Leaky Oil Tanks Can Mean Trouble for Sellers

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If you have a leaky oil tank that needs to be removed, a few months ago you might have received some financial assistance from the state of New Jersey.

But as of May 3, homeowners with leaking tanks are out of luck.  That’s when the NJ Economic Development Authority (EDA) fund – officially known as the Petroleum Underground Storage Tank Remediation, Upgrade and Closure Program, went bust after fourteen years.  

The program, co-administered by the EDA and the NJ Department of Environmental Protection, provided grants and loans as incentive to homeowners to remove leaking tanks, which can cause serious environmental damage. 

It has become a big problem in areas such as Baristaville, which has many old homes that were originally heated with oil.  Nearing the end of their natural lives, the old steel tanks are rusting and corroding.  Oil can seep out and leak into the ground, contaminating rivers, lakes and drinking water. 

Most owners of old homes might not even think about the condition of their underground oil tanks – until they go to sell their house.  In the past, most buyers were satisfied with having owners “decommission” non-working tanks by filling them with sand.  The town would issue a document stating as much, and the matter was considered over. 

But buyers have started to take a hard line.  “Three years ago, decommissioned tanks were acceptable.  Now, buyers want them out,” said Barbara Lawrence, of Keller Williams Midtown Direct Realty in Maplewood.

Lawrence was told by one oil tank removal company that a whopping 3 out of 5 decommissioned tanks are currently leaking.  And typically, homeowners are solely responsible for the costs of remediating the damage.  

It costs around $1,500 to remove a decommissioned tank.  But if there are leaks, the costs can shoot up dramatically.  How dramatically?  While average clean-up costs range between $3,000-8,000, if environmental damage is found the costs can reach up into the six figures.

More and more residential real estate deals are being delayed or even derailed by leaky oil tanks.  “Sellers can refuse to remove the tank, but it could cost them the sale and the buyers could move on,” said Lawrence.  (If an oil tank is actively in use to heat the house, it is most likely insured and any leaks would be covered.)

She recently represented a seller whose tank had been decommissioned ten years ago when they bought the house.  The new buyer would not buy the house unless the seller agreed to remove the tank. 

“What started out as a relatively simple tank removal quickly escalated when the tank failed.  Soil samples were taken to reveal contamination around the tank, reaching the neighbor’s yard.  Further soil removal and cleanup and the sellers’ insurance company’s involvement resulted in a delay of the closing by three months.”

Lawrence, who lives in Maplewood, had her own decommissioned oil tank removed last month.  To her relief, there were no holes or leaking.  “Most insurance companies will only cover liability if your tank is leaking into your neighbor’s yard.  Had I had contamination in only my yard, I would have been stuck with the cost.  That is the real potential nightmare, especially now that they’ve done away with the government reimbursement program.”

How can buyers and sellers potentially avoid being caught in that nightmare?  Here’s what Lawrence suggests:

Buyers:

*Don’t buy a house unless the seller agrees to remove the decommissioned tank upfront, and incur all costs.  (Put it in the contract when you agree on the initial terms.) 

*If the seller refuses to remove a decommissioned tank, walk away. 

*If the house is being heated by an active underground tank, don’t buy it unless you confirm that there is insurance on the tank and that it is transferable.

*If there is contamination, which could potentially delay the closing, make sure your attorney has negotiated enough money to be keep in escrow until they receive a “No Further Action Letter” from the state.

Sellers:

*If you are not aware if you have a decommissioned tank, check with the town records just in case.  If you do, have the tank removed before you list your house.

*If the buyer finds an abandoned tank, agree to remove it because if you don’t you’ll have the same problem with the next buyer.

Photo credit to Massachusetts Dept. of Environmental Protection.

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11 COMMENTS

  1. Let me get this straight. If we decommissioned our tank 15 years ago, and got a certificate that there were no environmental hazards, we are now supposed to remove the de-commissioned tank. Sounds like a bonanza for the environmental remediation industry. If my de-commissioned tank was found to be leaking, the first thing that I would do is sue the company that did the work.

  2. Funny!….”Oil can seep out and leak into the ground, contaminating rivers, lakes and drinking water.”
    I’m thinking of leasing the land under my house for frakking. They tell me it’s safe and won’t harm the groundwater. Cool! The I’ll use that money to decommish my old oil tank.

  3. Kind of like Social Security, Spiro. You bury it because it has use for you, with the full knowledge that when it rots and collapses, you’ll be long gone and it will be some other sucker’s problem.

  4. Not to speak anything against the EPA, but sometimes I think they are over zealous in their demands. Take a river, or a stream, for example. Lets say that there is a contaminated stream on public property, say like in a park. Do you see the EPA digging it up? Do you even see them TESTING it? No, you don’t !!

    But, Joe-Homeowner ? Oh ‘ya, perhaps the EPA can lunch on his waiting buyer’s cash to the seller, so lets go after the homeowner, who is about to get a BIG check as a D/P on Joe Seller’s impending sale.

    In Maplewood Memorial Park there is a “Duck Pond” ~ but all the Ducks are long gone. the water in it used to be clear, and one could view fish doing their thing. Now ? Murky greenish-brown “water”.
    Been that way now for 4 years or so. I don’t see any “testing” there.

    This is just a way to cause the private sector of homeowners to spit up gobs of money to feed the EPA, I.H.H.O.and, per usual, “We the people” have to fall in place. To date, I have known 8 persons who had to go thru this ordeal. 2 Bloomfield, 3 Maplewood and 1 each in Livingston, West Orange AND Millburn. ALL had clean soil and no bad readings. Cost them a pile of cash, however.
    How about the murkey sometimes smelly river in Watessing Park? I live directly across from it. How about the EPA footing the bill for remeading that? Nope. But my little 50x 100 lot that’s the killer, right?!!

  5. We have oil heat, have our tank regulary tested, have the insurance. Thankfully, no problems to date and we don’t plan to sell in the near future.

    Oil heat gets a bad rap but in defense of it, I have to say that whenever I’ve lived in a house with oil heat (including our current one), I hardly ever suffer from colds or other respiratory issues. We’ve been in our house 3 years and I think I’ve had 2 colds, that’s it. When I lived in gas-heated homes, I could count on 2-3 colds every year.

    Also, with gas you have issue of leakage and in the worst cases, explosions. As for cost, I think gas and oil are comparable in price.

    It’s a shame the EPA is going after folks with decomissioned tanks, after everything has been signed, sealed, delivered.

Comments are closed.