Records of Site Condition ("RSC") were devised to encourage the development of contaminated sites by providing a measure of protection for vendors and purchasers from Ministry of the Environment ("MOE") administrative orders. RSCs are now a standard requirement of purchasers in real estate transactions involving land with any appreciable level of contamination. However, getting an RSC can be timeconsuming and costly. Insisting that a vendor get one may kill an otherwise attractive purchase. They are required by law only in limited circumstances.
Should the purchaser demand one? Can a vendor refuse to provide one? Can the purchaser's interests be adequately protected without one? These questions constitute the RSC dilemma.
Part XV.I of the Ontario Environmental Protection Act ("EPA") permits an owner of property to apply for an RSC. Obtaining an RSC requires a "qualified person" to undertake, at a minimum, a Phase I environmental site assessment and, in most cases, a Phase II environmental site assessment, to certify to the MOE that the property meets applicable soil and groundwater standards. Once an RSC is obtained, the MOE is precluded from imposing administrative orders on, among others, an owner or previous owner of the site.
Recent amendments to the EPA, and to Ontario Regulation 153/04 under the EPA, have made the requirements for getting an RSC more difficult. Getting an RSC is now more time-consuming and costly.
What is often forgotten is that RSCs are only required, as a matter of law, in a limited range of circumstances, typically where the use of the property is being changed from industrial or commercial to residential or parkland. An RSC would not be required, as a matter of law, for many real estate transactions.
RSCs represent a material improvement, in terms of the level of protection for both vendors and purchasers, from what existed in the past, because of the protection from administrative orders. Purchasers and lenders, may insist that a vendor provide an RSC, in effect as a kind of enhanced insurance policy on the environmental condition of the property, even where one is not required.
Obtaining an RSC adds time and cost to a real estate transaction. Purchasers, vendors, and lenders can legitimately refuse or decide not to get an RSC when one is not required by law. Whether to get one will be a function of several factors, chiefly whether there has been an adequate examination of the environmental condition of the property, backed by the opinion of a qualified environmental consultant, and the vendor's willingness to provide contractual and financial assurances in the event that environmental conditions are worse than detected.
It should be noted that some municipalities demand an RSC as a condition of development. Some lenders may also demand an RSC, regardless of the level of contamination.
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.
