The non-Canadian residential property purchase prohibition – three primary areas of concern

The following article is re-printed with permission. It was written by David Tang and Mackenzie Laforet of the law firm Miller Thomson. Links to their bios and to the firm are included should you wish further information.

Why is the Greenstead Consulting Group re-printing an article concerning residential real estate, when our expertise is in commercial real estate? The answer is that the current iteration of the Act is broader than many may expect and it does affect commercial real estate developments of mixed use property that contains or may contain a residential component in the future.

David TangMackenzie Laforet

Many readers are already aware that the Canadian government has banned, as of January 1, 2023, the purchase of residential property in Canada by non-Canadians. The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act)[1] itself dates back to June 23, 2022, but relies upon regulations to fully flesh it out.  Those have now been introduced.

Broadly speaking, the Act addresses housing affordability and availability challenges by ensuring more housing is available for Canadians by prohibiting non-Canadians from buying housing.  Much has been written about the specific exceptions to the prohibition and this article will not describe the exemptions which are applicable.  One place to begin understanding the primary provisions of the Act and Regulation is Canada Mortgage and Housing Corporation’s (“CMHC”) article:

Our article looks at three critical concepts found in the Act and its primary regulation, SOR/2022-250[2], which came into force on January 1, 2023.   The Regulation answers the primary question of what real property is subject to the ban.  However, the approach taken by the Regulation will raise significant concerns for many of our clients given the unexpectedly broad application of the ban to property that is not immediately or obviously residential in nature.  It also provided criteria for determining what level of foreign control brings a purchaser within the ambit of the ban, and those are also broader than many anticipated.  This article also looks at the potential for prosecution of those engaged in assisting someone who may or may not be a non-Canadian in a purchase of residential property.  Unfortunately, the current language of the Regulations results in some significant ambiguity and what we believe are unintended consequences.  The primary author of this article and others at Miller Thomson LLP are involved in an initiative to clarify and hopefully correct any unintended consequences and Miller Thomson will update our readers periodically.

Overly broad definition of residential property

The ban applies to “residential property”, which is defined fairly clearly in the Act to include any condominium units (and common areas) and buildings that contain three or less dwelling units; essentially single family homes, duplexes and triplexes. The Regulations however adds to the statutory prohibition the purchase of any “land that does not contain any habitable dwelling, that is zoned for residential use or mixed use, and that is located within a census agglomeration or a census metropolitan area”.

The Regulation thus apparently prohibits the purchase of either a vacant lot or a commercial/industrial or institutional building on land that is zoned for “residential use or mixed use.”  There is no clear exemption for existing commercial/industrial/institutional-only buildings in mixed use zones where residential uses could be introduced, whether immediately or only upon significant redevelopment, as there is for multi-unit residential buildings.  The Regulation only asks whether the land contains a habitable dwelling, which almost all office buildings, factories and warehouses do not.  This result is likely not intentional since the CMHC, with whom the government consulted prior to promulgating the Regulation, notes in its press release that the Regulations prohibit applies to “vacant land that does not contain any habitable dwelling, that is zoned for residential use or mixed-use” despite the regulation itself not containing that word “vacant.”

Even if the prohibition only applies to vacant land, it has the effect of applying even if the lot is intended to be redeveloped for a multi-unit residential purpose, such as a rental apartment building or condominium.   This is despite the fact that if those multi-unit buildings already existed, the property would be exempt.  Redevelopment that increases the number of housing units available in Canada should be seen as actually advancing the purposes of the Act, by increasing housing accessibility. To prohibit the purchase of vacant land that will be developed into multi-dwelling units, is an unexpected action from the government, and one that seems counter-productive to the very purpose of the Act.

The Regulation’s reference to lands zoned for “mixed use” is unfortunately ambiguous.  Our expectation is that the Canadian government intended the term “mixed use” to mean only zoning where a residential use is one of the permitted uses, despite the lack of clarity.  Almost all municipalities zone some areas for a mixture of commercial, institutional and industrial uses while prohibiting residential uses.  It is not clear that those lands are not captured by the term “mixed use”.   There are even zoning by-laws that provide for very limited residential uses in industrial zones, for example for a caretaker of large industrial facilities, which would even on a purposive interpretation of that provision be captured by the ban.

Corporations and the importance of “control”

Corporations and other entities are subject to the ban if they fall within the definition of “non-Canadian” found at section 2 of the Act.  Corporations incorporated pursuant to Canadian corporate law can be subject to the “ban.”  The test is whether the corporation or entity is controlled by a non-Canadian entity.  The Regulations have provided the following definition of “control”:

(a) direct or indirect ownership of shares or ownership interests of the corporation or entity representing 3% or more of the value of the equity in it, or carrying 3% or more of its voting rights; or
(b) control in fact of the corporation or entity, whether directly or indirectly, through ownership, agreement or otherwise.

The extremely low threshold of a less than 3% direct or indirect ownership interest, equity value or voting rights in a Canadian corporation by any non-Canadian entity may snare many potential buyers.

The second “control” test, “control in fact”, is not defined in the Act or Regulations and many purchasers will need to carefully discuss with their legal counsel whether their purchase of residential property contravenes this Act. The meaning of “control in fact” will need to be determined on a case-by case fact-specific basis even if some guidance can be found in case law and experience interpreting section 256(5.1) of the Income Tax Act and other provisions in the Investment Canada Act, where that term is also used in arguably similar policy circumstances.

Penalty provisions for collaborators and purchaser

The Act carefully avoids invalidating contravening sales, focusing on imposing penalties and allowing for subsequent enforcement actions against the purchaser. Indeed, it explicitly provides that the sale is not invalidated by a contravention to avoid the chaos potentially voidable sales would create.

Instead, contravention is punishable by a maximum fine of $10,000 but applies broadly to “every person or entity that counsels, induces, aids or abets or attempts to counsel, induce aid or abet a non-Canadian to purchaser, directly or indirectly, any residential property knowing that the non-Canadian is prohibited under this Act from purchasing the residential property.  Individuals with managerial or supervisory functions of a corporation, along with “senior officials”, officers, directors or agents or mandataries of the entity are individually liable. A $10,000 fine represents a real deterrent to the purchase of the types of homes that we expect the Act is designed to ensure are made available to individual Canadian families.

