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Navigating valuation challenges and disclosure requirements for pits and quarries in Ontario under the Trust in Real Estate Services Act

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2025 – Volume 69 – Book 1
Navigating valuation challenges and disclosure requirements for pits and quarries in Ontario under the Trust in Real Estate Services Act
Tony Sevelka, P. App., AACI

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By Tony Sevelka, P. App., AACI

As real estate appraisers involved in developing estimates of Market Value, reliance on transactional data that fail to meet the definition of Market Value is typically avoided. Every property occupies a unique location, a defining characteristic of value, which can be enhanced or depreciated by Externalities. According to the Municipal Property Assessment Corporation (MPAC),1 the following five factors account for approximately 85% of the assessed value of a residential property:

  • Location
  • Lot dimensions
  • Living area
  • Age of property (adjusted for any major renovations or additions)
  • Quality of construction

Market Value is defined as the most probable price, as of a specified date, in cash or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably and for self-interest, and assuming that neither is under undue duress.2 Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

  • buyer and seller are typically motivated;
  • both parties are well informed or well advised, and acting in what they consider their own best interests; [emphasis added]
  • a reasonable time is allowed for exposure in the open market;
  • payment is made in terms of cash in Canadian dollars or in terms of financial arrangements comparable thereto; and
  • the price represents the normal consideration for the property sold and unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Value-influencing information in a real estate transaction can often be asymmetrical,3 with the vendor possessing critical knowledge not readily available to the buyer. When such information is withheld from the buyer, the purchase price is likely to exceed Market Value, resulting in a ‘tainted’ transaction. Transactions of this nature fail to meet the criterion of a ‘well-informed or well-advised’ buyer. Therefore, reliance on these transactions as indicators of Market Value should be avoided, which may compel the appraiser to rely on sales not similarly impacted or, in the alternative, adjust the sale price of the tainted transaction downward based on relevant proximity studies involving pits and quarries. The impact of pits and quarries on the value of neighboring properties has been thoroughly documented, driven by negative externalities.

Negative externalities are costs or adverse effects experienced by third parties who are not directly involved in a particular economic transaction or activity. These external costs are not reflected in the market price of the goods or services involved. Negative externalities can arise from various activities, such as production, consumption or development, and typically include public health, the environment, or overall quality of life. Because real property is immobile, real estate is affected by externalities more than other economic goods, services or commodities.4

In the context of real estate, the negative externalities associated with pits and quarries, such as noise, dust, toxic fumes, vibrations, fly-rock debris, and traffic, affect the use and enjoyment of neighboring properties, diminish their value, and can stigmatize the community. Additionally, these negative externalities can compromise the community’s health, safety and well-being.

Aggregate extraction operations

Aggregate extraction operations in the form of pits and quarries cause environmental degradation and are a major source of greenhouse gases and other pollutants, which contribute to climate change.5 The Aggregate Resources Act (ARA)6 defines a pit and quarry as follows:

  • Pit means land or land under water from which unconsolidated aggregate is being or has been excavated, and that has not been rehabilitated…
  • Quarry means land or land under water from which consolidated aggregate is being or has been excavated, and that has not been rehabilitated…

As reported by the Auditor General of Ontario in December 2023,7 there are about 3,400 licensed pits and quarries in Ontario,8 of which 1,524 (or 44.8%) are dormant (‘zombie’) pits and quarries, accounting for 25,000 hectares (61,776 acres), that have been inactive for at least 10 years. Therefore, the reference in the Ontario Provincial Planning Statement (PPS, 2024)9 (Section 4.5.3) to aggregate extraction being an ‘interim’ use is misleading and patently false. As noted in the Summary of the Auditor General’s report,

The extraction of aggregates can fundamentally transform landscapes, temporarily or permanently altering features such as woodlands, wetlands and farmland. The ongoing operation of a pit or quarry, as well as the accompanying heavy-duty truck traffic, can also have a number of negative impacts – particularly when close to communities – including noise, vibration [toxic fumes and fly-rock debris] (from blasting) and air pollution (such as dust and particulate matter).

