Greening
Canada’s Brownfields:
A
National Framework for Encouraging Redevelopment of Qualifying
Brownfields through Removal of Crown Liens and Tax Arrears |
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Prepared for The Government of Canada
and Provincial and Municipal Governments
By
The National Round Table on the Environment and the Economy
and The Canadian Brownfields Network
March
2005
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Annex 1- National Brownfield Redevelopment
Strategy for Canada
Recommendation 1.2
1.2 Remove Liens and Tax Arrears Against
Qualifying Brownfield Sites
Recommendation
That the federal and provincial governments
jointly develop principles and criteria for removing federal and
provincial liens and tax arrears in specific situations.
That the federal and provincial governments
amend their applicable bankruptcy and corporations legislation
to ensure that when a trustee in bankruptcy quitclaims a property
owned by a bankrupt company, then the property vests in the Crown;
if the company is incorporated under the Canada Business Corporations
Act, then the property vests in the Crown in right of Canada;
if the company is provincially incorporated, the property will
vest in the province.
Rationale
Removal of liens and tax arrears:
- reduces upfront costs to brownfield developers
and provides greater certainty of funds to developers at early
project stages (e.g. during purchase negotiations), when it is
difficult to obtain regular financial assistance
- represents a highly cost-effective approach to
delivering financial assistance to brownfields, because it can
be delivered for free (except for administration costs) to sites
that may be of zero or very little worth to the government in
the absence of any redevelopment.
Discussion
Many brownfield properties are delinquent in
their property tax payments to the point where they are subject
to a municipal tax sale. However, such properties are often
difficult to sell, because of deteriorated conditions, known or
perceived site contamination, and the anticipated high costs of
remediation. If left vacant, these sites typically are prone to
vandalism and become a burden to the municipal government. Although
many of these sites do not pay municipal taxes, they do draw heavily
upon municipal resources in the form of police, fire and inspection
services, as well as enforcement and infrastructure maintenance
services.
Often, such properties are also encumbered by outstanding
Crown liens, both federal and provincial, which cannot be cancelled
through a municipal tax sale. The combination of back taxes and
Crown liens can render a local redevelopment proposal unfeasible.
The prior agreement to remove all or part of these liens could be
a deciding factor in the financial viability of a potential brownfield
redevelopment project. This form of incentive has been offered in
the past on an ad hoc basis by all levels of government. (The actual
removal of the lien or tax arrears should not be finalized until
the completion of clean-up, to prevent a situation where a lien
is forgiven and then no redevelopment takes place.)
Some provinces are considering developing a set of
criteria and protocols to qualify brownfield redevelopment projects
for removal of all provincial liens in the event of investor interest.
This process would be more effective if clear and consistent criteria
and processes were established across all governmental jurisdictions,
so that developers and purchasers would know whether a particular
site, wherever it might be located, was eligible for lien removal.
In particular, a federal program to remove liens against affected
properties could be linked through a federal-provincial agreement
that, among other things, standardizes criteria and protocols.
Changes to federal and provincial legislation are
also needed to address the special question of brownfield sites
that are caught up in bankruptcy proceedings. The courts have interpreted
section 20 of the federal Bankruptcy and Insolvency Act to
mean that when a trustee in bankruptcy quitclaims a property, the
property returns to the bankrupt company. However, this in effect
creates an orphan site, with no entity in control of the property—a
development that can have dramatic and even dangerous consequences.
To ensure that there is some entity in control of
the property when a trustee in bankruptcy quitclaims a property,
the Bankruptcy and Insolvency Act, the Escheats Act
and the federal Canada Business Corporations Act, as well
as the provincial equivalents, will need to be amended to state
that, under these circumstances, the property vests in Her Majesty
in right of Canada, or the province, as appropriate. It is also
vital that the designated ministry receive the necessary funding
to manage these sites until remediation.
(It should be noted that removal of the lien does
not release the original debtor from the amount owing to the Crown.
Similarly, the vesting of property in the right of the federal or
provincial government does not release the original polluter from
liability, nor, with proper safeguards, would it create any additional
liability for the Crown).
Source:
Cleaning
up the Past, Building the Future:
A National Brownfield Redevelopment Strategy for Canada
(National Round Table on the Environment and the Economy, 2003),
pp. 20-21
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