However, in addition to the monetary fines, section 7(1) of the Act permits a court to order a residential property purchased by a non-Canadian in contravention of the Act be sold.  This remedy is what we expect will be the real teeth of the Act in the case of larger transactions.   This approach prudently allows discretion on the part of the government about whether to pursue the remedy based upon the circumstances of the purchase.  The Act further mandates judicial consideration of the value or merit of imposing this significantly more draconian remedy.  The court making the sale order must be “satisfied that the impact of the order would not be disproportionate to the nature and gravity of the contravention”.   Once made, however, the order would penalize the non-Canadian purchaser by deducting the costs of the sale and the Minister in bringing the application fro the order, any fines from the proceeds along with scooping any increase in value above the purchaser price, which would be paid to the Receiver General.   If a sale is ordered, the consequence is the loss of any commercial viability of the purchase.

The primary uncertainty at this time is which other players will be liable for prosecution for participating in some way in such a purchase.   The charging language is quite broad.  It likely includes any person acting for the purchaser in any sort of agency relationship, such as real estate agents, who has knowledge of the status of the purchaser.  The question of whether others, such as lawyers, mortgage brokers, lenders and even the vendor of the property (and its agents etc.) are captured by the language in section 6 of the Act and whether there will be rigorous prosecution is much more difficult to answer.   Careful consideration of the facts to determine the risk will be required in many cases.

While legal advisors will be able to provide some of these players with tools or solutions to minimizing the risk of prosecution, the question remains whether those measures create an unreasonable disincentive to the transaction.   Particularly where the transaction was to further the public objective of the Act of improving access to housing (as would be the case in the case of a purchase of vacant residentially-zoned lands for the development of new housing), the question remains whether the risks will prove a significant deterrent to these transactions.


These are just some of the issues and challenges that will arise as this Act is interpreted and enforced. Fortunately, the government has indicated that it will provide answers to concerns as they arise. Miller Thomson LLP is part of an initiative to encourage the government to clarify some parts of the Act and its regulations and we will continue to provide updates as they become available. We will also be monitoring whether there are challenges to the constitutionality of the regime based upon the separation of powers between Canada and the Provinces.

If you have any questions regarding these issues or the specific exemptions or rules contained in the Prohibition on the Purchase of Residential Property by Non-Canadians Act, please contact a member of the Miller Thomson Real Estate Group.

[1] S.C. 2022, c. 10, s. 235.

[2] Prohibition on the Purchase of Residential Property by Non-Canadians Regulations, SOR/2022-250 (“Regulations”).


This article was originally published by Miller Thomson LLP

The Canadian Federal Budget of 2022 and Real Estate

The latest budget proposes a number of programs intended to affect the price of residential real estate. The link below is to a government of Canada information page about the proposed legislation points. To be clear, it is our current understanding from the draft wording that none of these proposals will affect commercial real estate as they are all targeting housing affordability issues.

Chapter 1: Making Housing More Affordable | Budget 2022

Revised Lien Act Coming to BC, Canada

On March 31, 2022, British Columbia passed new legislation that will reform and consolidate the law on commercial liens in British Columbia. Bill 11 – 2022: Commercial Liens Act (the “CLA”) will modernize this area of the law and establish a framework for commercial liens that aims to be more consistent with other jurisdictions in Canada. While the CLA has received royal assent, the act will be brought into force by regulation at a yet to be determined date (likely 2023 at the earliest).

Generally, liens grant service providers (such as repairers, warehousers and common carriers) a legal right to retain a customer’s property to secure payment or performance of an obligation.

The current commercial lien regime in British Columbia is governed by a collection of outdated legislation and common law principles that are criticized as being difficult to follow, inconsistent, inflexible and inefficient. The CLA will repeal the current legislation and common law liens and replace them with a single comprehensive framework that is integrated with the Personal Property Security Act (the “PPSA”). In particular, the CLA will repeal and replace the Repairers Lien ActWarehouse Lien ActLivestock Lien ActTugboat Worker Lien ActWoodworker Lien Act, and the common law possessory liens which establish a lien for services. The CLA will not affect liens under the Builders Lien Act, which is most commonly used in commercial real estate and the Forestry Service Providers Protection Act.

Important information for Commercial Landlords and Tenants: Ontario Superior Court provides guidance on when leases can (and cannot) be transferred to new Tenants

Below is an excellent article concerning lease assignments by lawyer Daniel Waldman (bio and contact information is below).  There are a number of things tenants, and landlords can do to address situations such as those in this case. The bottom line for tenants is not to assume you can assign your lease, so the assignment and subletting provisions need to be negotiated and reflect what you want. Don’t simply accept the wording the landlord has in their standard lease form.

The bottom line for landlords is to consider all your current and future plans for the property and have those reflected in the lease. At the Greenstead Consulting Group we call that “Future-Proofing” the lease and property. If things change, and the landlord needs something new in the lease, it is better to negotiate than attempt to bullying your way to what you want.


As more and more brick and mortar businesses become unfortunate victims of this pandemic, many are hoping to assign their leases and free themselves of that liability. However, a recent decision from the Ontario Superior Court states that even if a suitable replacement tenant is found, commercial landlords are given wide leeway to refuse the transfer of a lease.

In Rabin v. 2490918 Ontario Inc., a commercial landlord refused to consent to a tenant’s request to assign its lease and the court was tasked with determining whether the landlord’s decision was “unreasonable” under the lease and at law.

The tenant ran a dental practice through a professional corporation in a medical office building in west Toronto for over 40 years.  The tenant’s current lease term commenced in 2015 and is set to expire at the end of 2025, with an option to renew for an additional five years.  The lease contained a boilerplate clause stating that it could not be assigned to another tenant without the landlord’s consent, which could not be “unreasonably withheld”.

