Environmental due diligence for commercial property in BC

Anyone buying, selling, financing or leasing industrial or older commercial property in BC: an old service station lot in East Vancouver, a light industrial building in Annacis Island, or a strip mall that once had a dry cleaner.

• Under BC's Environmental Management Act, responsibility for cleaning up a Contaminated site can reach current and past owners and operators. See Environmental Management Act (BC Laws).
• A Site disclosure statement may be required for certain past uses or when you apply for some permits. See Site remediation (Government of BC).
• An Environmental Site Assessment (Phase I) reviews history and records; a Phase II ESA tests soil and groundwater.
• Lenders often require environmental reports before they'll fund.
• The contract should deal with environmental risk: subjects, representations, indemnities and price.

Step 1: Learn the history

Ask what the property and its neighbours were used for. Gas stations, dry cleaners, auto repair, printers and many industrial uses can leave contamination behind. The Province's site registry may show records for some sites. See Site information and the Site Registry (Government of BC).

Step 2: Order a Phase I

A Phase I consultant reviews records, aerial photos, the site and nearby properties. It doesn't usually involve sampling. Give them access early and share any reports the seller provides.

Step 3: Decide on a Phase II

If the Phase I finds potential concerns, a Phase II tests soil, groundwater and sometimes vapour. It takes longer and costs more, so build time into your subjects.

Step 4: Use the results

• Walk away if the risk is too high.
• Negotiate a lower price, a holdback or seller cleanup.
• Get indemnities from a seller who can stand behind them.
• Plan remediation with an environmental consultant and lawyer.

Tenants

Tenants can also be responsible for contamination they cause. Before you move in, document the condition with a baseline report if your use carries risk. Read the lease's environmental clause carefully.

The rules in BC

The Contaminated Sites Regulation sets standards and processes. See Contaminated Sites Regulation (BC Laws). Who pays can depend on many factors, and there are exemptions and allocation rules, so get legal advice.

Lender reliance and old reports

Ask for historical environmental reports and closure letters on day one. If you are financing, confirm whether the lender must order the Phase I so it can rely on it.

Phase II follows when Phase I flags a risk worth sampling. Contract language should allocate cost and delay.

Consultants and environmental counsel lead; keep commercial dates flexible enough for real findings.