Examples of negative externalities involving aggregate extraction operations

Aggregate extraction operations, such as quarries and pits, can have significant external impacts on surrounding communities. Neighboring property owners often raise complaints and concerns about noise, vibrations, dust, toxic fumes, fly-rock debris and other environmental concerns. Below are a couple of examples typical of the complaints from impacted communities in Ontario:

  • ‘LaFarge Dundas Quarry,’ Blasting Quarry, Flamborough, Ontario (>600 ha or 1,483 ac): Blasting at the quarry sparked 58 noise and vibration complaints in the first five months of 2024, up from 10 in 2023, felt as far away as 1.5 kilometres from the quarry, despite blasting within regulatory limits: shaking houses; rattling windows; and pictures left askew. Some residents have mistaken the vibrations for earthquakes, and others have expressed worry about potential house damage or impacts to the aquifer they rely on for well water.10
  • ‘Miller Paving Braeside Quarry,’ Blasting Quarry, McNab/Braeside, Ontario (132.7 ha or 328 ac): Norma Moore, a longtime resident of Braeside Ridge, adjacent to the quarry, is acutely aware of blasting accidents, four of which she recalls. A mega blast in September 2005 did considerable structural damage to properties in the neighborhood; and a fly-rock incident in August 2007 did major damage to a home, more than 400 metres from the site,11 where the owner was almost killed. In another incident, fly-rock fell on a neighboring business’s roof. Finally, one incident occurred on September 10, 2021, when something crashed into trees in an offsite forested area, like the sound of shrapnel, following a blast at the quarry.12

Trust in Real Estate Services Act

In Ontario, both sellers and realtors are legally bound by the Trust in Real Estate Services Act (TRESA), Bill 145, enacted on March 4, 2020. This statute mandates the disclosure to prospective purchasers of any known applications for a nearby pit or quarry and the existence of a nearby pit or quarry, which can remain operational indefinitely. This requirement ensures that all material facts that could influence a property’s value or desirability are communicated in writing and acknowledged by prospective buyers.

Material facts

Material facts are defined as those that would affect a reasonable person’s decision to acquire an interest in real estate (real property). According to the Real Estate Council of Ontario (RECO), which administers TRESA, Material Facts (RECO Bulletin No. 7.3, effective December 1, 2023)13 include, but are not limited to:

  • Intended use of the property: Information about how the property can be legally used or developed.
  • Zoning by-laws: Established by the municipality, region or other governmental agencies, these impact the legal use of the property.
  • Rights-of-way, allowances, or restrictions: Any easements or restrictions on the use of the property established by the municipality, region, or other governmental agencies, or otherwise on the title.
  • Existence of nearby businesses or facilities: Facilities that may impact quality of life (e.g., quarries, industrial facilities, airports, rail lines, etc.).

Specific material facts related to pits and quarries

  • Application for a pit or quarry: The existence of an application for a pit or quarry nearby is a material fact that could affect the property’s value and desirability. Prospective buyers need to be aware of any potential future developments that may impact their decision.
  • Existing pit or quarry: The presence of an existing pit or quarry is a material fact that could affect the property’s value and desirability due to factors such as noise, dust, toxic fumes, vibrations, fly-rock debris, traffic, and visual impact.

Seller and agent disclosure

Ensuring such information is disclosed in writing protects all parties involved and guarantees transparency in the transaction process. Agents must provide this information to potential buyers to facilitate informed decision-making.

Acknowledgement and informed consent

Written confirmation of the material facts from the prospective purchaser, obtained on a ‘best efforts’ basis, is required. This means sellers and realtors must make a genuine effort to ensure that buyers are fully informed about all relevant facts before completing the transaction. This process includes:

  • Providing detailed documentation: Comprehensive information about material facts should be compiled and shared with potential buyers.
  • Clear communication: Ensuring that the information is conveyed in a manner that is easily understood.
  • Confirmation of understanding: Obtaining written acknowledgement from the buyer that they have received, reviewed and understood the material facts.

An impacted third-party property owner (seller), in an effort to preserve the value of their property, may choose not to disclose the material facts and retain an outside realtor with no geographic understanding of the local market, making both the vendor and realtor potentially liable for damages sustained by an uninformed purchaser.

The following warning clause in a Residential Subdivision Agreement dated November 20, 1998, registered against the title of the single-family dwellings in a plan of subdivision in Burlington, Ontario, next to a blasting quarry, does not conform to the requirements of ‘informed consent,’ as required by RECO under the Trust in Real Estate Services Act (TRESA) enacted in March 2020.

