in the circumstances.
Importantly, the Divisional Court accepted that demolition was not punitive. The decision emphasized that, despite multiple opportunities extending over several years, the developer had failed to obtain the required RSC and remained unable to demonstrate compliance with the conditions necessary for issuance of a full building permit.
(3) Application of Building Code Act Objectives
The Divisional Court held that Justice Casullo fully and adequately balanced the necessary considerations: the impact to the Developer against the need for Ajax to comply with its obligations to ensure construction in the municipality was performed in accordance with the BCA and the Building Code. The BCA prescribes requirements including the RSC because the property’s use was changing to a more sensitive use.
Critically, the Divisional Court stated that the decision the Developer made, to ignore the scope of the permit, is not regularized by the fact that, after the unauthorized construction, nothing further was done that would independently lead a court to consider a remedy other than demolition. The Divisional Court indicated that compliance with the Act had not been obtained for approximately four years from the date of the consent order to the date of the first instance hearing, and as of January 21, 2026, four and a half years after execution of the SPA, the Developer still had not obtained an RSC.
The appeal was dismissed. Costs were fixed at $30,000 inclusive of disbursements plus HST, payable by the Developer to Ajax. Demolition was scheduled to begin on May 12, 2026.
IV. Impact and relevance
The significance of the decision lies less in the novelty of the demolition remedy than in the Courts’ treatment of environmental compliance as a mandatory component of the building-permit regime. The decision confirms that where environmental requirements form part of applicable law, developers proceed at their own risk if they undertake construction before those requirements are satisfied. Courts exercising their powers under section 38 of the BCA will not necessarily be persuaded by sunk costs, project completion, or the prospect of future compliance where unauthorized construction has already occurred. The decision serves as a cautionary tale for developers contemplating regulatory shortcuts. It also underlines that parties cannot improve their litigation position by completing unlawful construction and then arguing demolition would be too costly. Conditional permits are limited to the work they are issued to allow, unauthorized work creates litigation risk and expenditures already incurred are unlikely to save a project.
For municipalities, the decision illustrates the practical importance of the “applicable law” concept under the Building Code regime. Although Chief Building Officials do not generally determine environmental compliance themselves, they must ensure that prescribed applicable-law requirements have been satisfied before a permit may issue. While municipalities do not administer the Environmental Protection Act or approve RSCs, they frequently incorporate RSC requirements into planning approvals, SPAs, and building permit processes. The decision demonstrates that municipalities may effectively enforce contaminated lands requirements through planning and building powers. The practical result is that failure to satisfy Environmental Protection Act related requirements can trigger significant municipal enforcement consequences. The decision underscores that compliance with permitting, inspection, and environmental remediation requirements is fundamental to lawful construction in Ontario, and that municipalities will be supported by the courts in enforcing these requirements.
For lawyers, the case provides important guidance regarding the significance of RSC requirements, municipal enforcement powers, and judicial attitudes toward redevelopment of brownfield lands. It is clear that courts view the RSC process as a fundamental safeguard, not a procedural formality. Developers who attempt to advance projects before satisfying contaminated lands requirements do so at considerable risk. The decision confirms that municipalities and courts are prepared to deploy the strongest available remedies, including demolition, where necessary to uphold the integrity of Ontario’s environmental and land-use regulatory framework.
Cases:
- 1940475 Ontario Inc. v. The Corporation of the Town of Ajax, 2026 ONSC 1846 (CanLII)
- The Corporation of the Town of Ajax v. 1940475 Ontario Inc., 2025 ONSC 5325 (CanLII)
For more information on this topic, please reach out to Katarzyna Sliwa and Dina Awad.
We thank Jessica Chen and Amaal Isse with assistance in preparing the paper.
[1] In Gravenhurst (Town) v. Brunton, 2011 ONSC 1799 , the owners commenced construction of a barn structure without a building permit, and disregarded an order to comply directing them to cease all work and to apply for a building permit. The Municipality’s application under the Building Code Act for removal or demolition of barn structure was granted.
[2] In Smith-Ennismore-Lakefield (Township) v. Tarala, 2016 ONSC 7109 , property owners commenced construction of an addition to their home without obtaining a permit. The Township issued a stop-work order. The Owner’s application for a building permit was refused because of technical deficiencies. The Township applied for an injunction, including a mandatory order requiring demolition of the addition, which was granted.
[3] In Cavan Monaghan (Township) v. Kings Custom Homes Inc., 2022 ONSC 1888 , the Owner commenced building a house on his property without a building permit. The Chief Building Official issued a stop work order and a further stop work and demolish order in July 2019. The lower court judge granted an interlocutory interim injunction restraining the owner from continuing work on the project and ordered the municipality to issue a building permit after the owner paid charges, revised and resubmitted an application. On appeal, the Divisional Court allowed the appeal and found the application judge erred in law in declining to order the demolition, finding her assessment that demolition would create waste of building materials not relevant when considering application under Building Code Act.
[4] Environmental Protection Act, R.S.O. 1990, c. E.19, s. 168.3.1.
Prohibition on certain changes of use
168.3.1 (1) Subject to subsection (2), a person shall not,
(a) change the use of a property from industrial or commercial use to residential or parkland use;
(b) change the use of a property in a manner prescribed by the regulations; or
(c) construct a building if the building will be used in connection with a change of use that is prohibited by clause (a) or (b).
