Environmental Checks When Buying a Business With Land in Alberta

If the business you want to buy owns or leases land, you are not only buying customers, equipment and a name. You may also be taking on whatever has happened on that land over the years, including spills, storage tanks, or past industrial use.

This article explains, in general terms, what environmental checks buyers usually consider in Alberta, which official records searches can help, and why contamination risk is worth raising with a lawyer before you commit.

This article covers the law of Alberta.

Why land changes the risk

Problems with soil or groundwater are often hidden. A tidy-looking shop, yard or farm site can still have a history that only shows up in records or testing. Cleanup can be costly, and it can also affect whether you can finance, insure or later resell the property.

Whether you could be responsible for contamination under Alberta law depends on the facts, including your role (owner, tenant or operator), when the problem occurred, and how the deal is structured. A lawyer can explain how that applies to your purchase.

What an environmental site assessment involves

An environmental site assessment is a review done by a qualified environmental consultant. It is usually done in stages, and each stage goes further only if the earlier one raises concerns.

• Records and history review: past uses of the site, nearby activities, permits, and earlier reports.
• Site visit: a walk-through to look for tanks, staining, waste storage, or other warning signs.
• Interviews: questions to the seller, staff, and sometimes neighbours about past practices.
• Sampling and testing: if concerns remain, soil, water or air may be tested to see what is actually there.

An assessment is not the same as an appraisal. A valuation looks at what the property is worth. It does not tell you whether the site is clean.

Registry searches that support your checks

Registry searches do not replace an environmental assessment, but they help you confirm who you are dealing with and what interests may be attached to the business.

Corporate Registry searches are requested through a registry agent, who charges a government fee plus a service fee. Certificates of status are not available for trade names and partnerships. Personal Property Registry searches are requested on a Search Request form at any registry agent office in Alberta.

Money and structure issues tied to land

If you plan to borrow, note that Canada Small Business Financing Program term loans can cover commercial real property. Financing is capped at the lower of the purchase price or the appraised value of the eligible assets. That appraisal figure is about value, so it is not a substitute for environmental due diligence.

Tax can also matter. Even with a valid GST election for the sale of a business, tax is still payable on a taxable sale of real property where the buyer is not a registrant. An accountant can confirm how this applies to your deal.

Contract protection is the other piece. Buyers often ask for promises from the seller about the condition of the land and for a way to recover costs if a problem appears later. Our article on holdbacks and indemnities explains how those tools generally work.

What to do next

• Ask the seller for past environmental reports, permits, and any government notices about the site.
• Talk to a lawyer early, before you sign a letter of intent or purchase agreement, about how contamination risk should be handled.
• Hire a qualified environmental consultant to start with a records and site review.
• Run Corporate Registry and Personal Property Registry searches through a registry agent.
• Ask your lender and insurer what environmental information they will want.
• Do not waive your conditions to close until you have the results.

Frequently asked questions