A frightening amount of money is spent every year in litigation and other anguish over contaminated sites. In terms of harm to human health and the environment, contaminated sites are far less important than clean air, clean water, climate change and urban sprawl. But because of our regulatory structure, contaminated sites pack a huge financial wallop.
Environmental law is often puzzling for those in other practice areas, since contamination is usually invisible and the liability rules may not make “common sense”. Here is a reminder of ten things every real estate lawyer and agent should know:
1. The Polluter Pays principle is a growing part of Canadian law. Regulators can often require polluters to cleanup decades after the fact, even if their conduct was legal at the time, and regardless of subsequent agreements of purchase and sale. There are also signs of growing civil liability for polluters. Rylands v. Fletcher is making a comeback, especially where companies profited from using toxic substances then left their messes behind.
2. This does not necessarily mean that a subsequent purchaser (of the original source of contamination or of an adjacent site) can obtain compensation, even in those fortunate cases where the polluter is still solvent. Non-polluters often end up paying and/or taking a loss. Caveat emptor is still in effect, and appropriate vendor warranties matter.
3. Non-polluters do not have unlimited liability. For example, an innocent purchaser is rarely liable for contamination that left the property before they bought it. But owning a contaminated site is usually expensive and always risky.
4. “How clean is clean” remains contentious. In McGeek v. Shell, the court didn’t require any cleanup, even though the regulations did. In Tridan v. Shell, the court went to the other extreme, requiring Shell to pay for cleanup to pristine, not just to Ministry of the Environment guidelines. Neither rule may apply now that there are regulatory cleanup standards. Regulatory requirements keep changing, and each set of standards contains several options and cleanup levels. For a November 2009 presentation on “how clean is clean?”, click Safeguarding_real_estate_transactions.
5. Just because the Ministry of the Environment can make a polluter pay does not necessarily mean that they will. They may bend over backwards to help homeowners in a Minister’s riding, but they are often unmoved by commercial disputes.
I’m not worried about this site…
6. Any site may be contaminated: homes, farms, apartment buildings, plazas, as well as industries and institutions. Often this is a question of history: did you know that part of Toronto’s Forest Hill used to be industries served by the Belt Line? The most common problems are from petroleum products (e.g. gas stations and leaking heating oil tanks, many of them forgotten for decades); chlorinated solvents (e.g. platers, drycleaners), waste disposal sites; and coal gasification plants (the once ultra-modern process of producing artificial gas from coal for municipal and domestic lighting).
7. Every site is different. For one thing, geology has a big impact on the significance and migration of contamination, and on whether it can realistically be cleaned. In coarse sand, contamination can run far and fast, but may be amenable to in-situ (underground) remediation. In clay, it may be enough to ‘dig and dump’, if the contamination didn’t escape through sewer bedding. In fractured bedrock, all cleanup bets may be off. And it matters enormously if anyone drinks the groundwater.
8. Then there’s chemistry. Petroleum products float on groundwater, smear into soil as the water table rises and falls, and become less toxic as they degrade. Chlorinated solvents (e.g. metal cleaning, dry-cleaning) sink through the water table, and become ever more toxic as they degrade. Leachate from putrescible waste worsens for some years, then eventually improves. Metals don’t degrade…¬
What can we do about it?
9. A good Phase I environmental site assessment (ESA) answers the questions, should we expect contamination on this site and, if so, where? A good Phase II ESA answers the question, is this site contaminated? It may not identify the source of the contamination or the cost to clean it. Of course, no report is a guarantee and not all consultants do good ESAs. At a minimum, make sure the consultant has good insurance. And check the retainer letter — many contain limitations of liability so strict that the report is almost useless.
10. For the owner of a contaminated site, all options are expensive. Excavation is quick though costly, but it is often impractical and won’t necessarily fix groundwater. Risk assessment, in-situ remediation and lawsuits are all painfully slow and unpredictable.
The bottom line is that a rather dysfunctional regulatory regime imposes huge, poorly warranted costs on owning contaminated sites. As a consequence, such sites remain a fertile cause of lawsuits against real estate lawyers, agents and consultants. But they keep good environmental lawyers busy!