The current landlord purchased the building in 2017 with plans to redevelop it for mixed residential and commercial use.  A land planning application to the City of Toronto was submitted some time ago, but very little had been done to move forward with the redevelopment since that time.  In particular, the landlord had made little progress in vacating the building, which was required for the redevelopment to proceed.

Earlier this year, the tenant sought to sell his dental practice to a group of younger dentists, who would form a new professional corporation to assume the lease for the remainder of its term.  When the landlord’s consent for the transfer of the lease was requested, the landlord stated that it would only agree to the transfer if a “demolition clause” were to be inserted, which would give the landlord the option of terminating the lease on two years’ notice if it intended on demolishing the building.  The landlord acknowledged that it made this offer opportunistically as a means of getting the tenant out of the building.

The tenant did not agree to the landlord’s condition, as the new dental practice would not agree to its tenancy being cut short.  Following a period of negotiation, the landlord stated that it would only consent to the transfer if the tenant provided voluminous financial information for the new tenant, some of which made no sense — such as financial statements for the new corporation which had yet to be formed.  The tenant refused to provide this information and took the position that the landlord was unreasonably withholding its consent to transfer the lease.  The tenant then commenced a court application seeking an order to affect the transfer.

In analyzing the tenant’s request, the court noted that it used to be the case that the law in this area almost always favoured the tenant.  As in, if a commercial tenant wished to transfer its lease, landlords were seldom able to say no.  However, the law has changed a lot in recent years to give landlords a lot more rope in this regard.  Courts have acknowledged that if commercial landlords are able to choose which tenants lease their spaces in the first place, they should also be given some leeway when it comes to transferring those same leases to other tenants.

In deciding whether or not to consent to a lease transfer, landlords are now permitted to rely on a variety of factors in making this determination.  For instance, they can examine the surrounding circumstances of the tenancy, the lease and the building in general.  They can also consider the commercial realities of the marketplace and how the assignment of the lease could impact them and the other tenants in a particular building.  The financial position of the proposed assignee is fair game as well.

Landlords are still not permitted to arbitrarily refuse a lease transfer.  Nor are they allowed to say no for opportunistic or ulterior purposes, such as securing higher rent or a better lease.  But courts have been clear that they should be given wide discretion in making their decisions.

Also, if the tenant feels that the landlord is unreasonably withholding consent, the tenant bears the burden of proving this.  In other words, it is not up to the landlord to convince the court that they are acting reasonably, but rather the tenant must prove that the landlord is acting unreasonably.

In this case, the court agreed that the landlord was acting unreasonably by requesting such far-reaching financial information for the new tenant.  However, it was also held that the tenant did not act in good faith either, insofar as it failed to provide any information at all.

In the end, the court chose to deal with the situation in a creative way – it did not grant the tenant’s application due to its failure to provide any information to the landlord.  However, the judge ordered that the tenant should be given the chance to make best efforts to respond to the landlord’s request for information; and, if the landlord still did not consent to the transfer of the lease, the tenant would be able to bring the application back before the court to seek the order again.

This case provides some valuable insight into lease transfers in commercial tenancies.  Many commercial leases and the Commercial Tenancies Act state that landlords are not permitted to “unreasonably withhold” their consent for such transfers, what exactly constitutes “reasonable” will come down to the facts of each case.

Although in this particular case, it would not have been reasonable for the landlord to refuse the lease transfer, as the proposed assignee was essentially the same dental practice run by younger dentists.  Nor was it reasonable for the landlord to demand a demolition clause, as this was clearly an attempt to secure a more favourable lease for its intended redevelopment.   But this does not mean that the landlord was necessarily constrained when it came to deciding whether the lease should be transferred or not.

Both landlords and tenants would be wise to heed the information provided in this decision when faced a with potential lease transfer.  This is particularly important in the current climate, with the COVID-19 pandemic making it difficult for commercial tenants to pay their rent. This decision should send a message that, just because they find new tenants that are willing to assume their leases, that does not mean that their landlords have to agree.  Landlords, on the other hand, cannot turn down a lease transfer for arbitrary or opportunistic purposes, but they still have wide discretion in deciding whether or not to give their consent.

About Daniel Waldman

Daniel Waldman is a senior lawyer in the litigation group at Pallett Valo LLP in Toronto. He practices commercial litigation with an emphasis on complex real property disputes, including commercial leasing, large-scale commercial real estate transactions, development deals, construction law and debt collection. Daniel represents a range of clients including developers, real estate investors, commercial landlords, REITs, banks and international construction companies. Daniel also regularly writes for a range of publications, including Canadian Lawyer Magazine, Precedent Magazine and The Advocates Journal.  He also publishes a regular column on The Real Estate News Exchange ( called The Property Law Hub, where he writes about developments in real estate litigation.  Daniel has also been named as a Lexology Legal Influencer for his writings on dispute resolution.

Contact information:


Phone: 289.805.4609


An Accelerating Cultural Shift Brings Massive Changes to Commercial Real Estate

A current, major cultural shift will have dramatic changes to how all commercial real estate is viewed, developed, occupied and managed, according to commercial real estate consultant Peter D. Morris of the Greenstead Consulting Group, located in Vancouver, Canada.

“Since the beginning of time, our culture  has predominantly been to go to get products, services, entertainment, and even work. The shift now is that consumers now want all that to come to us instead. We call it the Come to Me SM Culture”, said Morris.

While a small minority embraced the idea of some things being delivered to the consumer, such as mail order companies and their customers; Covid has brought the idea of having products and services delivered rather than going to get them ourselves into the mainstream. Morris notes that this cultural shift affects almost every aspect of our lives today and will accelerate at an increasing pace into the future. Morris believes commercial real estate owners and occupiers should now investigate the ramifications of this significant trend to stay ahead of the curve.

