July 9th - 2007

Merv’s Column: What constitutes “nuisance”?

The buyer purchased a New Brunswick gas station site “as is” and added it to other adjacent lands for development.

The buyer purchased a New Brunswick gas station site “as is” and added it to other adjacent lands for development. The buyer claimed for damages for the contamination of the soil on that site from the former Texaco property. The judge decided that about one third of his property had been contaminated beyond economical remediation before Texaco sold the service station. Although other portions of his lands may also be contaminated, he should have known that the contamination would not affect the use of the property for some purposes. Texaco is liable under the legal principles of “nuisance” and the famous case of Rylands v Fletcher.
 
The lands affected are about one third of the present enlarged property. In considering what the reasonable damages might be, the buyer looked for a range of $1.5 million to $2.3 million for the undeveloped land that he had bought for $5,156.33. The entire lot has a value of $100,000 if it were not contaminated.
 
The court looked at the entire situation and decided that a reasonable amount would be on the basis of one third of his net investment and carrying charges of the entire property with a reasonable allowance for interest. That amounts to $125,320.07 even though that is high compared to the value of the entire parcel if it were not contaminated.

Cousins v McColl-Frontenac 2006 NBQB 406

Merv's Comments
REALTORS®, appraisers, accountants, lawyers and judges may have very different views of determining “damages” or a “loss” in a real estate situation. Should we use loss of possible profits, loss of actual market value, the cost of cleanup to a governmental standard or some other approach? Do we add anything for the ‘stigma’ of a ‘dirty’ site even when it has been remediated? For a brief discussion of nuisance, look at OREA’s Encyclopedia, page 473.

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