Do you know what historically took place on the commercial land you own or the land surrounding it? If not, there is a chance it may be contaminated. While this may not necessarily impact you while you own the land, it can have huge financial repercussions if you ever go to sell or refinance, even if the contamination migrated to your property from somewhere else.
Canadian lenders are loath to lend for the purchase of land where there is the presence of any chemical in quantities in excess of the Saskatchewan Ministry of Environment’s (MOE) standards. In fact, Tier 1 lenders often will not even consider an application for financing regarding an impacted site unless the site is remediated to pristine condition, despite otherwise compliance with MOE standards and requirements.
Innocent adjacent landowners of migrating pollution are often in the worst position to deal with their contaminated land. While it is true that the Saskatchewan regulatory regime implements a “polluter pays” policy, the reality is it is rare that a polluter must pay to remediate land to pristine condition; in other words, a condition that is acceptable for lenders. As a result, the innocent victims of migrating contamination are left with a serious issue relating to the diminution of property value and the difficulty in selling the property, even if the owner is lucky enough to find a purchaser and is willing to take a reduced price.
It is important for the public to understand the MOE does not assist an innocent victim of migrating contamination to collect on losses associated with the contamination. The role of the MOE is solely related to the protection of the public and the environment from unacceptable levels of contamination; that is, managing the risk of harm to persons or environment. The MOE will not assist in determining devolution of property value and will not require the “person responsible” to make whole anyone that has been affected by migrating contamination.
In the end, to recover losses associated with migrating contamination, the property owner is left only with the costly and uncertain litigation process. Even if successful in litigation, the plaintiff may not be able to collect on its judgment if the defendant is unable to pay. What’s more, if a Court determines that an owner carelessly purchased contaminated land, without appropriate due diligence, and then resorts to litigation against an offending neighbour, that owner likely will not be successful and faces the possibility of paying the defendant’s legal fees.
Before purchasing commercial property, be aware of the historical use of that property and the surrounding property. A simple Phase 1 Environmental Site Assessment and seeking legal advice to ensure appropriate representations and warranties are included in contracts of sale may save you a lot of misery in the end.
For further information on litigation regarding contaminated commercial land, please contact Angela Stolz.
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