He noted, as an example, that just a decade ago retailers were told they needed an omnichannel presence to be relevant, so many created websites that were more or less brochures or billboards on the web. Today, retailers of all stripes must have an ability for consumers to easily buy from the comfort of their home and have the products delivered to them, to align with this trend. Morris cites emerging companies such as Foxtrot, a young US, technology based convenience store chain that was primarily created around web-based purchasing and home delivery first, with physical locations too.

Meal and grocery delivery services are another example of products going to the consumer rather than the consumer going to the store. Likewise, third-party restaurant delivery services such as DoorDash and Uber Eats (and many others) are flourishing. Even restauranters are carving out virtual restaurants with ghost kitchens that don’t have a physical presence.

Before Covid, employers were reluctant to have remote workers, citing supervision and productivity as just two potential issues. Technology platforms such as Teams, Skype and Zoom demonstrated that people no longer needed to go to the office, and even sales staff are conducting sales presentations virtually. The stigma of virtual communication is wearing off.

Morris stated that even in entertainment we have seen a significant demand for things such as first run movies simultaneously screened in theatres and with on-demand, pay per view offerings. “There is a reason people are buying ever bigger TV screens”, he said “and the movie producers are responding.”

Given this, Morris has been watching how this trend may affect all the commercial asset classes, such as retail, office, warehouse/distribution and mixed use. He contends all commercial real estate owners and occupiers must view their real estate through the lens of optimizing this cultural shift.

“One asset class that seems somewhat insulated from major disruption so far is warehouse logistics,” he said. Overall, new industrial completions are forecast to jump by 29% next year, according to CBRE Econometric Advisors. However, Morris notes that the leader in ‘Come to Me’ culture, Amazon, is also raising the bar.

“Amazon has taken the concept of people wanting products to come to them to the next level by incorporating how long should the consumer wait? Amazon is conditioning the consumer to believe they don’t have to wait weeks or days for something to arrive, but mere hours in some cases”, Morris said.

Morris doesn’t believe those in the commercial real estate industry have fully embraced this new culture and thinks more innovation is on the horizon as the culture sets in deeper and broader.

Morris concluded by saying; “All those involved in the commercial real estate sector need to abandon century’s old ideas of what their real estate means because the Come to Me culture is upon all of us.”

LOTA Deadline Change

On November 2, 2021, the B.C. government extended the filing deadline for the Land Owner Transparency Registry, but it only applies to pre-existing ownership. The new deadline is November 30, 2022, which is 1 year later than the original deadline.

The Land Owner Transparency Act (LOTA) and the Land Owner Transparency Regulation (LOTR) came into effect November 30, 2020, creating the Land Owner Transparency Registry. According to the LOTA and the LOTR, pre-existing owners of interests in land must disclose indirect ownership interests in their land to the Registry. The original deadline for pre-existing owners to make this disclosure was November 30, 2021.

In early November 2021, the B.C. government extended this deadline to November 30, 2022, due to COVID-19 pandemic, and to give pre-existing owners more time to gather the required information to file with the Registry. The government also noted this extension will allow it to offer more support for Registry filings through outreach and education.

It is important to understand that the extension only applies to pre-existing owners of interests in land who are reporting bodies and who owned their land on or before November 30, 2020. All purchasers of land after November 30, 2020, are still required to submit a transparency report to the Registry if the land purchased is held for another interest holder.

This is an update to our previous article on this subject.

What You Need to Know About the Recent Amendments to BC’s Contaminated Sites Regime

The following article was provided courtesy of Gowling WLG and discusses important changes in disclosure under the BC Environmental Act for certain types of property together with additional reporting requirements to the BC government. Please contact any one of the authors for additional information about these changes.

By Wally Braul, Maya Stano, Mark Youden and Lee Hawkings, Gowling WLG Canada International Law Firm & Legal Firm | Business Solicitors & Lawyers | Gowling WLG

On February 1, 2021, a number of amendments to BC’s Environmental Management Act (the “EMA”) and the associated Contaminated Sites Regulation (the “CSR) came into effect (the “Amendments”). The Amendments include new requirements on owners and operators of properties used for industrial and commercial purposes, and a shift from the long-standing “Site Profile” system to a more onerous “Site Disclosure Statement” system.

At a high level, the most significant departures from the previous regime are:

  1. categories of industrial and commercial lands subject to the amended regime are now set out in a schedule, with the potential for more categories to be added in the future; and
  2. when certain events occur – such as ceasing operations and decommissioning – owners and operators of ‘specified industrial or commercial use’ properties must prepare a Site Disclosure Statement (“SDS”) and hire an environmental consultant to conduct a preliminary site investigation (“PSI”) and submit both the SDS and the PSI results to the Ministry of Environment.

Below we describe the key changes in greater detail (Part A), and offer some hypothetical scenarios to demonstrate how these may impact commercial and industrial real estate transactions in BC (Part B).

A. Four Primary Changes  

1. Mandatory Site Disclosure Statements

First, the amended EMA requires regulated persons to provide a SDS. The new SDS system applies to a wide range of sites that are (or may be) contaminated.  It also introduces a new defined term: ‘specified industrial or commercial use’, that refers to activities listed in Schedule 2 of the CSR that are now subject to the new SDS requirements.

Section 40 of the EMA now requires owners and operators of lands that have been used for ‘specified industrial or commercial uses’ to provide an SDS to applicable regulators and municipalities when:

  • seeking subdivision, rezoning, or building permit approvals;
  • decommissioning or ceasing operations; and
  • seeking creditor protection or filing for bankruptcy.

The amended EMA also requires vendors of properties used for these ‘specified industrial or commercial uses’ to provide an SDS to the purchaser.

The amended CSR in turn provides a number of industry and circumstance-specific exemptions from these broad categories, including where a site is already subject to a regulatory instrument or other processes under the EMA.

2. Mandatory Preliminary Site Investigations

The second notable change (and perhaps the most consequential) requires many persons who are obligated to provide an SDS to also conduct a PSI (the requirements of which are prescribed in the CSR) and provide the results of the PSI to a director of the Ministry of Environment (s. 40.1 of the EMA). An important exception here is for vendors of real property that do not otherwise meet the requirements for “decommissioning” or “ceasing operations”. Such vendors selling a property ‘as is’ are only required to provide an SDS to the purchaser.

