A retail business changes hands on the strength of its lease, its inventory and its customer list. A contracting firm changes hands on the strength of its equipment, its people and, more than either of those, on what is still registered against it in places most buyers never think to look. The searches that matter here are specific to construction, and skipping one doesn’t show up until months after closing.
Key takeaways
Equipment and inventory can carry a registered security interest that survives a sale, because — as Ontario’s Personal Property Security Act tracks the registration, not the transaction, so “a seller can, whether through oversight or financial pressure, sell you an asset that still has a registered interest against it.” A PPSA search costs $8 per search at the ministry-direct rate, reveals the secured party’s name, the collateral description and the registration’s expiry, and has to be run under the seller’s exact legal name and any prior names — a company that changed its name three years ago doesn’t erase what was registered against the old one.
The timing matters as much as the search itself. Run it early, during due diligence, so a discovered lien can become a negotiating point rather than a surprise. Then run it again close to closing, because a new registration can appear after the first search — a seller under financial pressure between the letter of intent and closing is exactly the scenario a second search is meant to catch. Make discharge of anything found a condition of closing, not a promise to sort out afterward.
Worked example — an eight-unit fleet
A buyer is acquiring a mid-size grading and excavation company with an eight-vehicle equipment fleet the seller lists at a combined $640,000 book value. Eight PPSA searches at $8 each cost the buyer $64 — a rounding error against the deal size — run under both the seller’s current corporate name and the name it operated under before a 2023 rebrand.
One result comes back active: a registration against a $95,000 excavator, naming an equipment lender as secured party, more than three years after the seller told the broker the loan on that unit was “paid off.” Whether that’s an oversight or an unpaid balance, the registration — not the seller’s word — is what a court or a lender will look at after closing.
The fix costs nothing extra: make a signed discharge of that specific registration a condition of closing, and re-run the search on that one unit the week before closing to confirm the discharge actually landed on the public record.
Workplace Safety and Insurance Board obligations are one of the liabilities a buyer inherits without any special drafting: unpaid WSIB premiums automatically follow the business under Ontario’s Workplace Safety and Insurance Act, the same way employment liability and lease arrears do. A verbal assurance that the account is “up to date” isn’t proof. A WSIB clearance certificate is valid for up to 90 days across all of the holder’s contracts, and WSIB states email requests are typically returned within three to five business days — long enough to build into a diligence timeline without holding up the deal, and short enough that a seller with nothing to hide has no real excuse for not producing one.
Construction and trades businesses carry a specific environmental profile most retail or professional-services acquisitions don’t: fuel storage, chemical use, equipment-maintenance areas and, on older sites, an unknown history of what was stored or spilled before the current owner. A share purchase means the buyer assumes the corporation and all of its historical environmental liabilities outright; an asset purchase generally leaves liabilities with the seller unless expressly assumed — except that regulators can still hold a new owner or operator responsible “regardless of what the purchase agreement says between the buyer and seller.” A compliance order simply attaches to whoever owns or operates the site going forward.
The practical response is the same checklist either way: confirm the property’s ownership and prior-use history, pull current and historical permits and any compliance orders, ask specifically about on-site fuel or chemical storage, and get environmental representations and warranties — backed by a separate indemnity or holdback where the site’s history is genuinely unclear — written into the agreement rather than assumed.
Construction runs on subcontracted labour more than most industries, which makes worker classification a sharper diligence issue here than in a typical small-business purchase. A “subcontractor” who works set hours under company supervision, uses company tools and has no other clients looks, to a regulator or a court, like an employee regardless of the label on the invoice — and a deal structured on the assumption that a crew is all independent contractors can be wrong in a way that only surfaces after closing, in the form of back pay, vacation entitlements or WSIB premiums the price never accounted for. Deal structure changes the exposure: a share purchase inherits every historical employment liability with the corporation; an asset purchase offers more protection, but only for staff the buyer doesn’t rehire.
The value here is organizational, not judgment-making. A tool can cross-reference a seller’s equipment list against a batch of PPSA search results and flag which units don’t match cleanly, extract the key dates and dollar figures from a stack of equipment-lease and loan documents into one checklist, and keep the environmental and employment document requests moving instead of sitting in an inbox. It drafts the checklist and flags the anomaly; a lawyer still reads the actual registration, the actual permit and the actual contractor agreement and decides whether it’s a real problem — that judgment doesn’t move.
Related reading: preparing a trades business for sale and what a construction business is worth and a management buyout of a contractor.
Yes — the registration, not the sale itself, is what the PPSA system tracks, so a lender can still look to the collateral even after a good-faith sale if a discharge was never filed. Search under the seller’s current and prior legal names, and run it again close to closing.
The obligation follows the business under Ontario’s Workplace Safety and Insurance Act. A buyer should get a current clearance certificate, valid for up to 90 days, rather than accept a verbal assurance that the account is in good standing.
Not entirely. Regulators can hold a new owner or operator responsible for contamination or compliance issues regardless of how the purchase agreement allocates liability between buyer and seller, which is why environmental representations, indemnities or a holdback still matter in an asset deal.
Subcontractors who function like employees — fixed hours, company-supplied tools, direct supervision and no other clients — because that relationship can be recharacterized after closing, attaching entitlements the purchase price never priced in.
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