Records of Site Condition 

publication 

April 2006 - (Lang Michener Real Estate Brief )

Lang Michener Real Estate Brief
Background Information

In 2001, the Brownfields Statute Law Amendment Act was implemented to encourage the remediation and redevelopment of brownfield properties. Brownfields are abandoned, idled or under-used industrial and commercial facilities where expansion or redevelopment is complicated by real or perceived environmental contamination. The legislation clarifies environmental liability and attempts to address barriers to redevelopment. 

In December 2002, amendments came into force that provided limited statutory liability protection for municipalities, secured creditors, and others who undertake certain actions at brownfield properties. 

On March 9, 2004, the Soil, Ground Water and Sediment Standards for use under Part XV.1 of the Environmental Protection Act (the "Standards") were released. The Standards set out the prescribed contaminants and the applicable site condition standards for Records of Site Condition (an "RSC").

Voluntary Records of Site Condition

On October 1, 2004, amendments came into effect which provide new protection for environmental liability and new clean-up standards. These amendments are found in Records of Site Condition (Regulation 153/04) (the "Regulation"). 

These amendments allow for protection from environmental clean-up orders for owners if an RSC is filed in the Environmental Site Registry. These amendments allow an owner or occupier to voluntarily file an RSC if they want protection from statutory liability. 

Mandatory Records of Site Condition

On October 1, 2005, the final brownfields amendments came into effect. These new amendments require filing of an RSC if there is a change in the proposed use of the property from a less sensitive use category to a more sensitive use category. For example, if the property is being changed from "commercial use" to "residential use," it is now mandatory to file an RSC. A change in the zoning of the property under municipal by-laws does not require an RSC. 

It is also mandatory to file an RSC if a person intends to construct a building, if the building will be used in connection with a change in the use of the property. Municipalities will not issue building permits in these circumstances until an RSC has been filed. 

What is a Record of Site Condition?

RSCs provide owners with immunity in respect of administrative orders that might be issued with respect to a property. The criteria that have to be met in order to file an RSC are found in the Regulation. There are a number of exceptions to the immunity provided, including: 
  • it applies only to administrative orders under sections 7, 8, 12, 17, 18, 97, 157 and 157.1 of the Environmental Protection Act;
  • it does not apply to emergencies or off-site migration;
  • it is not retroactive; it applies only to the person who filed the RSC or a subsequent owner of the property; and
  • if a past owner wants to benefit from the statutory protection of an RSC, the agreement of purchase and sale must contain a specific covenant requiring the purchaser to file an RSC.
Whether RSCs, with these exceptions, will be found to be effective in limiting liability has yet to be determined. 

At a minimum, a Phase I Environmental Site Assessment ("ESA") is required for an RSC. The Phase I ESA must be performed by a "qualified person" as defined in the Regulation. The standard for a Phase I ESA in Canada that is most frequently referred to in retaining environmental consultants is the Canadian Standards Association Standard Z768-01, Phase I Environmental Site Assessment. 

Phase I ESAs typically cost in the range of $2,000 to $6,000, and can be completed in a matter of days. A Phase I ESA is intended to identify potential sources of environmental impairment both on- and off-site. A Phase I ESA includes:

1. Record Review: including historical records detailing previous land use, governmental reports and information regarding surrounding sites. 

2. Site Visit: the qualified person will visit the site, looking for things that might potentially cause problems (e.g. an abandoned underground storage tank). 

3. Interviews: the qualified person will interview site personnel, neighbours, former employees, government officials, etc., to obtain information about the site. 

4. Report: the qualified person will compile the information and make suggestions regarding further steps. 

After completing a Phase I ESA, a Phase II ESA may be necessary. The purpose of a Phase II ESA is to confirm whether or not potential sources of environmental impairment identified during the Phase I ESA exist on- or off-site. A Phase II ESA involves quantitative sampling and analytical techniques. The standard for a Phase II ESA in Canada that is sometimes referred to in retaining environmental consultants is the Canadian Standards Association Standard Z769-00, Phase II Environmental Site Assessment. 

The cost of a Phase II ESA varies depending on the methods used, size of the site, number, type and identity of suspected contaminants, and what is being tested (i.e. air, surface water, groundwater, soil, soil vapour, etc.). Phase II ESAs can take substantially longer and cost significantly more than a Phase I ESA. 

In the event that a Phase II ESA confirms the presence of contamination at a site, as set out in the Standards, remediation or risk assessment (which may still result in remediation) will be required before an RSC can be filed. 

The owner or occupier may remediate the property to meet the Standards. Once a property meets the Standards, an RSC can be filed.

In some cases, it may not be cost-effective to meet the Standards. The Regulation allows owners to develop site-specific standards through the preparation of a "risk assessment." This method permits the development of alternate standards to address contamination. This can result in no clean-up activities or reduced clean-up activities at the site. Once the risk assessment criteria have been met, the RSC may be filed. A risk assessment can take approximately a year to complete. 

If the MOE accepts the risk assessment, the MOE may issue a Certificate of Property Use ("CPU"). This is a discretionary power under the Regulation. A CPU may require the owner or occupier to take certain risk management actions, refrain from certain activities on the site, or post financial assurance. If the CPU requires the owner to refrain from certain activities on the site, the owner must provide a copy of the requirement to the occupants of the site. 

The MOE can order an owner to tell a prospective purchaser about the CPU. If the owner fails to do so, the transaction is voidable by the purchaser (s. 197, Environmental Protection Act). The MOE may order the CPU to be filed on title. If the CPU is filed on title, it is considered deemed notice to the prospective purchaser. 

Since October 2005, the chief building officer must refuse to issue building permits that are prohibited by a CPU. The Regulation provides that notice of the CPU must be provided to certain municipal officials whenever a CPU is issued by the MOE. 

Brownfields Environmental Site Registry

The Brownfields Environmental Site Registry should be a standard search in any property transaction.

Summary 

In dealing with real estate, it is important to keep in mind that RSCs may be filed to assist in protecting an owner or occupier from administrative orders in respect of contaminants present as of the certification date, and that RSCs must be filed if there is a proposed change in property use to a more sensitive use.

By Bruce McKenna