Commercial Real Estate News

Buyer beware


Property owners need to be on top of environmental regulations

It’s a challenging time in the commercial property development industry. The present economic uncertainty means everyone is looking for ways to save costs. Add the myriad of government environmental regulations introduced in recent years and there are many companies running hard just to keep up.

Richard CrenianIn spite of the many immediate environmental considerations on an acquisition, I have always believed in taking a long-term approach and so far it has provided beneficial. Most importantly, basic business practices to remember:

* Do your homework about a property and its locale
* Be up to date on local laws, regulations and upcoming changes that impact property ownership
* Get a comprehensive environmental assessment report

Caveat emptor

The last point has never been more critical. An investor cannot skimp when it comes to an environmental assessment report. In most cases this involves an investigation into the history of the property for any evidence of a previous tenant that may have used a contaminant – gas stations and dry cleaners are examples.

If there are concerns about a past or present tenant then what is called a Phase 2 examination is recommended. This is a much more detailed report that involves bore holes and soil samples.

Essentially, an environmental assessment report becomes a guideline for drawing up a Risk Management Plan. This may include periodic testing of the site including ground water tests to proper waste management.

Pay for protection

Doing your homework does not mean the job is done. It is important property owners and tenants purchase environmental insurance to properly manage the risks associated with the site.

For tenants that use contaminants, be sure to keep up to date on how they are using, storing and disposing of hazardous materials. It may be necessary to conduct an annual independent inspection to verify everything meets industry standards. However, this should not replace regular visits by the property management team.

Leave the big problems to the experts

If a site has a host of environmental issues and you do not have experience in this area: walk away. There are companies who have the knowledge and expertise to safely and economically redevelop a site, but that is a speciality in of its own – stay focused on what you’re good at.

One ongoing issue in the dry cleaning industry is the use of tetrachloroethylene, also known as perchloroethylene or PERC. It has been classified by a World Health Organization agency as a probable carcinogenic to humans. Tighter regulations have restricted its use but not everyone is paying attention. Earlier this year an Edmonton businessman was the first Canadian to receive a jail sentence for not properly handling the chemical. As a landlord your reputation could be affected if a tenant fails to adhere to the existing laws.

A good relationship between tenant and landlord should avoid any surprises when a lease comes to an end but it does not always work out that way. Often containers are left on the property and if they are not properly marked it could be a problem. If a dispute ends up in the courts it may not end well for either party, so landlords need to be proactive.

Nothing stays the same

The rapidly changing landscape is now a way of life in the property development industry. Business leaders with national companies need to have staff with the right knowledge as regulations in one province may not apply in another. Which brings us back to our initial point: these are challenging times but if you do your homework you will be able to manage the risks.

Richard Crenian is the founder and President of ReDev Properties. Since its founding in 2001, Richard and ReDev Properties have grown the asset management company using a long-term approach to manage over 25 commercial properties, primarily located in Western Canada. To learn more about Richard please visit www.richardcrenian.ca.

Read more from: Featured ColumnThe Long View

Richard Crenian

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Richard Crenian is the founder and President of ReDev Properties. Since its founding in 2001, Richard and ReDev Properties have grown the asset management company using a long-term approach to manage over 25 commercial properties, primarily located in Western Canada. To learn more about Richard please visit www.richardcrenian.ca.

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