How do I buy a dry cleaning business in Canada?

A dry cleaner is a different purchase from a shop that sells labour or goods, because the machine and the floor under it come with rules. Federal regulations made under the Canadian Environmental Protection Act, 1999 set what a dry cleaner using tetrachloroethylene must have and must record. Provincial law can also reach the land: Ontario’s Environmental Protection Act, for example, lets the Director order people who own or owned a property to act. This page is about those two layers. For the general checks on any cleaning business, see the Cleaning business buyer checklist.

Start with the solvent the machine uses

The federal Tetrachloroethylene (Use in Dry Cleaning and Reporting Requirements) Regulations apply, in Part 1, to the use of tetrachloroethylene for dry cleaning, except in the course of manufacture and in a textile mill. Ask the seller in writing which solvent each machine uses and ask to see the supplier invoices that show it. If the shop uses another solvent, Part 1 of these regulations does not govern it, so ask the seller which rules the business follows and where its paperwork is kept. Settle this before you make an offer.

What the federal regulations say about the machine

Section 5 says no person shall sell tetrachloroethylene to the owner or operator of a dry-cleaning machine, or use it for dry cleaning, unless the machine meets the listed design requirements. Those include using the same drum for the washing, extraction, drying and aeration cycles, and an integral separator that recovers tetrachloroethylene from waste water. The regulations also say the solvent, waste water and residue must be stored in closed containers at all times, except when access is needed for operation or maintenance. No person may use a spotting agent that contains tetrachloroethylene for commercial or institutional dry cleaning, and, despite section 5, no person may use it in a self-service machine. Section 5 also requires the machine to be operated within a facility equipped with a secondary containment system under each machine, tank or other container that holds the solvent, waste water or residue, and drain plugs ready to seal any floor drain it could reach. Walk the floor and look for both. Have a qualified person check each machine against section 5.

The duties move to you at closing

The rules on using a machine bind any person who uses tetrachloroethylene for dry cleaning. The waste duties fall on the owner or operator of the dry-cleaning machine, and the reporting duty on the owner or operator of the dry-cleaning facility. If you operate the shop after closing, that is you. Section 5 bars using tetrachloroethylene in a machine that does not meet it, so ask what upgrading or replacing a machine would involve. Ask your lawyer how a breach that happened before closing would be handled. BDC advises buyers to plan to have their team involved early on, lists licences and permits among the legal issues to review, and lists environmental impact among the elements to examine when the purchase includes a building. Bring a lawyer and an environmental consultant in before the offer, not after.

Waste records and the annual report

The owner or operator of a dry-cleaning machine must have all residue transported to a waste management facility no less than once every 12 months (section 9). Section 8 requires all waste water to be either transported on that schedule or treated by an on-site waste water treatment system of the kind it describes. An owner or operator of a dry-cleaning facility that uses tetrachloroethylene in a calendar year must also keep books and records and submit a separate report for each facility to the Minister, no later than April 30 of the following calendar year. Ask for the records and reports for every year the seller operated, with the shipping records behind them. Settle in the purchase agreement who files the report for the year of the sale.

The land and who can be ordered to clean it up

Contaminated land is also governed by provincial law, so check the law of the province the shop is in. Ontario’s Environmental Protection Act, as one example, lets the Director, in the circumstances set out in the Act, order a person who owns or owned, or who has or had management or control of, an undertaking or property to take listed steps. Ontario’s guidance on submitting a record of site condition separates the submission from the underlying environmental site assessment work, and notes that filing one creates protection from certain orders, which does not apply if the filed record contains false or misleading information or certifications. BDC lists environmental consultants among the experts who can help a buyer study contaminants and hazardous materials. Ask a lawyer how an asset or a share purchase, and an owned or leased site, would affect your exposure. See also Can a buyer require a clean environmental report to close?

• Written confirmation of the solvent in each machine, and the make, model and installation date of each one.
• The books, records and annual reports for each year, plus the shipping records for waste water and residue.
• Any environmental site assessments for the property, and whether the seller owns the land or leases it.
• Licences and permits the business holds, and which of them can move to you or must be reissued.
• Any orders, inspections or notices from an environmental authority, federal or provincial.
• Who will file the annual report for the year of the sale, and how the purchase agreement allocates any earlier breach.