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Real Estate

Real Estate and New Environmental Laws

Passed on May 14, 2009, the Green Energy and Green Economy Act (“GEGEA”) and the enacted Green Energy Act (“Green Energy Act”) have as their main objective to encourage the use of renewable sources of energy including wind, water, solar, biomass and biogas power. This is to be achieved by eliminating duplication and providing certainty for proponents undertaking renewable energy projects, while meeting the requirements established by the various ministries like the Ministry of the Environment and the Ministry of Natural Resources for such projects.

Requirement for disclosure

Certain disclosure obligations are created under Section 3 of the Green Energy Act when any residential property is being offered for sale. Before accepting an offer to purchase an interest in real property, the vendor is obliged to provide information to the prospective purchaser relating to energy consumption and efficiency. This requirement can be waived by the prospective purchaser and the obligation to provide this information is deemed satisfied when the vendor makes the information “reasonably available” to the prospective purchaser. Because of the infancy of this new legislation, what sort of information will be required in the disclosure is not known.

Such provisions under Section 3 of the Green Energy Act have created a lot of uncertainty in residential real estate transactions. For instance, the provision that the purchaser has the “right to receive” information creates an obligation on the vendor to provide the information, even if the purchaser does not request such information. Then, the provision allowing the purchaser to waive its rights to such information suggests that the vendor does have this obligation, but the wording is unclear. Moreover, the effect of the vendor’s failure to provide the required information is unclear in terms of its impact on the agreement of purchase and sale, nor is it clear how the information that is required to be disclosed will be generated and by whom (i.e. must be an expert in energy consumption and the environment?).

The effect on Building Code provisions

The reach of GEGEA is extensive: besides enacting the Green Energy Act, it also amends 15 other statutes, one of which is the Building Code Act. As the amendment brought about by the GEGEA in the Building Code Act says that the establishment of standards for conservation includes both energy and water conservation, it is quite likely that standards for energy efficiency would be imposed on the future construction of buildings by the GEGEA.

The effect on Planning Act provisions

Certain municipal powers under the Planning Act have been restrained by the GEGEA by creating exemptions for renewable energy facilities. Official plans, zoning by-laws, demolition control areas, and development permit systems are among such exemptions. Another provision stipulates that subdivision and part lot control restrictions do not apply to renewable energy project leases having a term between 21 and 50 years. All these various exemptions convey the impression that municipalities would no longer be in a position to control renewable energy projects.

The effect on Renewable energy Projects

Then, there is the Renewable Energy Regulation, promulgated on September 24, 2009, applicable to a “renewable energy project”, defined in the Green Energy Act as “the construction, installation, use, operation, changing or retiring of a renewable energy generation facility”. Further elaboration is provided by defining it as a “generation facility that generates electricity from a renewable energy source and that meets such criteria as may be prescribed by regulation and includes associated or ancillary equipment, systems and technologies as may be prescribed by regulation, but does not include an associated waste disposal site, unless the site is prescribed by regulation for the purposes of this definition” (i.e. such that the waste disposing system can be used to general energy or in the process generates energy).

Exemptions from the requirement for a Renewable Energy Approval, otherwise applicable to renewable energy projects are described in Section 9 of the Regulation and includes, if the project was already approved and qualified under the Environmental Protection Act, or that no approval was required or qualification under the said Act and the construction has already begun, or an exemption was obtained and construction is already complete.

As the Green Energy Act becomes more widely enacted it would be wise for sellers, purchasers and their real estate agents to contact the lawyers at Levy Zavet PC prior to executing any Purchase and Sale Agreements in hopes of obtaining advice and clarity on this matter at that time.