Environmental Claims – Another Thing for Landlords to be Scared of

We hear a lot about environmental issues in this day and age.  Global Warming is the current topic of conversation.  The focus used to be smog.  Anyone remember acid rain?

Anyhow, there are also day to day issues that come up that can present sticky (sorry, couldn’t resist) legal problems.  True, these are not the “big” issues of national or global importance, but they are important nonetheless.

The most common issues relate to property.  Owner “A” runs a business using chemicals that spill onto Owner “B’s” land.  There is now a maze of regulatory issues, statutory claims, and claims arising pursuant to the common law.  Not to mention the insurance coverage issues.  In many cases there are leasing issues as well.  Let’s talk about that.

For example, owner of commercial lands leases to a business that utilizes chemical processes, or operates a gas bar, or pretty much anything else.

Leases will have (or should have) provisions dealing with contamination.  In certain circumstances, based upon the wording of the lease, the risk of damage to the property as a result of environmental contamination can be deemed to be allocated to the landlord/owner.  For example, if in the provisions dealing with which party is to obtain insurance for such an event, and if it calls for the landlord to do so, a court could conclude that the parties agreed that the risk of loss falls on the landlord, and therefore cannot sue the tenant for the tenants negligence.

The more common situation are provisions that make it clear that the tenant is responsible.  Of course that is of little use unless there is insurance to back it up.  In these cases, the lease will call for the tenant to obtain insurance, and that such insurance is to include coverage for environmental contamination.  Further, the lease will call for the tenant to produce a “certificate of insurance” to confirm such coverage upon request by the landlord.  This is where it usually breaks down.

Landlords rarely, in my experience, ask for the certificate during the currency of the lease.  More importantly, in my view, a landlord should look at the specific policy in place at the time of entering the lease to ensure that there is appropriate coverage.  Even if there is coverage, the extent of exclusions and escape clauses for the insurance company to deny coverage are often vast and numerous.

But since the insurance does not seem to be an issue until there is a problem, a landlord can find out too late that there is no insurance available to address the cleanup and damages. What is worse, the statutory and regulatory requirements are such that the landlord is now on the hook.  And heaven help the landlord if any of the contamination has migrated to a neighbour’s property.

John Barzo
205-60 Collier Street,
Barrie, Ontario, Canada
L4M 1G8

#: 705-733-6245

Leave a Comment

  • Linda Loftus at 8:31 pm

    I was wondering what the exposure to a Landlord and Tenant would be if the lease had expired, was never resigned but the tenant continues to occupy and pay rent. If an environmental issue arises. Who is on the hook?

    • John Barzo at 8:47 am

      Without getting into all the subtleties of environmental liability, my unresearched sense is that whatever the liabilities are, the fact that the tenant is now an overholding tenant would not change the liability picture. Also, remember the various parties can claim. The landlord as against the tenant. A neighbouring owner as against both the tenant and the landlord, and lets not talk about what the MOE can do……