Good fences make good neighbours, but they're little help when it comes to contaminated sites. Contaminants often leach through soils, resulting in problems for adjacent property owners. A review of B.C. Ministry of Environment submissions by Next Environmental revealed that approximately 25 per cent of commercial and industrial properties have contaminants which leached to adjacent sites.
The cost of cleaning up these offsite contaminants can cost property owners millions of dollars. But the expense isn't only measured in dollars and cents. There's also a bureaucratic hurdle.
Property owners typically need to address offsite contamination before the Ministry of Environment will issue a Certificate of Compliance that allows redevelopment of the original property. This can delay new projects, and increase holding costs even as it ensures all affected properties are addressed.
Small wonder, then, that Morguard Real Estate Investment Trust and Burquitlam Building Ltd. challenged a decision by ministry staff to withhold a Certificate of Compliance for property at 566A Clarke Road in Coquitlam.
Next Environmental, working on behalf of Canada Safeway Ltd., identified that contamination from Morguard, on an adjacent site, had leaked onto Safeway property, and informed the ministry, which - in keeping with practice - decided to withhold a Certificate of Compliance for Morguard's site. The unexpected information came in at the last minute, leading to the delay of Morguard's redevelopment plans. Morguard consequently appealed the decision on the basis that its property was in compliance even if others were not.
This past June, the Environmental Appeal Board ordered the ministry to issue Morguard a Certificate of Compliance on the basis that remediation of contamination at its property met "applicable standards" and shouldn't delay the Certificate of Compliance.
According to a summary of the case by Harper Grey LLP, the law firm representing Morguard, the ruling does not support the standard view that all contamination emanating from a site needs to be delineated prior to issuance of a Certificate of Compliance. This has two significant legal implications, Harper Grey notes:
The mere fact that contamination exists on neighbouring property, even where it migrated from the site for which a certificate of compliance is sought, will not invalidate an application if the legal and technical requirements for issuance of a certificate, in place at the time the application was made, have otherwise been met.
The standard by which environmental investigations and remediation are to be judged is not one of perfection. While no one explicitly uses the term "perfection" when describing the standard for investigation, Next's identification of contamination on Safeway's site underscores how the ruling not only lowers the bar for property owners seeking Certificates of Compliance for their own contaminated properties as well as boosts the need for owners of adjacent properties to determine the extent to which their properties may be contaminated.
Property owners may not be responsible for perfectly delineating offsite contamination, but they're liable for clean-up costs. By addressing onsite and offsite contamination in a single, coordinated approach, the time and expense required can be reduced.
Next Environmental helped one client coordinate cleanup efforts involving 25 separate industrial property owners - all of whom received certificates of compliance for their properties. Remediation costs were reduced by many millions of dollars compared to what they would have been if each property owner had acted alone.
With the recent ruling that property owners have greater freedom to act independent of one another, collaboration becomes more important than ever in cleaning up contamination cheaply and efficiently.
A message from Harm:
Some of you have met me at NAIOP events, but perhaps we haven't had a chance to chat about how NEXT can add value to your next development project involving a contaminated site. Over the next few months, I will be writing several blogs demystifying the contaminated sites process for developers, real estate agents and lenders. I will use the proven case study approach, and provide regulatory and technical footnotes when I think they are needed. I hope you'll find these blogs provide insight and help your day-to-day real estate business. If you need more detail on any topic, please feel free to call me, or catch up to me at our NAIOP events. Good luck in your transactions!