Offices in Ottawa and Perth
(613) 722-1500

CONTACT US (613) 722-1500

Purchasing Contaminated Sites

Purchasing Contaminated Sites

By:

Posted August 8, 2022

Purchasing a property that is contaminated can be daunting.  There are many risks to consider, including significant liability risks.  In some cases, a full assessment of the risks may not be possible before the decision to proceed or not must be made.  A purchaser will be in a much better position to make decisions if it acquires as much information as possible about the property, and does so early enough in the transaction that the agreement of purchase and sale can be structured to address any issues, if required.

Sometimes, the fact that a property is contaminated is known by the vendor and disclosed when it is offered for sale.  If this is so, there will be environmental reports available for review by a potential purchaser, as well as the purchaser’s engineer and legal counsel.  Gaps in the available information and potential liability risks may be able to be identified early on.  Further site investigation may be required to better understand the contamination, assess any known or potential risks of off-site migration, consider what remedial work may be required to address the contamination and estimate how much available remedial options could potentially cost, among other things.  There are also several other sources of information that may be available to assist in this assessment, including, but certainly not limited to, inquiries with the Ministry of the Environment, Conservation and Parks, other regulatory authorities and information about surrounding properties.

Ideally, some of these issues may be able to be addressed in the agreement of purchase and sale itself.  It may be necessary to include provisions in the agreement to allow for further site investigation, the completion of remedial work, a price adjustment, indemnification for liabilities, or any number of terms to address the condition of the property and the risks associated with the contamination.  Such agreements of purchase and sale require a degree of creativity, with the objective for the purchaser being the minimizing of risks going forward.

In other situations, contamination is discovered during a purchaser’s due diligence work, after an agreement of purchase and sale has been entered into.  When this occurs, it is likely unexpected by both parties to the transaction, and a degree of flexibility is essential in determining whether the transaction will be able to move forward.

For example, further site investigation may be required by the purchaser to better assess the extent of the contamination discovered and the associated risks.  If the agreement does not provide for further access for site work, the vendor will need to decide if it will be allowed or not.  While it is possible that a purchaser denied access may choose to proceed with the transaction based on the information available, despite the potential risks, it is also possible that a refusal may end the transaction, as the purchaser may conclude that the risks are too uncertain.  Flexibility to re-negotiate terms of the agreement may be necessary to conclude the transaction.

Ultimately, the earlier in the due diligence process the initial site investigation is conducted, the more time is available to conduct any negotiations or investigations that result from it.

In every transaction involving contaminated lands, a purchaser must assess the potential liability risks and financial implications of acquiring the property.  A purchaser’s ability to make that assessment is enhanced by the information available.  The earlier in the process that a purchaser is able to acquire that information, the more time that a purchaser will have to engage in the negotiations that may be required to minimize the risks.

For further discussion on these issues, please listen to our podcast, A Manner of Speaking, episode title: “Environmental Issues and Real Estate Transactions with Daniella Sicoli-Zupo”.

This blog post was written by Cheryl Gerhardt McLuckie, a member of the Environmental Law team.  Cheryl can be reached at 613-369-0365 or at cheryl.mcluckie@mannlawyers.com.

More Resources

Blog |
Employment, Labour, and Human Rights, Commercial Litigation

By: 

Posted May 23, 2023

Both in my commercial and employment litigation practice, I encounter Ontario business owners faced with serious charges laid against them under the Provincial Offences Act[...]
Blog |
Family Law

By: 

Posted May 18, 2023

The recent Supreme Court of Canada decision in Anderson v. Anderson, 2023 SCC 13, provides guidance on domestic contracts and the enforceability of an informal[...]
Blog |
Environmental Law

By: 

Posted May 16, 2023

When many people think of contaminated sites, they think of the usual suspects such as industrial properties and gas stations.  They may not think of[...]
Blog |
Business Law

By: 

Posted May 9, 2023

Often business owners reach a point where they are considering the sale of their business either through the sale of shares or the sale of[...]
Blog |
Family Law

By: 

Posted May 2, 2023

Overview of Tort Claims in Family Matters Tort claims can be made in family law matters, so as to prevent a multiplicity of proceedings and[...]
Blog |
Employment, Labour, and Human Rights

By: 

Posted April 25, 2023

In a case that recently was decided from the Court of Appeal of Ontario called Celestini v Shoplogix Inc., 2023 ONCA 131, the Court had[...]

Subscribe to Our Newsletter

"*" indicates required fields

Name*
Consent*
This field is for validation purposes and should be left unchanged.