A Newmarket Clinic Purchase Complicated By A Former Garage's Past

The situation

Tomasz had spent most of his career practising as a surgeon out of leased space, splitting time between a hospital and a rented clinic he did not own and had no long-term control over. After separating from Darius, also a surgeon, the two had sold their shared home and divided the proceeds, with Tomasz taking on primary care of their two children. Tomasz's share, combined with his savings, was enough for a meaningful down payment on a commercial property of his own — something stable and entirely his, at a point in his life when stability mattered more than usual, with two kids depending on him.

He found a two-storey commercial building in Newmarket that suited the practice he wanted to run: enough square footage for two consultation rooms, a small procedure room, and a reception area, with parking behind the building and a location on a street with other medical and professional offices. The listing mentioned, almost in passing, that the building had most recently operated as a general office use but had a long history before that as an automotive repair garage. Tomasz did not think much of it. The building looked recently renovated, the mechanical bays had clearly been converted to office space years earlier, and the seller, Shirin, described the garage use as ancient history, something from before she had owned the property.

Tomasz came to us once he had a signed agreement of purchase and sale, conditional on financing, a building inspection, and a review of the property's environmental history — a condition his lender required as a matter of course for a property with any past industrial or automotive use. He expected that condition to be a formality. Buying a commercial building rather than leasing meant he was, for the first time, also buying whatever history came with the land underneath it, and that history turned out to matter more than either he or Shirin had assumed.

What the environmental review found

Automotive garages are one of the property uses that reliably trigger closer environmental scrutiny in a commercial purchase, because the activities associated with them — fuel storage, waste oil handling, solvent use, and in many older garages, underground storage tanks — carry a real risk of soil and groundwater contamination that has nothing to do with how the building looks above ground. We arranged for a Phase I Environmental Site Assessment, the standard first step: a review of historical records, past ownership, aerial photographs, and municipal and provincial environmental databases, without any physical soil or groundwater testing. It is meant to answer one question — is there reason to believe contamination might be present — rather than to confirm whether it actually is.

The Phase I assessment answered that question in the affirmative. Municipal records showed that an underground storage tank had been removed from the property roughly three decades earlier, during a period when tank removal was not always accompanied by the soil testing and reporting that would be expected today. There was no record on file confirming that the surrounding soil had been tested or confirmed clean at the time. Under Ontario's environmental protection framework, a property with this kind of history does not carry an automatic liability finding, but it does carry enough uncertainty that a Phase II Environmental Site Assessment — actual soil and groundwater sampling at points across the site — became the only way to know what, if anything, was actually in the ground.

The Phase II results, which took several weeks to come back, found elevated petroleum hydrocarbons in the soil in a contained area near where the old tank had reportedly sat, at levels above what current provincial standards permit for the property's commercial use. The contamination was not extensive and did not appear to have reached groundwater, but it existed, and it needed to be dealt with before the concern could be considered closed. Shirin maintained, and there was no reason to doubt her, that she had genuinely not known about the tank removal or its history — she had owned the building for a comparatively short time and had never been told. That did not change what the soil testing showed, but it did shape how the negotiation that followed actually went.

What we did

1. Extended the due diligence condition rather than letting it lapse. The financing and environmental conditions in the original agreement were not written with a Phase II assessment's timeline in mind. We negotiated an extension with Shirin's lawyer before the original condition date arrived, so Tomasz was never forced to choose between waiving an unresolved environmental concern and walking away from a building he genuinely wanted.
2. Quantified the actual scope of the problem before negotiating anything. Rather than treating the Phase II results as a reason to abandon the deal outright, we had the environmental consultant provide a written estimate of what remediation would cost — excavating and replacing the contaminated soil in the affected area and confirming clean results afterward. That estimate, not a general sense of alarm, became the basis for everything that followed.
3. Negotiated a price reduction reflecting the remediation cost. We proposed reducing the purchase price to account for the work Tomasz would now need to arrange as the new owner, rather than asking Shirin to complete the remediation herself before closing, which would have added months to the timeline. Shirin's lawyer countered with a smaller reduction; the two sides settled roughly in the middle.
4. Structured a holdback rather than relying on price alone. A price reduction only works if the estimate turns out to be accurate. To protect against the remediation costing more than expected, we had a portion of the sale proceeds held back in trust by the lawyers at closing, to be released to Shirin once remediation was confirmed complete, or applied toward the actual cost if it ran over.
5. Preserved a limited seller indemnity for a defined period. We negotiated a clause under which Shirin remained responsible, for a set window after closing, for costs tied specifically to contamination that predated the sale and was not captured by the Phase II testing already done — protection against the risk that the known problem turned out to be larger than the soil samples suggested, without asking Shirin to guarantee against every possible future finding indefinitely.

The outcome

The purchase closed roughly ten weeks after the original scheduled date, later than either side wanted, but with the environmental question resolved on paper rather than left open. The purchase price, originally agreed at about $1,850,000, was reduced by roughly $70,000 to account for the remediation Tomasz would need to arrange, bringing the closing price to about $1,780,000. A further $55,000 of the proceeds was held back in trust, to be released to Shirin only once a licensed contractor confirmed the affected soil had been excavated and replaced and follow-up testing showed the site met current standards for its use.

This was not a clean outcome, and it was not meant to be treated as one. Tomasz became the owner of a building with a documented history of contamination, and he took on the responsibility of managing the remediation himself as the new owner, coordinating contractors and confirming the work met the standard the holdback required. The limited indemnity from Shirin gave him a defined window of protection if the problem proved worse than the testing suggested, but that window would close eventually, after which any further environmental issue on the property would be his alone to manage. He accepted that trade-off with a clear understanding of what it meant, rather than discovering it after the fact.

Shirin, for her part, sold a property she had owned for a relatively short time at a lower price than she had hoped, and left a portion of her proceeds tied up in trust for months after closing while the remediation work was completed and confirmed. She had not caused the original contamination and had not known about it, and the negotiated outcome reflected that — she was not asked to indemnify Tomasz against every future risk, only the specific one the testing had already identified. Both sides gave something up. Tomasz got the building he wanted, with the risk quantified and priced rather than hidden, and Shirin closed a sale that a fully informed buyer might otherwise have walked away from once the Phase II results came in.

The remediation work was completed within about four months of closing, confirmed by follow-up soil testing, and the holdback was released to Shirin shortly after. Tomasz moved his clinic into the building the following spring. The building he owns today is not, on paper, a property with a spotless history — it is one where a known problem was found, measured, and dealt with before it became his alone to explain.

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