Does an asset buyer inherit environmental cleanup liability in Ontario?

In an asset purchase the buyer chooses what it takes, so people assume the seller’s environmental past stays behind. Ontario’s Environmental Protection Act is less accommodating. Some of its orders follow the person who caused a discharge, but others follow ownership and control of the property, and a buyer who acquires the land or takes over the operation can fall inside them.

What stays with the person who caused it

Section 17 lets the Director order a person who causes or permits the discharge of a contaminant into the natural environment to repair or prevent the injury or damage. That duty attaches to the discharger. A buyer that purchases equipment, contracts and goodwill, and does not take over the site or the discharging operation, does not become the discharger by signing the purchase agreement.

What follows the property

Section 18 is different. It lets the Director require a person who owns or owned, or who has or had management or control of, an undertaking or property to take steps such as monitoring, studying or putting plans in place, where the Director has reasonable and probable grounds to think the steps are necessary or advisable to prevent or reduce the risk of a discharge, or to prevent, decrease or eliminate an adverse effect from a contaminant on, in or under the property. The wording turns on ownership and control, not on who caused the contamination, so a buyer of the land or of the running operation is within its reach once it holds either.

Orders that already exist

An order made against the seller may not stay with the seller. Section 19 says an order or approval under the Act is binding on any other successor or assignee of the person to whom it was directed. A buyer who steps into the seller’s position at the site should ask for every order, notice and approval on file before pricing the deal.

What to check before signing

• Whether the assets include the land, or the buyer will lease or operate the site, since both ownership and control matter.
• Whether a record of site condition has been filed for the property, and what protection it gives.
• Whether the seller holds environmental compliance approvals, which have their own process for changing ownership.