Business only, or land and business
Gas station listings in BC come in two forms: the business and equipment on leased land, or the freehold property with the business. The second is a real estate transaction as much as a business one, and the environmental condition of the land becomes your problem the moment you own it. Even on leased sites, a buyer who operates the tanks can face liability for contamination that happens on their watch, so the environmental work below applies either way.
Environmental site assessment
BC's Environmental Management Act and the Contaminated Sites Regulation govern fuel-contaminated land. Commission a Phase I environmental site assessment by a qualified professional, which reviews records and history, and a Phase II with soil and groundwater sampling if the Phase I finds any risk, which at a working gas station it usually does. Ask the seller for every past assessment, tank test, spill report and remediation record. Lenders will not fund a station without this, and neither should you.
Tanks, lines and dispensers
Find out the age, material and construction of every underground storage tank, when the lines were last tightness-tested, whether there is leak detection and monitoring, and what the fire department and the province's inspection records say. Older single-wall steel tanks are a replacement cost you must price into the deal. Dispensers and meters must meet Measurement Canada requirements; check the inspection stickers and the service history.
The fuel supply agreement
Most branded stations sell fuel under a supply agreement with an oil company that sets the brand, the pricing formula, volume commitments, the term and what happens on a sale. Read it in full. It may require the supplier's consent to assignment, it may lock you into pricing that leaves thin margins, and it often owns the canopy signage and image. Unbranded or independent stations have freedom but buy fuel without the marketing and card-lock network.
Where the money actually comes from
Fuel margins are cents per litre and swing with wholesale prices; the convenience store, propane, lottery, car wash and service bays are where many stations make their real profit. Separate the revenue and margin of each line in the statements. Lottery commissions, tobacco and vape products, and liquor where the station holds a licence each have their own regulator and their own transfer rules.
Modelling a gas station purchase
Build the model line by line. Fuel: litres per month times the margin in cents per litre under the supply agreement, minus credit card fees, which on fuel are significant because the card fee is charged on the whole pump price while you keep only the margin. Store: sales by department with the margin for each, because tobacco and lottery are high-volume, low-margin lines while prepared food and drinks are the opposite. Car wash: cycles times price minus water, chemicals and maintenance. Then subtract wages for a business that is often open long hours, environmental monitoring costs, tank insurance, property tax or rent, and a capital reserve for tanks and dispensers.
Lenders treat gas stations as specialised assets. Expect them to require the environmental assessments, the fuel supply agreement, several years of statements with fuel volumes shown separately, and often an appraisal; a station with property is usually financed as commercial real estate with the business income supporting it.
Diligence checklist for a gas station
- Phase I and, if indicated, Phase II environmental site assessments by a qualified professional; all historic spill and remediation records.
- Tank and line specifications, ages, tightness tests, leak detection and monitoring records, and provincial storage tank registration.
- Fuel supply agreement: term, pricing, volumes, assignment rights and image obligations.
- Monthly fuel volumes and margins for three years, reconciled to supplier invoices.
- Store, lottery, tobacco, liquor and food permits and their transfer rules.
- Property: title, zoning, survey, easements, and any right-of-way or highway access limits.
- Insurance history including environmental impairment coverage.
Licences, permits and the transfer
Expect a municipal business licence, a fuel-handling or fire permit for the tanks, provincial registration of the storage tank system, food premises permits if the store prepares food, a lottery retailer agreement, and possibly a liquor licence with its own transfer through the Liquor and Cannabis Regulation Branch. In an asset sale, PST applies to the equipment, dispensers and store fixtures, and you should hold a PST clearance certificate at closing.
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Frequently asked questions
Who pays to clean up contamination found during due diligence?
That is negotiated in the purchase agreement. Buyers commonly require the seller to remediate to the standard required by the Contaminated Sites Regulation or to reduce the price by the assessed cost, and they make the deal conditional on the Phase II results.
Can I change the brand of a gas station after I buy it?
Only if the fuel supply agreement allows it or has expired. Many agreements run for years with volume commitments and consent requirements on sale; read it before you make an offer.
Sources
- Province of BC: Contaminated sites (Environmental Management Act)
- Measurement Canada: fuel dispensers
- Province of BC: Buying and selling a business (PST on business assets)
This guide is general information for British Columbia, not legal, tax or financial advice. Rules change; confirm current requirements with the regulator linked above and with your own lawyer and accountant before you buy.