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What do polluting tenants owe their landlords?  Typically, industrial leases have been interpreted to require polluting tenants to remediate their contamination at the end of the lease.

For example, Darmac Credit Corp. v. Great Western Containers Inc. was a dispute between a drum recycler and its landlord.  The recycler leased property in Alberta from 1982 to 1991. Chemicals from the drums contaminated soil and groundwater, and humidity from the drum washing operation caused premature failure of the roof.  The lease had no environmental conditions, but did require the lessee to restore the premises to their original “physical condition”. The landlord sued, and won. The tenant was obliged to conduct a full environmental study and to remediate the property in accordance with government guidelines. “In today’s commercial world, unless a lease provides otherwise, it is implied within a lease that lands are to be returned uncontaminated.  Contaminated lands are not saleable lands.  Perhaps, when this particular lease was entered, environmental concerns were minimal, but they have become prominent in recent years.  Although environmental damage was not directly addressed when this lease was entered, the tenants are responsible for any contamination they cause.” (pg. 28).

The landlord however was entitled to only part of its damages, because it had not reacted promptly when the contamination occurred.  “When the plaintiffs became aware the tenant was not willing to proceed with the remediation or investigation properly, they had an obligation to proceed with their own investigation and remediation with diligence.”

Similarly, in O’Connor v. Fleck, a landlord successfully sued a tenant who had operated a foundry in the building for 26 years, after several industrial uses by others. After the foundry left, the landlord found tonnes of metal-laden dust in the crawl space, ceilings, walls and floor cavities. Some of the dust was leachate toxic for lead. The lease required the tenant to remove all industrial waste on termination of the lease, but allowed “wear and tear”. Although no government agencies required the landlord to cleanup the site, he investigated the contamination and removed much of it in order to re-lease the site. He sued for $200,000 in investigation and cleanup costs, costs of financing, lost property value, legal costs, etc.

The BC Supreme Court found it was an implied term of the lease that the property would be returned reasonably free from contamination. The tenant was required to take all reasonable steps to remove the dust when it vacated the site.

This was also the conclusion in Progressive Enterprises Ltd. v. Cascade Lead Products Ltd. and Jon Edward Turvey, where a commercial landlord sued its former tenant for the costs of lead contamination of the floor. The lease (from 1970) had no environmental conditions, except the normal commercial lease terms that the property be returned in “good repair, subject to reasonable wear and tear.” There were no applicable government standards for lead on indoor surfaces, but the Health Unit insisted on ‘zero tolerance’.

 

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