Warning clause

The following warning clause shall be registered on title and included in all development agreements and offers of sale and purchase or lease of all lots:

“The purchaser/tenants acknowledge the presence of a future extractive industrial land use to the west and that extraction may take place during the daytime only.”14

Informed consent requires that the buyer fully understands the implications of the nearby extractive industrial land use, including potential impacts on their quality of life, property value, and any other relevant factors. To meet the legal requirement of informed consent, the disclosure should be more comprehensive and clearly explain the potential effects of quarry operations, not just limit the information to extraction times. It should also ensure that the buyer acknowledges and understands this information in writing before proceeding with the transaction. Post-COVID-19, more people are working from home or have established home businesses or occupations, which means that impacts from aggregate extraction operations are experienced persistently and more broadly.15

The role of appraisers

An appraiser involved in the valuation of a property in proximity to an application seeking approval of a pit or quarry, or to an existing pit or quarry, must be aware of the negative externalities associated with aggregate extraction operations and take them into account in the valuation process. In doing so, before relying on a particular transaction in the neighborhood, the appraiser must investigate the circumstances involving the transaction to ensure that the buyer was knowledgeable and fully aware of the potential impacts. Additionally, it is important to note that a license to permit aggregate extraction in Ontario has no expiry date, and in the case of a blasting quarry, a blaster is not required to possess a license or certificate demonstrating competency in the detonation of explosives.

The severity of the negative externalities associated with pits and quarries depends on the size, scale, intensity, and duration of the proposed or existing aggregate extraction operation. The appraiser must identify these factors and reflect them in the estimate of market value. Failure to recognize the negative externalities in the valuation process could result in an unsupported estimate of market value and expose the appraiser to a potential claim of negligence from an authorized user of the appraisal.

Appraisers, as members of the Appraisal Institute of Canada (AACI), must comply with Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP), in undertaking an appraisal assignment. Like realtors, appraisers must possess geographic competency, address negative externalities (i.e., an external detrimental condition), and have sufficient knowledge, skill and expertise to complete the assignment credibly. Conducting a physical inspection of the subject property and the surrounding area, and enquiring about municipal development applications, are essential components of the due diligence process. Additionally, visiting the Environmental Registry of Ontario (ERO) website16 can be prudent, as it allows the public to view and comment on proposals, decisions, and actions that may affect the environment, including those involving pits and quarries, and notices about licenses, permits and changes to existing approvals for pits and quarries.

Buyers seeking to locate in non-urban areas

Homeowners seeking non-urban locations typically have specific preferences that align with their desire for a different lifestyle.17 Here are some of the key features and amenities they look for:

  1. Space and privacy: Larger properties with more land and greater distance between neighbors, offering more privacy and space for outdoor activities, gardens, or even small-scale farming.
  2. Natural beauty: Proximity to natural landscapes such as forests, lakes, mountains, and open fields. The scenic beauty and tranquility of nature are significant draws.
  3. Peace and quiet: A quieter environment with less noise and light pollution compared to urban areas, providing a more serene and relaxing living experience.
  4. Community feel: Close-knit communities where neighbors know each other, fostering a strong sense of belonging and support. Local traditions and events are often highly valued.
  5. Quality of life: A slower-paced lifestyle with less stress and a focus on well-being and family life. Access to fresh air and outdoor activities contributes to overall health and happiness.
  6. Self-sufficiency: Opportunities for sustainable living, such as growing their own food, using renewable energy sources, and having more control over their environment.
  7. Space for business operations: Non-urban locations often offer more space, which can benefit home-based businesses and occupations requiring additional room for operations, storage or equipment.
  8. Affordability: More affordable housing options with the potential to get more value for their money, such as larger homes and properties.
  9. Proximity to urban amenities: Reasonable access to urban centres for work, shopping, healthcare, and entertainment, allowing them to enjoy the benefits of both rural and urban living.
  10. Recreational opportunities: Easy access to recreational activities like golfing, hiking, skiing, cycling, snowmobiling, horseback riding, birdwatching, dog walking, hunting, fishing, boating, and camping, enhancing their quality of life.
  11. Opportunity to have pets: Larger properties and more outdoor space make it easier and more enjoyable to have pets, which research has shown to offer many health benefits (e.g., physical health, mental health, stress reduction, heart health, social interaction, sense of purpose, emotional support).18
  12. Safe and secure environment: Lower crime rates and a sense of safety compared to urban areas, making it an ideal place to raise a family or retire.

These preferences reflect a desire for a lifestyle that balances the tranquility and beauty of the countryside with the convenience and amenities of urban areas. Research indicates that individuals living in rural areas are more satisfied with life than their urban counterparts. Those residing in peri-urban and mixed regions also report being more satisfied than those living in urban areas.19 Pits and blasting quarries can significantly impact and interfere with the quality of life in non-urban areas. These operations can interfere with the use and enjoyment of property, cause environmental degradation and lower property values.20 Pits and quarries are considered the antithesis of a peaceful rural setting, and these operations disrupt the natural beauty that attracts people to non-urban areas.

