Underground oil tank

Member since 2019 · 16 posts · 2 votes

Hello!
If there is an underground oil tank, is the seller legally responsible to remove it before the buyer acquires the property? Or can it be negotiated within the contract? This property is in Connecticut.

Thank you!

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Jonathan GreeneBusiness Member

Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes

They are not legally required to remove the tank, but you should not buy without that as a condition unless it is an REO and you are aware of the risks. It can be negotiated. Most on-market sellers in NJ know they have to remove them or the property will never sell. Here, removal is $1,800 range and if there is a drop of contamination it will run up another $7,500. It it hits water it goes up and up.

An oil tank that is underground and in use is actually much safer, in general, than one that is out of use and buried. In use you would know from the consumption if there was a large leak. When it was decommissioned and left there you don't know they did the process. Sometimes they weren't cleaned and filled with sand which eventually compresses together and can seap out.

In short, there are a number of ways this can go wrong. I know a lot about them if you decide to go forward and want advice, but the short version is just require it as part of you buy but your language should read to the effect of:

"Seller will have the underground oil tank removed by a trained and licensed company and provide notice from the township that there was no contamination. If the tank does not pass the town's requirements and/or there is any contamination, seller will be responsible for cleaning up all contaminated areas and getting a report from DEP."

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Aaron K.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
6y
It is up for negotiation most places, but those things are nightmares, they can contaminate the soil, if you are the buyer I wouldn't buy it with the tank in place.
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
They are not legally required to remove the tank, but you should not buy without that as a condition unless it is an REO and you are aware of the risks. It can be negotiated. Most on-market sellers in NJ know they have to remove them or the property will never sell. Here, removal is $1,800 range and if there is a drop of contamination it will run up another $7,500. It it hits water it goes up and up.
An oil tank that is underground and in use is actually much safer, in general, than one that is out of use and buried. In use you would know from the consumption if there was a large leak. When it was decommissioned and left there you don't know they did the process. Sometimes they weren't cleaned and filled with sand which eventually compresses together and can seap out.
In short, there are a number of ways this can go wrong. I know a lot about them if you decide to go forward and want advice, but the short version is just require it as part of you buy but your language should read to the effect of:
"Seller will have the underground oil tank removed by a trained and licensed company and provide notice from the township that there was no contamination. If the tank does not pass the town's requirements and/or there is any contamination, seller will be responsible for cleaning up all contaminated areas and getting a report from DEP."
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Nikki Cuozzo
OP
Member since 2019 · 16 posts · 2 votes
6y
Hi Jonathan! Thank you for the information! I'm asking on behalf of a seller of a property, that has an old, currently unused, underground oil tank. With the information you gave me, it seems to be in the sellers best interest to negotiate with the buyer, for it to become the buyers responsibility. However it also sounds likely the buyer will not close on the property without the tank being removed and soil inspected...any additional advice for this seller?
Thank you!
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Christopher Kolasa
Rental Property Investor · Boston, MA · Member since 2016 · 61 posts · 18 votes
6y
Hey @Nikki Cuozzo, I was in a similar predicament, I purchased a home in Middletown, Connecticut and one of the issues was a suspected underground oil tank, at least at the time it was a combo of an unknown fill pipe and unknown vent pipe. After searching for lot of advice, and the suspicion of a buried tank this became a unfortunate deal breaker. Noted a lot of properties on the same road had oil tanks on the DEP website, I believed I searched for Brownfields. I was concerned of a potential $10k-$100k cleanup if contamination bleeds into a neighboring property. All buried oil tanks will eventually leak due to the constant saturation and desaturation of the soil in New England, this one was likely 60+ years old according to the fill records and my limited knowledge of the history of the house.
I spoke about it with the owner and this news became overwhelming for him. Deal breaker. He wasn't gonna deal with the tank. Tough to walk away but it was the right move for me even after months of a very slow negotiation, and work dealing with knob and tube and asbestos (out of his pocket). Costs became to high to get out of the nuisance for him but with no other choice, we knew where the tanks would be and instead of a $3000 survey of the property, he found someone that had this ground penetrating radar, took two scans of the suspected property, bam right underneath the vent pipe. A company came out and pulled the tank in a day, it came back fortunately dry. I believe the owner paid about $4000 to get rid of it and thereafter the deal came back to the table.
