Investing in Canada? What You Need To Know About Environmental Risk.

There are substantial differences between the regulatory framework in Canada and the US, which impacts the environmental risk that commercial real estate investors are exposed to.  In order to adequately manage this risk and protect against liability, those investing in Canada should be aware of the local environmental regulation and the appropriate approach to due diligence.

In Canada, property rights and liabilities are addressed by both the Federal Parliament and the Provinces, and each Province has their own set of Environmental Laws. On a Federal level, in 1999 the Canadian Parliament passed the Canadian Environmental Protection Act, which forms the basis of the Federal environmental regulatory framework.  The Act has been amended several times, the latest revision taking place in 2013.  Liability for environmental contamination is addressed in Section 205 “Liability of Owner of Substance”, which determines that a property owner is liable for various costs including any remediation that is required. However, a number of scenarios are excluded from this, including if the contamination resulted from an act of war, or was wholly caused by an act or omission of a third party with intent to cause damage.  The language of these exclusions is somewhat ambiguous, particularly as it relates to the Act’s definition of “intent”.