This new ‘mandatory investigation’ provision is in addition to the existing authority of a director to order owners or operators to undertake site investigations (as set out in s. 41 of the EMA).

3. The Administrative Penalties Regulation Amendments

The third notable change is with respect to penalties, with the Administrative Penalties (Environmental Management Act) Regulation being amended to provide an administrative enforcement regime to support the new SDS system. The potential maximum penalties are:

  • $75,000 per day for contraventions of certain EMA provisions; and
  • $40,000 per day for contraventions of certain CSR provisions.

These administrative penalties can be enforced against parties who fail to provide an SDS or fail to fulfill the automatic site investigation requirements.

4. Local Government Act and Vancouver Charter Amendments

Finally, the Local Government Act (“LGA) and Vancouver Charter have also been updated to incorporate the new EMA and CSR provisions. This update continues the Ministry of Environment oversight of specified municipal approvals related to potentially contaminated sites, which is commonly referred to as a “freeze and release”.

Under this system, municipalities must not approve specified zoning or permitting applications until they have received one of several “notices” from the Ministry of Environment granting permission. Under the previous regime, the Ministry of Environment made such determinations based solely on the Site Profile and whatever other public data was available. As a result of the recent Amendments, the Ministry of Environment will now be able to rely on an SDS and the results of the PSI undertaken by the applicant when issuing such notices.

B. Hypothetical Transaction Scenarios  

The following scenarios illustrate how the Amendments create new considerations for real estate transactions involving lands used for a ‘specified industrial or commercial use’.

  1. Selling ‘Specified Industrial and Commercial Use’ property ‘as is’
  • The only regulatory requirement on vendors selling the ‘specified industrial and commercial use’ property ‘as is’ is to provide an SDS to a prospective purchaser.
  • Further site investigations may, however, be voluntarily conducted by the owner, and the results provided to the purchaser in order to accommodate the deal.
  1. Selling ‘Specified Industrial and Commercial Use’ property after ceasing operations
  • For business reasons, an owner may choose to shut down operations at the ‘specified industrial and commercial use’ property well in advance of the sale. Depending on the extent to which industrial operations have ceased and how long operations are ceased for, this owner may be required by the EMA and CSR to:
    • provide an SDS to the registrar of the Ministry of Environment;
    • provide the results of a PSI to a director of the Ministry of Environment; and
    • provide an SDS to the purchaser.
  1. Selling ‘Specified Industrial and Commercial Use’ property after decommissioning
  • To accommodate a deal, an owner may agree to decommission and remediate parts of the ‘specified industrial and commercial use’ property prior to sale. Depending on the extent to which the site has been decommissioned, this owner may be required by the EMA and CSR to:
    • provide an SDS to the registrar of the Ministry of Environment;
    • provide the results of a PSI to a director of the Ministry of Environment; and
    • provide an SDS to the purchaser.
  1. Seeking to rezone or redevelop ‘Specified Industrial and Commercial Use’ property before sale
  • To attract purchasers, an owner may seek municipal approval to rezone or redevelop the ‘specified industrial and commercial use’ property to a more valuable land-use prior to sale. Depending on the intended use of the property (and corresponding municipal approval that will be required), such owner may be required under the EMA and CSR to:
    • provide an SDS to the applicable municipality;
    • provide the results of a PSI to a director of the Ministry of Environment;
    • seek a “notice” from a director of the Ministry of Environment (such notice allows the municipality to approve the application); and
    • provide an SDS to the purchaser.
  • Further, under the updated provisions of the LGA and the Vancouver Charter, the applicable municipality would:
    • assess the SDS;
    • forward the SDS to the registrar of the Ministry of Environment;
    • ‘freeze’ the zoning application until it has received a “notice” from the Ministry of Environment; and
    • if a “notice” is received, ‘release’ the zoning application and proceed with making a decision whether to approve or deny.

ASTM Proposes Changes to Phase I ESA Standard (E1527)

The following article discusses proposed changes to the Phase 1 Environmental Site Assessment [ESA] process. It was provided to us by the original author, whose contact information is after the article.

Although the lawyer-author is based in the USA and references the EPA in the USA, the ASTM standard for Phase 1 ESA is used in Canada as well. The major difference you should be aware of however, is that Canada and the USA, and its various states, have different items considered to be Hazardous Material. Therefore, your ESA consultant should be aware of the differences, between the countries or between the various states; particularly as they apply to a site under investigation, and so-called ‘non-scope considerations’.


  • ASTM International’s E1527-13 Standard Practice on Phase I Environmental Site Assessments (ESAs) is required to be revised, reapproved as is or abandoned this year.
  • The ASTM E50.02 Task Group has been reviewing the existing standard, and many of group’s proposed changes are intended to correct what are viewed as deficiencies in implementation of the current standard. Other changes are offered to provide greater consistency in the language of the standard.
  • The current draft is out for ballot with results due on July 10, 2021. All users (and their counsel) are encouraged to actively participate in these discussions.

Every eight years, ASTM International’s standard-setting committees are required to evaluate existing ASTM standards. The ASTM E1527-13 Standard Practice on Phase I Environmental Site Assessments (ESAs) is required to be revised, reapproved as is or abandoned this year. The ASTM E50.02 Task Group has been diligently reviewing the existing standard for more than a year, and has been developing a series of proposed changes to the standard. Many of the proposed changes are intended to correct what are viewed as deficiencies in implementation of the current standard. Other changes are offered to provide greater consistency in the language of the standard. Several of the proposed changes are very nuanced. Not all of the proposed changes are uniformly supported. This Holland & Knight alert highlights what are believed to be some of the key proposed changes. The current draft is out for ballot with results due on July 10, 2021. It behooves everyone who relies on Phase I ESAs to actively engage in this updating process. The voices of the development and legal communities are currently sorely underrepresented in these discussions.

