What should an environmental indemnity clause cover when buying a potentially contaminated site in Ontario?

An environmental indemnity clause is a contractual promise, negotiated as part of the purchase agreement, that allocates responsibility between buyer and seller if contamination or an environmental liability tied to the property surfaces later. A well-drafted clause typically addresses known contamination already identified through due diligence, how costs of any further investigation or remediation will be shared or assigned, and what happens if a new issue is discovered after closing that wasn't part of the disclosed environmental picture.

It should also specify a time period during which the indemnity applies, since environmental issues can take years to surface, and address whether the seller is required to maintain some form of financial security, such as a holdback of sale proceeds, to back up the promise rather than leaving the buyer to chase a seller who may be difficult to locate or judgment-proof later. Buyers should be cautious about relying on an indemnity alone in place of proper due diligence, since a contractual promise is only as good as the other party's ability and willingness to pay when the time comes; a lawyer's review of the specific wording against the actual environmental reports obtained is essential before relying on it.