Am I liable for contamination on a property I am not buying with the business?

Leaving a property out of a business purchase does not automatically leave its contamination behind. Environmental statutes aim at people connected to the contamination or the site, and the test is usually ownership, occupation or control rather than what the purchase agreement includes. This page uses Ontario’s Environmental Protection Act as its worked example. Other provinces run their own regimes, and the details differ.

What the Ontario Act looks at

The Act defines a “person responsible” as the owner, or the person in occupation or having the charge, management or control of a source of contaminant. Its power to order preventive measures reaches further: in the circumstances the Act sets out, the Director can require a person who owns or owned, or who has or had management or control of an undertaking or property, to take specified steps. The word “undertaking” matters to a buyer, because a business operating at a site can have management or control of it without owning the land.

Three common situations

• Asset purchase with the premises leased from the seller or another landlord: your exposure follows what you occupy and control, so read what the lease says about existing contamination and who must deal with it.
• Share purchase: the company is the same legal entity after closing, so an order the Act allows against it before the sale can still be made against it afterwards.
• A former site the seller keeps or sells: the Act reaches a person who owned or previously had control of a property, so in a share purchase the company’s past sites matter even though the land is not part of the deal.

What to ask before signing

Ask which sites the business has used, including past ones, and for any environmental reports on them. A phase one environmental site assessment includes a review of a property’s current and past uses, as Ontario’s guidance on records of site condition shows. Newfoundland and Labrador’s Impacted Sites Management Section searches its files for property owners and purchasers and their consultants, lawyers and realtors, so check whether your province offers a similar search.

Provinces differ

New Brunswick’s program refers to a responsible party, who must engage a site professional to assess a site, and notes that historical contamination is usually hidden underground until an assessment or excavation finds it. Saskatchewan’s guidance on environmentally impacted sites has chapters on who is responsible and on transferring responsibility for a site. Check which body decides in your province and what it says.