Maybe would try to investigate with through the fill pipe with a borescope for some corrosion holes and cleanliness of the bottom to understand potential spill potential ($25 on amazon).
Good luck! Hope this story may help!
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Jonathan GreeneBusiness Member
Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
6y
@Nikki Cuozzo in my opinion, all sellers who are still owners and present should do the removal. No one will buy an on-market, market price deal with an underground tank. The risk is too high and tank insurance does not cover as much as people think.
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
As Jonathan said:
Seller should definitely remove prior to sale...
Q:If you were the buyer how much off regular price would you want if it was still there?
A: the absolute most it could possibly cost you plus a few thousand for the aggravation.
So if the seller finds the absolute worst case they still get a few thousand more, if they find anything less than absolute worst case they get $10,000+ more for their property.
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Nikki Cuozzo
OP
Member since 2019 · 16 posts · 2 votes
6y
@Christopher Kolasa thank you so much that was extremely helpful! Glad it worked out for you!
1 Reply
Eric Drum
Rental Property Investor · Harrisburg PA · Member since 2019 · 61 posts · 42 votes
6y
Be aware, if you remove from a commercial property, there are different EPA rules for post removal soil inspections for years. These are much different rules than residential oil tank removal.
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John Barrows
Real Estate Broker · Auburn, WA · Member since 2015 · 151 posts · 106 votes
6y
Ahhh, oil tanks.... Your state and federal government has specific laws governing how these items are dealt with to decommission the tank.
In commercial you'll need a phase 3 report on the property. This report will go trough 3 separate steps in order to determine the extent of any issues, then move forward to decommission the the site.
Residential (depending on state) whether they adopt federal guidelines or have their own will be consistent with the outcome of a decommission resolve. Most generally, you'd want to drill holes in and around the tank, have the soil inspected by an ecological/hazardous waste company then determine if there's any contaminates in the soil. If none exist, it could be as simple as having a company come out, suck out any lingering residual from the tank/clean and fill with slurry forever. Most, will just remove the tank so as when the tank finally rusts out the slurry won't stay in the ground.
See your state and federal laws prior to extracting any possible hazardous waste. Good luck.
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Greg PowersPro Member
Real Estate Agent · Manchester, NH · Member since 2013 · 120 posts · 159 votes
6y
@Nikki Cuozzo
A buyer is not likely to take on that responsibility. But it would be worth having your seller contact your state environmental division about it. I listed a residential property In New Hampshire that had an underground tank that was suspected of leaking. One expert (whose name I can provide to anyone interested) recommended that the tank be removed before trying to test the soil for leakage. Because it was a residential tank, it was of a size considered "non-regulated" so a contractor was able to remove and dispose of it.
In our case, there was no leakage so my client only paid the cost of the removal, which I believe came to a few thousand dollars.
If there HAD been a release of oil, then the NH Department of Environmental Services would have gotten involved. But the DES has a reimbursement fund that my client could have tapped into. Whenever we buy a tank of gas for our car in NH, a portion of the taxes paid goes into a general fund devoted to cleaning up hazardous waste spills in the state.
The process for accessing that fund would have been to first file a claim with the homeowner's insurance carrier and see if they would cover it. If not, the homeowner would simply need written confirmation that the insurance company was denying the claim, and then he could use funds from that DES pool, with a $100 deductible.
So if your state has a similar program, even if there is a leak it might not cost a lot of money, although it will probably cost a lot of time.
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Steven Lowe
Real Estate Agent · Scottsdale, AZ · Member since 2019 · 448 posts · 320 votes
6y
Originally posted by @Nikki Cuozzo:
Hello!
If there is an underground oil tank, is the seller legally responsible to remove it before the buyer acquires the property? Or can it be negotiated within the contract? This property is in Connecticut.
Thank you!

I can't say what the laws are in your area but earlier this year I did a SFR rehab project in Chicago where there were two above ground heating oil tanks under the front porch which the seller swore were empty. They weren't! More like half empty. I had to call a company that specializes in oil removal to come out and drain the tanks before I could have them removed. Seller had to pay for the tank removal after closing.

