Leasing commercial property in Ontario is an exciting endeavour for many business owners, but it can also come with risks. One of the primary risks for both commercial landlords and tenants comes from issues relating to contaminated lands. These risks make understanding the environmental liabilities and regulatory requirements critical for all parties involved. 

This blog will explore the law related to contaminated lands in Ontario and explain what commercial landlords and tenants should know about associated leasing issues. 

What are “Contaminated Lands”? 

The Environmental Protection Act defines “contaminant” as “any solid, liquid, gas, odour, heat, sound, vibration, radiation or combination of any resulting directly or indirectly from human activities that cause or may cause an adverse effect.” If a substance that can cause an adverse effect exists on the property, the property could be considered “contaminated land.” 

How “Contaminated” is a Contaminant? 

With contaminants being defined so broadly in the Environmental Protection Act, it can be difficult to determine whether a substance is a contaminant or whether the presence of a presumed contaminant is serious enough to warrant further investigation. 

The presence of a small amount of a contaminant is not inherently problematic. Ultimately, the determination turns on the concentration of the contaminant on the land in question. The permitted levels of contaminants can vary based on the substance in question and are prescribed by regulation. Therefore, if you are unsure whether a contaminant poses an issue for the property, it is best to speak with an experienced environmental lawyer

Liability for Contaminated Lands? 

Under the Environmental Protection Act, individuals are prohibited from discharging contaminants into the natural environment in amounts exceeding those prescribed by the regulations. This legislation creates “strict liability” for discharging a contaminant in these circumstances, meaning that the responsible person will be liable for a contamination even if it occurred accidentally. If an individual is found responsible for a contaminant under the Environmental Protection Act, they can likely face significant fines that vary depending on the nature of the contaminant and its impact. 

Beyond the strict liability imposed by the Environmental Protection Act, individuals responsible for contamination could face further legal repercussions in civil law. For example, if the contaminant impacts a neighbouring property, the owner of that property may sue for damages. 

Who is Liable for Contamination? 

The Environmental Protection Act creates strict liability for the “responsible person” involved in a contamination – the party who actually contaminated the property. In a landlord-tenant scenario, assuming the tenant was the one who contaminated the property, the tenant would be found liable for the resulting contamination. Conversely, if a landlord’s actions led to contamination of the property before the tenant began leasing the property, the landlord would be liable for the contamination. 

However, like many legal issues, exceptions may apply. For example, the terms of the commercial contract may deal with liability between the parties, or both parties may be found liable for resulting contamination if it can be proven that both knew about the contamination. To that end, speaking with an experienced environmental lawyer is important if you have concerns about liability relating to contaminated lands. 

Leasing and Contaminated Lands: What Landlords and Tenants Should Know 

Contamination can occur before or after a commercial lease begins, and in some cases, the commercial landlord may not even know contamination exists on the property. This is why it is essential for both parties to take steps to protect their rights before entering into any commercial tenancy. Some examples of proactive steps for parties to take are outlined below: 

Do Your Due Diligence 

Before entering into a commercial lease, both parties should conduct thorough due diligence on the property. In the case of contaminants, a great first step involves obtaining a Phase I Environmental Site Assessment to help determine whether any contamination issues exist on the property and, if so, to determine the nature and extent of the contamination. In some cases, Phase II and III Environmental Site Assessments may also be appropriate. 

Environmental assessments are not just a valuable tool for tenants to determine whether contamination issues exist. They can also help landlords establish a “baseline” regarding the site’s contamination. If contamination occurs due to the tenant’s use of the property during their lease, this information can help landlords protect their rights and establish liability for the contamination. 

Check the Lease Agreement Carefully

It is important for landlords and tenants to read any commercial lease agreement carefully for obvious reasons, but with respect to contamination issues, it is especially critical. For example, the commercial lease might include requirements that the tenant carry environmental liability insurance in the event of contamination or that the tenant must remediate the leased premises before ending the tenancy if contamination is present, among other things. Reading the lease agreement carefully before signing will not only help you ensure that you understand your rights and obligations regarding the agreement and help you identify any concerning clauses or omissions. 

Respond to Potential Contamination Issues Quickly 

Regardless of whether you are a landlord or a tenant, you must ensure you respond to potential contamination issues quickly to minimize potential environmental damage and your liability. Knowing any hazardous activity on the property warrants immediate investigation. Take, for example, the lesson from Duling v. Teskey, in which case a landlord was held liable for an explosion caused by their tenant because the landlord had known that the tenant had been engaging in hazardous activities on the property. 

Final Thoughts on Leasing and Contaminated Lands

It is important to understand the risks associated with contaminated property. Beyond taking steps to avoid contamination, it’s also important to protect your own interests by conducting appropriate due diligence, understanding the terms of your lease agreement, and responding quickly to potential contamination issues. 

Dealing with commercial leases can feel like a complicated experience, especially when environmental issues are at play. That is why it is important to consult with an experienced environmental lawyer long before you sign a commercial lease to ensure you are empowered with the knowledge and advice necessary to navigate this process easily. 

Experienced Ontario Real Estate and Environmental Law Lawyers Advising Clients On Contaminated Lands

At Tierney Stauffer LLP, our commercial and environmental lawyers are committed to providing experienced legal advice that aligns with the evolving landscape of environmental regulation. We excel in assisting clients with navigating the complexities of environmental issues, offering strategic advice, and helping clients achieve sustainable and responsible solutions. 

For assistance with environmental law issues, call us at 1-888-799-8057 or online to schedule a free consultation.


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