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Soil contamination and Underground storage tanks: Know the Risks before Buying or Selling

Environmental due diligence is critical to buying a detached home in the Lower Mainland. It is critical for buyers and sellers to conduct searches to determine the presence of contamination which may severely affect the value of residential property and may impact redevelopment and financing plans.

One such environmental issue to be examined is the presence of contamination due to underground storage tanks located on the property. If a property contains or previously contained an underground storage tank, the soil may be contaminated, posing risks not only to the property being sold but also to neighboring properties. Under the Environmental Management Act of British Columbia, owners of contaminated sites are held responsible for remediation efforts, including the cleanup of neighboring properties affected by migrating contaminants.

The responsibility for contamination is imposed on both present and former owners of a contaminated site, and allocation of costs of remediation will be based upon culpability of the parties and the level of contamination which occurred during each owner’s ownership of the property. For that reason, Sellers are advised to take proactive measures to address contamination promptly, thereby minimizing the risk of legal action from purchasers or neighboring property owners. Buyers are advised to conduct a thorough physical inspection of the lands they are planning to purchase. Hiring qualified environmental analysts and advisors can be expensive, but can potentially save Buyers from greater costs in the future. If environmental issues are discovered early, Buyers may decide against proceeding with the purchase, or attempt to negotiate more favourable terms (i.e. a reduced purchase price) with the Seller.

What happens if a purchase is completed and contamination is discovered after the completion? In situations where the contamination occurred primarily during the Seller’s ownership, Buyers may be entitled to recover the bulk of remediation costs unless they were aware of the contamination at the time of purchase and the terms of the sale reflected this knowledge. To safeguard against potential liabilities, sellers should disclose the existence of underground tanks and any contamination to prospective buyers, preferably in writing through a Property Disclosure Statement. Buyers should carefully review the Property Disclosure Statement and any environmental reports supplied and discuss them with their lawyer.

The financial implications of oil tank and soil contamination cases can vary significantly. Remediation costs typically range from $30,000 to $50,000, making them unsuitable for small claims court but insufficient for Supreme Court litigation. However, in more severe cases, remediation costs can exceed $200,000, especially if exacerbated by unscrupulous contractors or resulting in failed real estate transactions.

It’s crucial for both Buyers and Sellers to understand their rights and responsibilities concerning environmental issues in residential conveyances. Seeking legal guidance and conducting thorough due diligence can help mitigate risks and ensure a smoother transaction process for all parties involved. By addressing environmental concerns transparently and proactively, property owners can safeguard their interests and avoid potential legal disputes down the line.

If you need assistance with reviewing your proposed purchase agreement or have any questions about the above, please reach out to discuss.

Contact Peter Coady, Real Estate Lawyer

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Key Contacts
Peter Coady | Real Estate Lawyer | Ratcliff LLP