Law Times

Law Times • November 20, 2017 Page 11 www.lawtimesnews.com Redevelopment of old properties a growing trend Pay close attention to assessments, say lawyers BY DALE SMITH For Law Times W ith real estate at a premium in large cities, redevelop- ing old industrial and commercial properties is a growing trend, but this kind of brownfield reclamation also contains risks when it comes to liabilities. Lawyers say that careful at- tention must be paid to the disclosure of environmental assessments by purchasers and that it's important not to rely solely on vendors' assessments as part of their due diligence. "We have a regime in Ontar- io where you need to get a record of site condition if you're chang- ing a property use from indus- trial or commercial to residen- tial," says Lana Finney, a partner with global law firm DLA Piper (Canada) LLP in Toronto. A number of old industrial or commercial properties in downtown Toronto are being turned into condos and other mixed-used developments. Finney says that an RSC can help to reduce liability because the property has to meet min- istry standards or have site- specific standards under a risk assessment in order for the re- cord to be granted. Finney says a filed record can protect clients against certain costly ministry orders. "Because purchasers, when they're changing the use, need to get these anyway, we're now starting to see vendors of prop- erty requiring purchasers to file a record of site condition, because if the vendors require it as a term in an agreement of purchase and sale, the vendors themselves can also get the pro- tection," says Finney. Lawyers say that even if their clients obtain a record of site condition, it may not protect them against ministry orders related to off-site migration of contaminants, which means they could be liable for cleanup. "I frequently deal with real estate lawyers who are working through a deal and take them through whatever issues may come up," says Michael Hebert, partner with Beament Hebert Nicholson LLP in Ottawa. "[I]f a piece of land is con- taminated, you have serious problems for both a purchaser in terms of assuming liability and a vendor in terms of succes- sor obligations." Hebert says that if there is a sale with a remediation by the vendor, then lawyers need to define very carefully what it is that they're doing and trying to achieve, along with who mea- sures it and what determines what is compliant or not. "Even if you're a vendor and the purchaser is going to agree to remediate, you're going to have very similar concerns because of the fact that you could be li- able down the road if the pur- chaser doesn't do what they're supposed to," says Hebert. He says what can happen is that a vendor can find the con- tamination is worse than initial- ly anticipated because the bore holes used to test the site may not have been representative of what is on the property. "That's why it's important to have good environmental engi- neering going into the creation of Remediation Action Plans, so that the contamination is going to get dealt with," says Hebert. He notes that even if the con- tamination has been satisfacto- rily delineated, there is never a 100-per-cent guarantee that the remediation costs will be as pre- dicted. "We always allow a margin of error of at least 20 per cent, which wouldn't be allowed in other commercial transactions, but that's a minimum," says Hebert. He notes that the language of documents needs to be very carefully examined between vendor and purchaser to ensure there is full disclosure of all of the environmental assessments, and purchasers may want to consider getting their own as- sessments or peer review of ex- isting assessments so that the client is not relying solely on the vendor. The downside of that, how- ever, is the associated cost. Finney notes that if a vendor is selling a property while leav- ing behind contaminants, they need to measure the level of sophistication and financial po- sition of the purchaser with re- spect to dealing with the issues. "I've certainly seen instances where there's a transaction and the purchaser either goes belly up and they just don't have the sophistication to deal with the issues, so they don't or they FOCUS Lana Finney says lawyers are seeing more cases of vapour intrusion, which is an added liability factor in real estate deals. See Vapour, page 13 [I]f a piece of land is contaminated, you have serious problems for both a purchaser in terms of assuming liability and a vendor in terms of successor obligations. Michael Hebert In-class and online programs recognized by Law Societies Executive Education to Navigate the Canadian Legal Landscape Visit Lexpert.ca to find out more Right-sized Thinking® • 1-800-323-3781 • pallettvalo.com Your Authority For: Business Law • Commercial Litigation • Commercial Real Estate Construction • Insolvency & Corporate Restructuring Employment & Labour • Wills, Estates & Trusts No Matter the Size or Type of Case, We Can Handle It From the complex to the simple; our range of expertise enables us to handle whatever size or type of legal issue you may have. We are committed to providing forward-thinking and flexible legal counsel while maintaining client service excellence. That's what we like to call Right-sized Thinking®. Untitled-5 1 2017-11-14 1:42 PM

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