Underground Oil Tanks

UNDERGROUND OIL TANKS…TICKING TIME BOMB?

As a real estate attorney, I have seen firsthand what a leaking underground oil
tank can do to a real estate transaction. More importantly, I’ve seen what it can do to a
homeowner’s finances. We’re talking tens of thousands of dollars and many months to
correct the situation if the leak gets into the soil and underground water supply. If you
own a home with a functioning underground oil tank, the wise thing to do is to get that
tank out of the ground, the sooner the better. Not only is the tank a ticking time bomb for
the homeowner, but it can be a major hindrance to a smooth real estate transaction.

Isn’t it a major process to remove the underground tank? Actually, the removal
process is not as difficult or as expensive as you’d think. There is actually a New Jersey
state funded program that will provide a $3000.00 grant towards the removal if you
qualify. The qualification requirements concern annual household income and net worth.
If your household income is less than $250,000 and your net worth is under $500,000,
you would qualify. The removal company will then install the tank in an above ground
location in your basement, or outside the property, depending on the location of the
heating system and the homeowner’s preference. The grant should cover most of the
costs associated with the removal and new above ground tank installation.

What about insuring the oil tank, wouldn’t that cover me in case of a leak? If you
don’t have oil tank insurance…get it right away. Many oil tank insurance companies
require a homeowner to have insurance in place for a specified period of time (usually
one year) before the insurance will cover any leaks upon removal. So if you currently
have an uninsured oil tank, do not just remove it without insurance, follow the necessary
steps to ensure that when it is removed, proper coverage is in place. But take note, if you
do have tank insurance, don’t make the mistake of assuming that you are completely
covered in case of a leak. Most policies only cover up to $100,000 in remediation costs,
which if the leak affects the area water supply, might not be adequate. Some
homeowner’s insurance policies do provide coverage above the $1000,000 if the
groundwater is contaminated, so make sure to check with your homeowner’s insurance
provider for the coverage applicable in that scenario. In addition, some policies only
cover a leak in the tank itself. Most leaks occur in the pipe connections leading to and
from the tank, which might also be excluded from your policy.

Can’t I just sell the property with the underground tank in place and let the next
homeowner deal with it? Most Buyers are quite wary of buying homes with underground
tanks, and for good reason. It is not that uncommon for older underground tanks to leak
oil into the surrounding soil. Typically, a well represented Buyer will discover early on
that the home has an underground tank and attempt to negotiate its removal before even
finalizing the Sale Contract with the Seller. As an attorney, I strongly recommend that
my clients purchasing a home think twice if there is an underground tank on the property
and the Seller refuses to remove it prior to closing. As discussed, it can be a major
headache and financial burden to buy a house with an existing underground tank and it’s
a risk many home buyers will not assume.

What if the home has an abandoned underground tank, or had one that was
recently removed? If this is the case, make sure your attorney requests the appropriate
documentation from the Seller showing the removal or abandonment was done according
to proper town and state guidelines. If the Seller cannot provide the appropriate
documentation, it is important for the Buyer to have the soil tested for contamination.

As you can see, it makes sense as a homeowner to get a head start on removing
the underground tank before even listing the property for sale. With the real estate market
on a current downturn, it is even more prudent to eliminate potential deal breaking
variables that are under your control, like an underground tank, rather than adding one
more time bomb to already mine laden process.