Luxury townhouse owner bound by restrictive covenant, must remove new windows

As a real estate transactional lawyer, you may not regularly deal with the enforcement of restrictive covenants but understanding how courts approach these disputes is crucial when advising clients on property purchases and community association governance. The recent Ontario Superior Court decision in Castle Hill Neighbourhood Association v. Morse, 2025 ONSC 4522, provides important guidance on the validity and enforceability of restrictive covenants within building schemes.

The Facts

Jerome Morse owned a luxury townhouse in the Castle Hill community near Casa Loma in Toronto—a development of 93 white row townhouses designed to maintain a uniform Edwardian-style appearance. After a fire damaged his property in April 2024, Morse undertook repairs and decided to add eight new windows to the north-facing exterior wall of his end-unit townhouse. While he obtained the necessary City building permit, he did not initially seek approval from the Castle Hill Neighbourhood Association Board as required by the community’s restrictive covenants and by-laws.

When the Association learned of the unauthorized window additions in March 2025, they informed Morse that Board approval was required. After Morse formally requested permission in April 2025, the Board unanimously denied his request, citing their obligation to maintain the uniform exterior appearance of the townhouses. Morse refused to comply, leading the Association to seek a court declaration that the restrictive covenants were valid and enforceable.

The Legal Framework: Building Schemes vs. Developer Restrictive Covenants

Justice Schabas’s decision emphasizes a critical distinction that transactional lawyers should understand: the difference between building scheme restrictive covenants and developer restrictive covenants.

Developer restrictive covenants typically benefit the developer or a single property owner and are subject to strict interpretation because they interfere with the free use of land. In contrast, building scheme restrictive covenants create a “community of interests” where all owners share similar burdens and enjoy reciprocal benefits.

The Court relied heavily on Chapadeau v. Devlin, 2018 ONSC 6456, which established that building schemes must be interpreted according to ordinary contractual interpretation principles, considering:

• The surrounding circumstances
• The building scheme as a whole
• The intentions of the parties
• The text read in light of the entire contract

For a valid building scheme to exist, the following elements must be present:

1. All parties derived title from a common vendor
2. The vendor laid out the development with restrictions intended to apply to all lots
3. The restrictions were intended to benefit all lots in the scheme
4. Purchasers bought their properties knowing the restrictions would benefit other lots in the community

The Court’s Analysis: Clarity Without Rigidity

Morse argued that the restrictive covenants were too vague and uncertain to be enforceable because they lacked objective criteria for the Board’s decision-making. The relevant covenant prohibited any changes to building exteriors “without consent of the CHNA Board first having been had and obtained, which consent may be unreasonably withheld.”

Justice Schabas rejected this argument, finding the covenant to be clear and unambiguous. The covenant’s stated purpose was explicit: “imposing a general scheme of development [and] enforcing uniformity.” Importantly, the covenant applied to all exteriors without limitation—not just front-facing walls, and with no exception for the five end units with exposed side walls.

The Court held that building scheme covenants do not require detailed objective criteria to be valid. The absence of specific factors does not render a covenant unduly vague because decision-making is inherently informed by the purpose of the covenant itself—in this case, maintaining exterior uniformity.

The phrase allowing the Board to “unreasonably withhold” consent was found to operate similarly to a “final and binding” clause, essentially creating a privative clause that grants broad discretion to the decision-making body.

Practical Implications for Transactional Lawyers

This decision offers several important takeaways:

1. Due Diligence is Critical: When acting for purchasers in communities with restrictive covenants, carefully review whether the covenants constitute a building scheme. If so, explain to clients that courts will give these covenants broad interpretation and will defer significantly to the community association’s decisions.
2. Board Discretion is Substantial: Even where covenants lack detailed objective criteria, courts will uphold them if the overall purpose is clear. Boards may be entitled to withhold consent even unreasonably, particularly where the covenant explicitly provides for this.
3. “Exterior” Means All Exterior: Don’t assume that side or rear walls will be treated differently from front-facing walls unless the covenant explicitly states otherwise. The Court rejected Morse’s argument that his side wall should be treated differently simply because it wasn’t visible from the street.
4. Prior Approvals Don’t Create Precedents: The fact that a board previously approved other exterior modifications does not necessarily mean they must approve subsequent requests. Boards retain discretion to apply the covenants as they see fit within their mandate to preserve the community’s character.
5. City Permits Are Not Sufficient: Advise clients that obtaining municipal approval does not satisfy private covenant requirements. These are separate legal obligations, and compliance with one does not excuse non-compliance with the other.

Conclusion

Castle Hill reinforces that building scheme restrictive covenants serve an important function in preserving community character and property values through reciprocal obligations. Courts will uphold these covenants even when they grant significant discretion to community associations, provided the covenants clearly articulate their purpose.

For transactional lawyers, this case underscores the importance of thoroughly reviewing and explaining restrictive covenants to purchaser clients, particularly in planned communities. While clients may be frustrated by what seems like arbitrary decision-making, the law recognizes that homeowners in these communities have knowingly accepted restrictions in exchange for the benefits of living in a carefully maintained development. As Justice Schabas noted, Morse’s remedy, if any, lay in the democratic process of changing the Board’s composition—not in court intervention.