Real estate practitioners are increasingly required to make efforts to keep up with quickly-evolving environmental legislation impacting the sale of land.
The provincial government is currently considering feedback it received to a suite of proposed amendments to its Ontario Regulation 153/04 - Brownfields Records of Site Condition, which will require stepped-up due diligence by lawyers, owners, and consultants to fulfil land sale transactions.
The amendments were posted on the province’s Environmental Registry last fall and the deadline for submissions was in February.
The amendments include enhanced soil and groundwater standards that reflect scientific advances and changes to the process for submitting Records of Site Condition, means in which to properly conduct phase I and II Environmental Site Assessments, and diminished liability protections for landowners regarding contaminants.
As well, the Environment ministry has introduced a Modified Generic Risk Assessment model that will be available on its web site that is intended to enable applicants to streamline their risk assessments and clean up a site without completing a full MOE risk assessment.
“What is driving this in large measure is science,” says Barry Weintraub, chairman of the Ontario Bar
Association’s environmental law section and a partner at Rueter Scargall Bennett LLP.
“There’s been a realization that the old standards that were in place in some circumstances may expose people to risks that weren’t previously known. So there’s a need to put in place standards that are more stringent but the problems it creates is what to do with old clean ups that were done based on standards that were in place at the time?”
Weintraub was one of three speakers at an OBA Lawyers Edge program hosted in April for the real estate and business law bars entitled Dirty Deals - Addressing Environmental Issues in the Purchase and Sale Transaction.
Aaron Atcheson, a partner at Miller Thomson LLP, and Vico Paloschi, vice president of environmental due diligence and remediation at Pinchin Environmental Ltd., also spoke at the session hosted at Miller Thomson’s London office.
Weintraub says the fast-moving pace of environmental legislation changes means real estate and business law practitioners have no choice but to keep up to speed.
“It’s not title information, so if lawyers just restrict themselves to just looking at title, it’s not going to show up,” he says of the environmental condition of a registered piece of land. “But if you’re advising clients on purchasing land or a business and want them to know the risks involved, it’s something you have to look into.”
He notes that under the changes, land owners are not able to submit a record of site condition more than one year following the commission of a soil sample so “some of these sites that were remediated two or three years ago under the current regulations may not even comply with an RSC now.”
As well, he says while a record of a site condition provides for some limited immunity from further clean up orders, “if you have a site that’s been cleaned up under the old standards, the question is will they meet the new standards?”
Paloschi says he expects upwards of 50 to 75 per cent of site conditions records will be deemed to be contaminated following the changes.
“Basically there are a lot of properties out there that are clean and meet the current standards, but when the ministry implements these new standards, they will be deemed contaminated properties,” he says.
At the very least, lawyers will have to advise their clients to do entirely new reports to ensure they comply, he says.
Paloschi also discussed resources available for lawyers, the technologies used in remediation, and generally how lawyers can ensure they cover all the bases in facilitating transactions for clients. His firm works regularly with lawyers across the country assisting with environmental issues.
He notes that lenders are also paying more attention to environmental criteria when considering financing.
“The lending climate at the moment is leading to a lot more conservatism when it comes to environmental issues,” he says. Therefore, even if an applicant meets the new standards, “will the lenders view a previously cleaned-up property as the same as meeting the current requirement?”
Paloschi sums up developments as both progressive and tough, although not necessarily onerous. “Environmental due diligence in general is becoming more stringent for every transaction,” he says. “But the understanding of issues now is so much better than it was five or 10 years ago.”
Atcheson says the changes will likely affect all properties to some degree or another, so it is imperative lawyers be thorough in their due diligence.
“One of the things real estate lawyers should be doing as part of a title search on a commercial or industrial property is a search of the MOE’s Brownfields Environmental Site Registry,” he says, although based on questions posed by attendees to the OBA session, Atcheson says he suspects many lawyers have not incorporated that process into their full and off-title searches.
“I think only a small percentage of real estate practitioners are including a review of the Brownfields registry web site in a title search at this stage,” says Atcheson.
“But it’s a valuable tool that lawyers can use to allow their clients to better understand the property they are purchasing.”
He adds that matters involving environmental searches and due diligence are moving to the fore, so lawyers must keep step or put their clients at risk.
In the long term, the changes will benefit all parties. “The ministry’s intention is to encourage brownfield revitalization and for the most part the changes are a step in the right direction,” he says. “But there are some modifications required” in the way lawyers handle certain land sales transactions.
Once the proposed amendments are introduced, it’s expected there will be a transition period providing a window of 12 months to file a new record of site condition based on the former criteria. After that, all new RSCs will be subject to the new regime.