Sources for understanding pits and quarries,
their negative externalities, and potential value impacts

The following sources have been provided to assist appraisers, particularly those active in peri-urban, semi-rural and rural areas where aggregate extraction is most likely to occur. These resources help in comprehensively understanding the negative externalities and potential value impacts of pits and quarries on nearby third-party properties. They offer valuable insights and data on the environmental, legal, and social implications of aggregate extraction operations, including other forms of surface mining, as well as specific case studies and analyses:

End Notes

  1. MPAC Fact Sheet, June 1, 2024.
    https://www.mpac.ca/en/News/FactSheet/MPACFactSheet
  2. The Appraisal of Real Estate, Fourth Canadian Edition, ed. Dybvig, (University of British Columbia, Real Estate Division, 2023), p. 6.1-.4
  3. Kurlat, P., & Stroebel, J. (2014). Testing for Information Asymmetries in Real Estate Markets. National Bureau of Economic Research. Retrieved from NBER Working Paper No. 19875. https://www.nber.org/system/files/working_papers/w19875/w19875.pdf?form=MG0AV3
  4. The Appraisal of Real Estate, Fourth Canadian Edition, ed. Dybvig, (University of British Columbia, Real Estate Division, 2023), p. 3.16.
  5. Sandberg, L. A. and Wallace, L. ‘Leave the Sand in the Land, Let the Stone Alone: Pits, Quarries and Climate Change,’ Faculty of Environmental Studies, York University, Toronto, Ontario. https://scispace.com/pdf/leave-the-sand-in-the-land-let-the-stone-alone-pits-quarries-3s3b63uk77.pdf?form=MG0AV3
  6. Aggregate Resources Act, RSO 1990, c A.8, <https://canlii.ca/t/5537h> retrieved on 2024-12-27
  7. Value-for-money Audit: Management of Aggregate Resources, December 2023, https://www.auditor.on.ca/en/content/annualreports/arreports/en23/AR_mgmtaggregates_en23.pdf
  8. Aggregate Site Authorized, data includes, site location and size, licensee name, operation (pit or quarry) and MNRF district responsible for the site. https://data.ontario.ca/dataset/aggregate-site-authorized
  9. Provincial Planning Statement, 2024, https://www.ontario.ca/page/provincial-planning-statement-2024
  10. Van Dongen, Matthew. ‘LaFarge quarry blasts trigger complaints,’ Hamilton Spectator, Jun 15, 2024. https://www.pressreader.com/canada/the-hamilton-spectator/20240615/281487871513652
  11. Miller Paving Ltd. v McNab / Braeside (Township), 2015 CanLII 70369 (ON LPAT), <https://canlii.ca/t/glwwn>, retrieved on 2025-01-01
  12. Moore, Norma. ‘Aggregate danger: Quarries do not make good neighbors,’ Ottawa Citizen, Mar 11, 2024. https://www.pressreader.com/canada/ottawa-citizen/20240311/281621015304909
  13. Material Facts, RECO Bulletin No. 7.3, effective December 1, 2023. https://reco.on.ca/getmedia/d0f700bd-5848-4edb-a9f5-a35040ec2b20/RECO-Bulletin-7-3-Material-facts.pdf
  14. Tyandaga Environmental Coalition Inc. (TEC). (2016, December). https://burlingtonpublishing.escribemeetings.com/filestream.ashx?DocumentId=10709
  15. Research to insights: Working from home in Canada, January 18, 2024. https://www150.statcan.gc.ca/n1/pub/11-631-x/11-631-x2024001-eng.htm?form=MG0AV3
  16. Environmental Registry of Ontario. https://ero.ontario.ca/
  17. Urban vs. rural living, houseful, Nov 2, 2023. https://blog.houseful.ca/urban-vs-rural-living/?form=MG0AV3
  18. Bowman, Alisa. “Boost your health: The benefits of having a pet,” Mayo Clinic, March 18, 2024. https://mcpress.mayoclinic.org/healthy-aging/boost-your-health-the-benefits-of-having-a-pet/?form=MG0AV3
  19. Philip D. St. John, et al. “Life satisfaction in adults in rural and urban regions of Canda – the Canadian Longitudinal Study on Aging,” Rural and Remote Health, August 28, 2021, Volume 21 Issue 3. https://www.rrh.org.au/journal/article/6631#:~:text=Results%3A%20Individuals%20living%20in%20rural,CI%3A%201.19%E2%80%931.45).

In McMullin v. Nova Scotia (Director of Assessment), 1999 NSUARB 38 (CanLII), <https://canlii.ca/t/5g04>, the Board ruled that “the operation of the quarry is an external obsolescence, resulting in a loss in value to the subject property” and that “the operation of a quarry in the vicinity of the subject property is, indeed, a negative factor which should be accounted for in the present assessment….The presence of such adjacent uses would clearly have an impact on the fair market value of a particular property.”