Nuanced Changes to the Definition of REC

Anyone who reads dozens of Phase I ESAs each year knows that, historically, one could give the same fact pattern to three different Environmental Professionals (EPs) and get three completely different opinions about whether there were Recognized Environmental Conditions (RECs) on the property, and why. In order to try to reduce the amount of variability in REC opinions, the E50.02 Committee is proposing a nuanced change to the REC definition in order to obtain more consistent interpretations. The new definition would read as follows:

The term recognized environmental condition means (1) the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release to the environment; (2) the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment; or (3) the presence of hazardous substances or petroleum products in, on, or at the subject property under conditions that pose a material threat of a future release to the environment. A de minimis conditions is not a recognized environmental condition.

This revised definition is supplemented with examples in Appendix X4 that are intended to clarify what each of these three phrases in the definition means. For example, under the first part of the definition, the presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment, an EP could not conclude that an off-site property was a REC. Under the second part of the definition, the likely presence of hazardous substances or petroleum products in, on, or at the subject property due to a release or likely release to the environment, an EP could conclude, based upon his or her experience and observations, that the subject property’s use as a gas station or dry cleaner for a significant period of time prior to regulatory controls, or the presence of a bare-steel underground petroleum storage tank installed at the subject property decades ago without any leak detection systems, may be examples of a REC due to the likely presence of a release of hazardous substances or petroleum products to the environment. Finally, Appendix X4 provides examples of what constitutes a material threat of a future release under the third part of the definition, including precariously stacked drums and bulging tanks. Appendix X4 explains that the past closure of a leaking underground storage tank, for example, may not constitute an Historical Recognized Environmental Condition (HREC) unless the EP has evaluated the data associated with that closed tank to be sure that the sampling data meets current regulatory standards for unrestricted use and whether there is an open vapor exposure pathway. Appendix X4 also provides examples of RECs, HRECs and Controlled Recognized Environmental Conditions (CRECs) in order to try to achieve greater consistency in the use of these terms in the future.

These written examples are supplemented further by a REC, HREC and CREC diagram in Appendix X4. All of this supplemental information should facilitate more informed discussions between users and EPs to be sure that they are using the terminology of E1527 as intended and reaching consistent conclusions whether a given fact pattern constitutes a REC, HREC or CREC.

Recognition via a Footnote that Emerging Contaminants Are Currently an Issue in Many States and Perhaps Should Be Addressed in the Phase I ESA (as a Non-Scope Consideration)

If someone is commissioning a Phase I ESA in a state where emerging contaminants, such as per- and polyfluoroalkyl substances (PFAS), are an issue, the EP will not be identifying these contaminants under the changes proposed to E1527. This is because the U.S. Environmental Protection Agency (EPA) has not yet designated any of the PFAS compounds to be a hazardous substance under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). ASTM continues to consider these compounds to be “non-scope.” So users in the growing number of states that are regulating PFAS under one or more of their regulatory programs should be alert to adding PFAS as a non-scope item ( to their consultant’s scope of work.

ASTM addressed this issue indirectly via a footnote in Section 1.1.4 of the standard, by reminding users and EPs that there may be other state requirements, including those which may define emerging contaminants as hazardous substances:

If a Phase I Environmental Site Assessment is being conducted to satisfy state requirements and to qualify for the state (or other jurisdiction) equivalent of LLPs, users and environmental professionals are cautioned and encouraged to consider any differing jurisdictional requirements and definitions while performing the Phase I Environmental Site Assessment. Substances that are outside the scope of this practice (for example, emerging contaminants that are not hazardous substances under CERCLA), may be regulated under state law and may be federally regulated in the future. Although the presence or any release/threatened release of these substances are “non-scope considerations” under this practice, the user may nonetheless decide to include such substances in the defined scope of work for which the environmental professional conducting the Phase I Environmental Site Assessment is engaged. See Section 13.1.2 [sic].

Controversy Over the CREC Definition

There remains a vigorous debate about the CREC definition in the standard and its inclusion of the phrase “property use limitation” (PUL).

3.2.17 controlled recognized environmental condition—a recognized environmental condition affecting the subject property that has been addressed to the satisfaction of the applicable regulatory authority or authorities with hazardous substances or petroleum products allowed to remain in place subject to implementation of controls (e.g., property use limitations or activity and use limitations). For examples of controlled recognized environmental conditions, see Appendix X4. Discussion— …

(2) In determining whether a recognized environmental condition is “subject to implementation of controls (e.g., property use limitations or activity and use limitations),” the environmental professional shall identify the documentation providing the property use limitation or activity and use limitation that addresses the recognized environmental condition in the report’s Findings and Opinions section(s).

(3) When the environmental professional determines that a recognized environmental condition is “subject to implementation of controls (e.g., property use limitations or activity and use limitations),” this determination does not imply that the environmental professional has evaluated or confirmed the adequacy, implementation, or continued effectiveness of the property use limitation or activity and use limitation.

Those who oppose the current CREC definition see no need for the phrase PUL to be included in the standard. Users are reminded that there has been a long-accepted definition of Activity and Use Limitations (AULs) for more than 20 years – ASTM E2091, Standard Guide on Activity and Use Limitations, Including Institutional and Engineering Controls. AULs are described in detail in Section 6 of ASTM E2091; they include proprietary controls, state and local government controls, statutory enforcement tools and informational devices. See, e.g., 6.6.1 of E2091. The AUL terminology is consistent with the 2002 Brownfields Amendments statutory language and EPA’s 2019 Common Elements Guide, both of which require a purchaser to be in compliance with land use restrictions and not to impede the integrity or effectiveness of institutional controls in order to maintain its Landowner Liability Protections (LLPs). Neither the 2002 Brownfields Amendments nor the Common Elements Guide ever uses the term PUL. Developers are looking for bright-line tests, which the well-established term AULs provides. There is no need for the ambiguous term PUL to be used in the E1527 standard. The opponents are asking for this ambiguous phrase to be deleted throughout the standard.

