What a Record of Site Condition Leaves Uninsured on a Brownfield Deal

The Canadian Brownfields Network has named 26 finalists for this year's Brownie Awards, from a former landfill turned residential community in Edmonton to a PFAS barrier at the Thunder Bay airport and a bus barn redevelopment in Saskatoon. Every one of those projects reached the finish line because someone agreed to own land with a contamination history and someone else agreed to lend against it.

In Ontario, most of those deals lean on a Record of Site Condition (RSC). Buyers and lenders often treat a filed RSC as the end of the environmental question. It is a regulatory document with real protection behind it, and it also has gaps that sit squarely on the people who paid for the site.

What the RSC protects and what it does not

Under Part XV.1 of Ontario's Environmental Protection Act and O. Reg. 153/04, an RSC records a property's condition as of a certification date, signed off by a qualified person after a Phase One and usually a Phase Two environmental site assessment. Filing is mandatory when land moves to a more sensitive use, such as industrial to residential. Once the RSC is in the Environmental Site Registry, the ministry generally cannot issue certain orders about historic contamination against the filer, later owners, or people who occupy or control the property afterwards.

The province's own guidance lists the limits. The protection does not reach contamination that migrates off the property after the certification date. It falls away if the RSC contains false or misleading information. It does not stop an order if the property is later put to a more sensitive use than the RSC disclosed, or if someone breaches a Certificate of Property Use or the soil management rules. The Director can still order the current owner to deal with an emergency caused by contaminants that were present on the certification date. And an RSC does nothing to stop a neighbour or a later buyer from suing.

The rules are also shifting toward more sampling. Amendments that took effect in October 2025 mean an RSC based only on a Phase One assessment can no longer be filed to satisfy a lender or purchaser, so more transactions now carry a Phase Two. Better data helps. Carol Le Noury, named Brownfielder of the Year, spent two decades building the historical records that Phase One work depends on at ERIS, growing it from 10 staff in 2005 to about 210. A Phase Two still samples soil at points on a grid, and contamination can sit between the boreholes.

How the gap reaches an insured

This scenario is an illustration, not a reported loss from any finalist project.

Scenario. A developer buys a former auto parts plant in southern Ontario for a townhouse project. The Phase Two finds petroleum hydrocarbons and some metals, the developer remediates to residential standards, and the RSC is filed. The lender closes on the strength of it. Three years later, a servicing crew trenching for the final phase hits a solvent-stained soil zone near an old floor drain that no borehole touched. Groundwater sampling shows a trichloroethylene (TCE) plume extending under the commercial property next door, and the neighbour's tenant raises vapour concerns.

Mechanism. The RSC still bars the ministry from ordering the developer to clean up the historic contamination as it sat on the certification date. It does not cover the plume's movement onto the neighbour's land since then, and it does not stop the neighbour suing in nuisance or under section 99 of the Act for its losses. The ministry can order the owner to address the vapour risk if it sees a danger to health. The project stops while the developer works out who pays.

Outcome. The developer's CGL excludes pollution. The excavation contractor's Contractors Pollution Liability (CPL) policy covers releases the contractor causes, not a plume that was already there. The seller's indemnity in the purchase agreement was capped and the seller has since wound up its operating company. A claim against the consultant who ran the Phase Two means proving negligence, and sampling to a recognised standard is not negligence. The lender now holds security on a stalled project with an open environmental claim against it.

Where brownfield programs fall short

Most brownfield insurance conversations happen at closing, if they happen at all, and they focus on the remediation budget. The larger exposure comes later and from three directions the RSC does not cover: off-site migration, third-party claims, and unknown conditions found during construction. Those are the losses a Site Pollution Liability (SPL) policy written for the transaction is built to carry, with cover for pre-existing conditions, off-site cleanup, third-party bodily injury and property damage, and legal defence.

The details decide whether that policy works. The term should run as long as the buyer's or lender's hold period, and a three-year term on a seven-year build leaves the last phases bare. Known conditions in the Phase Two get excluded or scheduled, so the reports need to be in front of the underwriter early. The lender should be named on the policy with rights that survive a foreclosure. A change-in-use exclusion can undo the whole program on a residential conversion. And the remediation contractor and the consultants need their own CPL and environmental Errors and Omissions (E&O) cover, because the owner's policy will look to them on subrogation.

At TerrAssure we underwrite these deals from the consultant's reports, not from the RSC alone. We ask where the boreholes went, what the site was used for in each decade, what the risk assessment assumed and what the Certificate of Property Use requires. Those answers tell us more about the next ten years than the filing date does.

What brokers should do now

• Developers converting industrial land to residential. Ask for the Phase One, Phase Two and any risk assessment before the deal firms up, and quote SPL with a term matching the build and sales period.
• Lenders and mortgage investment corporations financing brownfield projects. Check whether the borrower's environmental policy names the lender and keeps responding after a default or foreclosure.
• Owners of land with a Certificate of Property Use. Pull the CPU conditions and confirm the policy does not exclude losses tied to failed risk management measures, such as a vapour barrier or soil cap.
• Remediation and excavation contractors. Confirm CPL is in place and that the owner's contract does not push pre-existing contamination onto the contractor.
• Environmental consultants signing RSCs. Review environmental E&O limits against the size of the projects they certify.

If a client is buying, financing or redeveloping a brownfield, send us the site assessment reports and the deal timeline before closing, while there is still room to shape the terms. Talk to our underwriting team about building the environmental program around the transaction.

Sources

• Environment Journal: Brownie Awards 2026 jury reveals finalists from across Canada
• Environment Journal: Brownfielder of the Year is industry leader Carol Le Noury
• Government of Ontario: Guide to site assessment, cleanup of brownfields and filing of records of site condition
• O. Reg. 153/04: Records of Site Condition
• McMillan LLP: Developer-friendly changes to Ontario's Record of Site Condition regime
• Understanding the Record of Site Condition process in Ontario
• Lerners LLP: Section 99(2) of the Environmental Protection Act