A new case from the Ontario Superior Court provides another
example of the risks associated with purchasing contaminated sites.
In a failed real estate transaction, the potential purchasers were
left with substantial costs but did not own the properties they had
intended to buy.
In 1828445 Ontario Ltd. v.
Guerra, experienced corporate real estate
developers began the process of purchasing three adjacent
properties, intending to redevelop them as a high rise. They knew
that at least one of the properties was contaminated based on the
environmental investigation of a nearby property they already
Before the end of the conditional period for the offer to
purchase the new properties, their consultant warned them that: the
soil was "heavily impacted"; groundwater contamination
exceeded Table 3 standards; the contamination might have spread to
other neighbouring properties; and there was a risk of liability.
The estimated cost of remediation was $1.35 M.
Nonetheless, the plaintiffs decided to waive the conditions and
proceed. There was some evidence that the plaintiffs intended to
use the presence of contamination and the threat of litigation to
try to negotiate a lower selling price.
Further investigation confirmed that one of the properties, the
site of a former dry cleaner, was the source of the contamination,
and that it had spread onto 5 or 6 neighbouring properties.
The plaintiffs brought an action against the vendors, although
the transaction had not yet closed. On the day of closing, they
requested a remediation agreement and a $5M bond. Not surprisingly,
the vendor refused and the transaction did not close.
The defendants successfully brought a motion to have the action
dismissed because there was no genuine issue requiring a trial. The
Having elected to assume the risk and make the
contract unconditional, the plaintiff cannot subsequently use the
fact that the risk has materialized as a basis for re-negotiating
the contract. The additional information obtained during the summer
of 2011 may have helped to quantify the risk, but the nature of the
risk, and the implications arising from it, remained the
At the end of the day, the plaintiffs did not own the
properties, but were still on the hook for the deposits and
assignment fees associated with the failed transaction.
This and many other cases demonstrate that those dealing with
the purchase and sale of contaminated sites should exercise caution
and due diligence. They can be very expensive mistakes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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