When pressed to provide a definition of PUL, the E1527 Task Group came up with a tautology – simply repeating the words without offering any other meaning. PUL is not an accepted term of art in the industry. Instead, the Task Group now attempts to define the phrase through examples in Appendix X4 (examples 8, 9 and 10). But Examples 9 and 10 appear to be examples of sites that have met a risk-based cleanup standard, without any clear description of what constitutes the “control.” More than 20 years ago, ASTM rejected the concept that achieving a risk-based cleanup standard was, by itself, any type of control. That is why ASTM instructed one of its Task Groups to develop the E2091 standard on AULs, to supplement the E2081 standard on risk-based corrective action.

Concern Over Scope of Historical Resources to Be Reviewed on Adjoining Properties

The E1527 Task Group made significant changes in Section 8.3 regarding the scope of review of historical records. This section has been reorganized to emphasize that the standard historical information sources include aerial photographs, fire insurance maps, local street directories, topographic maps, building department records, interviews, property tax files, zoning/land use records and other historical resources. When evaluating the uses of adjoining properties (Section 8.3.9), the standard now emphasizes reviewing the “top four” sources of historical information (aerial photographs, fire insurance maps, local street directories and topographic maps) for those properties as well, at least if the “top four” sources were obtained for the subject site and included the adjoining properties. Several EPs have expressed concern that the proposed changes will result in a significant expansion of the scope of review for adjoining properties, as the existing E1527 language simply states that this historical information “should” be reviewed for those properties.

8.3.9 Uses of the Adjoining Properties—During research of the subject property, as described in 8.3.8, uses of the adjoining properties that are obvious shall be identified to evaluate the likelihood that past uses of the adjoining properties have led to recognized environmental conditions in connection with the subject property. This task requires reviewing the following standard historical resources if they have been researched for the subject property (see 8.3.8), provide coverage of one or more adjoining properties, and are likely to be useful in satisfying the objective in 8.3.1:

  1. aerial photographs (see,
  2. fire insurance maps (see,

iii. local street directories (see, and

  1. historical topographic maps (see

In cases where any of the preceding four standard historical resources are not reviewed for the adjoining properties but they were reviewed for the subject property, the environmental professional shall indicate in the report why such a review was not conducted. Additional standard historical resources should be reviewed if, in the opinion of the environmental professional, such additional review is warranted to achieve the objective in 8.3.1. Factors to consider in making this determination include, but are not limited to: the extent to which information is reasonably ascertainable; likely to be useful; the time and cost involved in reviewing such resources (for example, reviewing property tax files for adjoining properties may be too time-consuming); and local good commercial and customary practice. Other historical resources may be used to satisfy the objective of 8.3.1, but are not required to comply with this practice. The report shall describe identified uses at the adjoining properties, indicate the earliest dates identified for the first developed use of the adjoining properties (for example, records showed no development of the adjoining properties prior to the specific date), and identify significant data gaps. The term “developed use” includes agricultural uses and placement of fill dirt, and other uses that may not involve structures.

Clarification That the 180-Day or One-Year Shelf Life of the Report Begins to Run from the Date of the First Task Conducted, and That Those Dates Must Be Listed in the Report

Section 4.6.1 of the standard describes how long the Phase I report will be presumed to be viable. It will be presumed to be viable if the report was completed no more than 180 days prior to the date of acquisition, or up to one year if certain components of the report have been updated: the interviews, review of government records, visual inspection of the property and EP Declaration. The E1527 Task Group intends to clarify in the next update of the E1527 standard that this update clock begins to run from the first of these activities, and that the date each component (interview, environmental lien search, review of governmental records, visual inspection and EP Declaration) must be identified in the report. If the EP conducts the environmental lien/AUL search, the date of that report should also be listed in the Phase I ESA.

Clarification That AUL/Environmental Lien Title Reports Must Search Land Records Back to 1980.

The user is responsible under Section 6.2 of the standard for providing land title records that describe any environmental liens or AULs. The revisions to the standard explain that this is typically done in one of two ways: through a Preliminary Title Report/Title Commitment, or through a Condition of Title Report/AUL-Environmental Lien Title Report.

An important issue that came to the attention of the E1527 Task Group was that many companies running so-called AUL/Environmental Lien Title Reports were only searching the land records back to the last change in title, giving purchasers a false sense of security that there were no environmental liens or AULs. The Task Group proposes to address this issue by clarifying the methods for searching title in Section 6 and explaining that companies preparing AUL/Environmental Lien Title Reports must search the land title records back to 1980 for potential restrictions on title. Users who rely on these types of searches are encouraged to talk with the companies performing these searches for them to be sure that they are prepared to comply with this clarification of the current requirement.

6.2.1 Method 1 Transaction-Related Title Insurance Documentation Such as Preliminary Title Reports and Title Commitments – the user may rely on title insurance documentation, commonly fashioned as preliminary title reports or title commitments, which are prepared in the course of offering title insurance for the subject property transaction to identify environmental liens or AULs filed or recorded against the subject property. Title insurance documentation involves a reliable review of land title records or judicial records. See Appendix X1. However, the user (or a title professional engaged by the user) should closely review the title insurance documentation, particularly the areas of the documentation listing subject property encumbrances or “restrictions on record,” for indications of AULs or environmental liens.

6.2.2 Method 2 Title Search Information Reports Such as Condition of Title, Title Abstracts, and AUL/Environmental Lien Reports – Alternatively, users may rely on title search information reports to identify environmental liens or AULs filed or recorded against the subject property. Title search information reports, commonly fashioned as Condition of Title, Title Abstract, AUL/Environmental Lien or similarly titled reports, provide the results of land title record and/or judicial records research (as applicable) for information purposes only, rather than for the purposes of offering title insurance. Users may rely on title search information reports as long as the title search information reports meet the following scope. Scope of Title Search Information Reports – Title search information reports shall identify environmental covenants, environmental easements, land use covenant and agreements, declaration of environmental land use restrictions, environmental land use controls, environmental use controls, environmental liens, or any other recorded instrument that restricts, affects, or encumbers the title to the property due to restrictions or encumbrances associated with the presence of hazardous substances or petroleum products. Title search information reports shall review land title records for documents recorded between 1980 and the present. In the case of jurisdictions that rely on the judicial records for filing of environmental liens, the judicial records shall also be reviewed for environmental liens filed anytime between 1980 and the present. If judicial records are not reviewed, the title search information report shall include a statement providing that the law or custom in the jurisdiction at issue does not require a search for judicial records in order to identify environmental liens.


