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:
*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.
*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.