Environmental site assessment (Phase I / Phase II)
An environmental site assessment is a structured investigation of a property’s contamination risk. A Phase I is a non-intrusive review of history, records and site conditions; a Phase II follows only if the Phase I identifies concerns, and involves sampling soil or groundwater.
Environmental liability in Canada can attach to current owners and operators regardless of who caused the contamination, and remediation costs can exceed the value of the property. That is why lenders routinely require a Phase I before advancing against commercial or industrial real estate, and why buyers commission one even when leasing.
Businesses where it matters most
- Manufacturing and fabrication, particularly with solvents, plating or coatings
- Auto repair, collision and fuel handling — waste oil, hoists, underground tanks
- Dry cleaning, historically one of the highest-risk uses
- Any site with a long industrial history, whatever it is used for now
How structure changes the exposure
In a share sale the corporation keeps whatever environmental liability it already carries, and the buyer acquires that with the shares. An asset purchase can leave more of it behind, though not always — which is one of the reasons environmental risk is a structuring conversation, not only a diligence one.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentSelling a business
- 02Treadstone LawLegal commentaryEnvironmental Liabilities to Check Before Buying a Business in Ontario
- 03Treadstone LawLegal commentaryEnvironmental Liability in an Ontario Asset Purchase vs Share Purchase
- 04Treadstone LawLegal commentaryLease Red Flags to Watch For Before Buying a Business in Ontario
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