Who is liable if an underground oil tank is discovered after closing?

A buried oil tank found after closing raises three separate questions: whom the government can order to deal with it, who pays in the end, and what you can claim back from the seller. The first answer comes from environmental law and depends on the province. The second and third come from your purchase agreement, which is why a tank found after closing is a drafting problem as much as an environmental one.

Whom the government can order

Ontario’s Environmental Protection Act has order powers that reach an owner or previous owner of the source of a contaminant, and its preventive-measures orders can go to a person who owns or owned, or has or had management or control of, an undertaking or property. Those categories turn on a person’s connection to the site, such as owning it, having owned it or running it. So the question after closing is who now holds that connection: you as owner of the land, or the company whose shares you bought.

Other provinces use their own regimes

British Columbia manages contaminated sites under its Environmental Management Act and Contaminated Sites Regulation. Saskatchewan works within The Environmental Management and Protection Act, 2010 and its Environmental Code, with a process that moves through notification, assessment, corrective action and a notice of site condition. Who can be required to act differs by statute, so a tank found outside Ontario calls for the local rules to be read rather than assumed.

What the agreement decides between you and the seller

Whatever the government can order, how the cost is shared between you and the seller is usually a question for the purchase agreement. Ask whether the seller made a statement about environmental condition or underground tanks, whether there is an indemnity and for how long, and whether any money is held back at closing.

Check the site before you close

Where the business owns or occupies a site with a fuel storage history, ask a qualified consultant for a site assessment before closing. Ontario’s guidance on records of site condition refers to Phase One environmental site assessments under Ontario Regulation 153/04, including a table of the site’s current and past uses. For the wider checks, see what environmental checks you need.