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Posted on January 23rd 2007 in Real Estate

Liability for Environmental Contamination

Liability for Environmental Contamination

When purchasing real estate there are a number of items that need to be addressed. One issue that is gaining prominence, particularly in respect of commercial real estate, is the environmental condition of the property being considered for purchase.

If the property under consideration is potentially contaminated there are a number of obvious reasons why the purchaser needs to be aware of this information. This fact may have an affect on the decision to proceed with the purchase as well as the purchase price.

Another reason this information is so important is that in Ontario liability for environmental clean up is not based on fault. The Ministry of the Environment can direct any number of companies or individuals to take corrective action with respect to particular lands in order to comply with Ontario’s environmental laws. The list of those potentially liable for this arduous and costly task include past owners, present owners, occupants and anyone having the charge, management and control of the land.

Obviously environmental due diligence is significant in assessing the purchaser’s potential for environmental liability. The process involved is essentially an information gathering exercise and will include:
– Looking at the use of the property both past and present;
– Looking at the use of neighbouring properties both past and present to determine if contamination has or may migrate off site;
– Searching for relevant orders or approvals related to the property;
– Analysing any existing environmental reports for the property; and
– In some cases conducting environmental testing.

While the potential for environmental liability can be onerous, the Ontario government enacted legislation in 2004 to help alleviate some of this burden. The Brownfields Statute Amendment Act is specifically designed to encourage the redevelopment of land that had previously been used for commercial or industrial uses and is perceived as contaminated, i.e. brownfields.

The two key amendments are the creation of the Environmental Site Registry (ESR) and the Record of Site Condition form (RSC). The ESR is a registry separate from the province’s land registration system. It allows persons to file records of site condition and facilitates the public’s access to information contained in those records. The RSC provides an exception to the unlimited liability for environmental cleanup orders. Once an RSC has been filed no order can be made against the current or subsequent owner, occupant or person in charge of the land. To file an RSC the property must have been properly assessed by an environmental professional and shown to meet the soil, sediment and groundwater standards appropriate for the proposed use of the land.

While this issue of liability for contaminated property is primarily a commercial real estate issue, rural and cottage properties that have a well or septic system are not immune to such problems. Therefore it is important to seek legal advice prior to proceeding with any real estate purchase and preferably before signing the agreement of purchase and sale.

Our firm handles all types of real estate transactions. For further information contact Howard Steinberg or Stan Landau.