For those who have always disliked the awkward phrasing of the conclusion in a typical Phase I report, the Task Group has now changed the phrasing (Section 12.7) so that it reads as an affirmative statement.

12.7.1 “We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E1527-21 of [insert address or legal description], the subject property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This assessment has revealed no recognized environmental conditions, controlled recognized environmental conditions, or significant data gaps in connection with the subject property,” or

12.7.2 “We have performed a Phase I Environmental Site Assessment in conformance with the scope and limitations of ASTM Practice E1527-21 of [insert address or legal description], the subject property. Any exceptions to, or deletions from, this practice are described in Section [ ] of this report. This assessment has revealed the following recognized environmental conditions, controlled recognized environmental conditions, and/or significant data gaps in connection with the subject property:” (list).

Key Takeaways

Many of these proposed changes are quite nuanced but important and could lead to greater consistency in the findings and conclusions of Phase I ESA reports, if taken to heart by EPs. However, the proposed inclusion of “property use limitations” as a “required control” within the CREC definition remains extremely troublesome, as it appears to encompass mechanisms that are neither “land use restrictions” nor “institutional controls,” and therefore mechanisms that go well beyond the requirements of the 2002 Amendments to CERCLA or the 2019 EPA Common Elements Guide. The direction in which the ASTM E50 committee is headed puts EPs at risk of having to make legal judgments without a license, and their clients at risk of losing their landowner liability protections under CERCLA. It’s not too late to weigh in on this very important issue.

For more information or questions on the ASTM Phase I ESA Standard proposed changes, contact the author, who is chair of the ASTM Activity and Use Limitations Task Group as well as an active member of the ASTM E50.02 Committee and several of its task groups.

If you would like further information about this article and you do business in the USA, contact the article author:

Amy L. Edwards, Partner, Holland & Knight

Washington, D.C. 202.457.5917

Landlord Considerations Regarding Virtual Restaurants & Ghost Kitchens

The relatively recent phenomena of “ghost kitchens” and “virtual restaurants” have flourished during Covid-19. Creating a “virtual brand” that is only available through delivery apps provides various benefits to a restaurant in your property, particularly at a time when governmental orders have restricted the use of dine-in options. These virtual brands still require bricks and mortar locations for the production of their menu items and to serve as pick-up locations by those making the deliveries.

Although the terms ghost kitchen and virtual restaurant is often used interchangeably, the main difference between a ghost kitchen and a virtual restaurant is that a virtual kitchen is usually part of a restaurant or franchise system using their existing kitchens to produce and promote products for delivery only through delivery apps under a brand not associated with the restaurant itself. Conversely, ghost kitchens tend to be brands that rent the use of kitchen facilities. Ghost kitchens may produce multiple brands for the same owner using similar ingredients but packaged in completely different ways. Stand alone ghost kitchens can also be used by more than one company at one time in shared facilities.

Since ghost kitchens are a good way for a new chef or an existing brand to test out new concepts or new items without making the investment into a brick and mortar location, they may share an existing restaurant’s kitchen space.

Here are some things landlords should consider.

Trade Names, Use Clauses and Exclusivity Clauses

Typically, ghost kitchens and virtual restaurants typically have no visible signage and are not promoted in the same way typical restaurants are promoted. Does your restaurant lease specify only one trade name? How are the other brands promoted virtually and to the deliver apps? Will this create confusion in your market when your restaurant also displays and promotes other brands from its physical location?

If as a landlord wishing to allow a restaurant to have a virtual presence then a lease amendment is needed to permit the general use of take-out or delivery and must not be restrictive to a particular brand. Consideration must also be given in these circumstances to whether there are any exclusive use obligations contained in any other lease which might restrict what products can be sold out of a virtual restaurant.

We recommend that the addition of a virtual restaurant or ghost kitchen be temporary and frequently reviewed by the Landlord. Therefore, a time period should be included in amendment, and claw back provisions should be included to maintain merchandising flexibility.

Operating Hours

Care should be taken that the restaurant providing a virtual environment doesn’t simply go dark and only operate virtually. This is particularly true whereby other tenants expect each tenant to contribute to ‘footfall’ and exposure.

Sales Reporting

All sales from the virtual operation should be recorded as sales from the premises, and the tenant sales auditing process should be reviewed and amended as required.

Subletting and Profit Rent

Make sure you have all your subtenancy protections in place, including any so-called ‘profit rent if others are using the kitchen facilities as their ghost kitchen. Make sure that any and all other users of the facilities have a signed subtenancy agreement, and the tenant is liable for the subtenant’s actions.

Numbers of Restaurant Covenants

Some other tenants in a property may include restrictions on the number of restaurants in a property. Ostensibly, this is related to the use of the parking field for dine-in eating where the other tenant doesn’t want to have restricted parking availability affecting their business.


Check with your insurance agent if the Landlord needs additional coverage, particularly if the facilities are used by others. Obtain a letter from the tenant’s insurance carrier that the expanded virtual operations are covered and obtain a revised certificate of insurance, if needed.

Each subtenant will also need to provide certificates of insurance if the facilities are used as a ghost kitchen by others.


Verify that the restaurant offering either a virtual restaurant or ghost kitchen has all the permits required. Additional business licenses and modified health and safety permits may be needed, etc.

These are just a few of the items a Landlord should consider prior to permitting a virtual restaurant or ghost kitchen. These new operating models may prove to be the lifeline your food services tenant needs, but it is equally important for the Landlord to protect its position, by conducting proper due diligence and documentation.