Environmental issues to watch out for when buying commercial realty

5-minute read

Any entrepreneur contemplating a land purchase should consider the environmental condition of the property. If industrial activity has taken place there previously, it may be contaminated. Decontamination can be a costly and protracted undertaking, so do your due diligence before going ahead with a purchase.

What is a contaminated site?

A property is considered contaminated if there are enough pollutants present to be potentially harmful to humans or the environment. Contamination is usually the result of unsound practices at commercial or industrial sites where hazardous materials have been manufactured, stored or used. Careless waste disposal, fuel spills and leakage from storage tanks are often to blame.

About 60% of Canada's contaminated sites involve petroleum hydrocarbon (PHC). Other contaminants include oxygen-depleting organics and nutrients such as animal manure, human waste, potassium, phosphate and nitrogen, "toxic" organics such as PCBs and pesticides, metals such as zinc, cadmium, lead and mercury, radioactive materials such as uranium, heavy water and radon gas, and nuisance substances such as sulphur, iron, methane or unexploded ordnance.

These materials are dangerous because they can seep into the soil, groundwater or other buildings, cause fires, explosions and unpleasant odours, be harmful to human life or the environment, or, in extreme cases, cause the soil to lose its ability to retain water or recycle nutrients.

The Government of Canada's Contaminated Sites Management Working Group (Federal Contaminated Sites) provides information on the causes of contamination and on strategies to remedy this problem.

What business activities cause contamination?

Special care should be taken if any of the following high-risk activities have taken place on the property:

Oil and petroleum extraction, processing, transport or distribution
Chemical manufacturing or processing
Plastics, polystyrene and rubber manufacturing
Food or animal by-product processing
Mineral and metal extraction and processing
Transportation-related industries including the manufacturing, distribution and service of automobiles, aircraft and trains
Wastewater treatment, contaminated soil processing and snow disposal
Pulp and paper manufacturing
Cement and asphalt manufacturing
Businesses requiring the storage of hazardous materials such as gas cylinders and oil

Prior to discontinuing any such activities, you or the company selling the land may need to undergo an environmental assessment and submit a site cleanup plan to authorities for approval, especially if high-risk activities are known to have taken place on or near the property. Even if previous activities and occupants are unknown, it may still be a good idea to assess the site, if only to avoid being held responsible for cleaning it up.

If you are looking to buy real estate, start by contacting your municipal or provincial government. An environmental firm can also be hired to assess the condition of a site.

Although not a legal requirement, an environmental assessment of a site, performed according to the norms of the Canadian Standard Association, is usually required by financial institutions involved in real estate purchases. That's especially so if the area is known to have been an industrial site.

Laws and regulations stipulating who is responsible for carrying out assessment and decontamination of such properties vary from province to province. In general, the responsibility falls on the person or company that was using the property when the contamination occurred. This responsibility may extend to any entity that had control of the site even if it never owned the property. Check your province's regulations to see if there are special programs in place to rehabilitate abandoned land.

Assessing the site

To determine whether a site or its groundwater is contaminated, some provinces require soil and water samples to be analyzed and research to be carried out on property titles. Requirements for the collection and analysis of samples and the approval of a property as uncontaminated are different from one province or territory to another. (Here are links to the rules in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Atlantic Canada, the Northwest Territories, Yukon and Nunavut.) If decontamination is required, the following issues must be addressed:

Who is responsible for decontamination?
What is the potential for future liability?
How might this affect the future value of the real estate?
Are the costs worth the investment?
Can the land be cleaned up enough to be suitable for the activity you have planned for it?

To answer these questions, you may have to consult legal, environmental and real estate experts.

Cleaning up: Decontamination

Specialized environmental consulting firms are often hired to decontaminate sites. They use a wide range of processes, each of which carries environmental and financial advantages and disadvantages. Recent innovative technologies can help reduce the costs of environmental cleanup, including in-situ bioremediation, which involves injecting biological agents into the soil; phytoremediation, in which plant materials are used to neutralize contamination; and chemical oxidation, in which oxygen is used to change the molecular structure of organic contaminants so as to help them biodegrade. Multiphase extraction, also known as bioslurping, involves the simultaneous vacuuming of liquids and pumping of air. Yet another process known as air sparging involves pumping air into water to help hydrocarbons degrade.

Soil and groundwater decontamination firms are not always experts in all of these processes. That's why it is important first to identify what types of contaminants are present. This in turn will help you choose the most effective decontamination method and the company best qualified for the job.

Preventing further contamination

Businesses have a responsibility to minimize their impact on the environment. Environment Canada offers guidelines on how to reduce emissions, effluents and wastes. While these guidelines are not legally binding, they may be the basis for future laws and regulations.

To limit the impact of your business on the environment, identify which environmental legislation regulates your activities, take care to manage hazardous substances safely, pay special attention to safe storage and leak prevention, and dispose of all waste properly, reusing and recycling where possible.

Finally, consider performing an environmental audit in order to reach compliance with an international environmental standard, such as ISO 14000.