Underground is a different animal as there is a higher risk of contamination if there's a leak so companies that do that type of work charge a lot more for it.
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Steven Lowe
Real Estate Agent · Scottsdale, AZ · Member since 2019 · 448 posts · 320 votes
6y
Originally posted by @John Barrows:
Ahhh, oil tanks.... Your state and federal government has specific laws governing how these items are dealt with to decommission the tank.
In commercial you'll need a phase 3 report on the property. This report will go trough 3 separate steps in order to determine the extent of any issues, then move forward to decommission the the site.
Residential (depending on state) whether they adopt federal guidelines or have their own will be consistent with the outcome of a decommission resolve. Most generally, you'd want to drill holes in and around the tank, have the soil inspected by an ecological/hazardous waste company then determine if there's any contaminates in the soil. If none exist, it could be as simple as having a company come out, suck out any lingering residual from the tank/clean and fill with slurry forever. Most, will just remove the tank so as when the tank finally rusts out the slurry won't stay in the ground.
See your state and federal laws prior to extracting any possible hazardous waste. Good luck.

I've heard that depending on former use certain commercial buildings are an automatic Phase 2, such as gas stations and dry cleaners. Have not personally dealt with a Phase 3. What do those run? I've heard stories.
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Mark F.
Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
6y
@Nikki Cuozzo Sounds like most of the people here gave great advice. I did extensive research on the forums and talking to RE people in person including oil tank specialist. They all come to the same conclusion.
Up to the seller 100% unless you want to gamble. Could be just a removal, or it could cost up to 100k after oil contamination.
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Sean McKennaPro Member
Flipper/Rehabber · Goffstown, NH · Member since 2019 · 80 posts · 59 votes
6y
@Nikki Cuozzo
You can do UST underground storage tank inspections. They have a tool that locates leaks in the tank underground. Or better they can tell you the tank is okay.
The real problems come from abandoned tanks.
Call your local fire department. They know all the laws regarding oil tanks. Most of the time you need to file a mechanical permit with the fire departments to remove tanks.
I’m sorry I can’t be of more help. I only know the oil laws in NH and MA.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
6y
@Nikki Cuozzo you didn't mention if you are talking commercial or a single family home. I would not buy commercial with a buried oil tank.
However My friend bought a home with a buried tank. He made sure the tank was empty and had the tank tested for leaks. I would feel safe doing that.
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Bryan Devitt
Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes
6y
@Nikki Cuozzo a friend is in the process of buying a large property with. 3000g underground tank (that's not a typo and I don't know who could afford to fill that). He ended up paying the owner an extra $10k to have the tank removed, soil inspected and new tank installed inside so he didn't have the worry of a $20-50k bill if it was leaking. It cost the owner just over $5k to remove it, nothing was leaking (still 2000g in it) so both parties made out. If it was leaking the owner would have had a hefty bill but the odds of finding a buyer to follow through on the purchase with it in the ground is slim. My friend couldn't even get normal insurance with the tank there and the added insurance would have doubled his annual premium, so that $10k had a ROI that most investors would jump on
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John Barrows
Real Estate Broker · Auburn, WA · Member since 2015 · 151 posts · 106 votes
6y
@Steven Lowe The 3rd phase of the inspection is the clean up of the site. Once the site has been determined to have contamination the site must be cleaned. That's the most expensive stage because of the fee's for taking it to a site that allows these contaminated soils. Remember, this could take weeks or months do to the place that takes the soils may be located. I know in Washington, there used to be a site in Vancouver, WA but, I think that was closed and now it goes to Oregon so that can be very expensive. You'd have to do some checking on where the soils would be taken.
Many times the Phase 3 can be into the thousands of dollars like for gas stations and the like. Check with your local laws and the Federal clean up act that was adopted in 1972.
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John Mocker
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
6y
Nikki Something else to consider is the impact of the tank on insuring the property. We represent over 3 dozen Insurance Carriers for Home/Dwelling Fire Insurance. The majority of the carriers will not write a property with an inground tank. Others will write the policy but will exclude pollution. Be sure you will be able to insure the property before you Once you purchase the property any pollution becomes your problem.
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Amy H.
Rental Property Investor · Richmond, VA · Member since 2017 · 295 posts · 229 votes
6y
@Nikki Cuozzo For a residential property- I recently bought a rental with an underground oil tank and an above ground tank. The seller paid for the inspection.. there was no leak or environmental damage. The seller and I agreed to split the costs of removing the underground storage tank.. $1,400 total. To remove the above ground tank, I paid another $300.
Not sure why everyone is acting so dramatic about it haha. I got quotes from 6+ regular insurance companies and no one had an issue with the UST or AGT. I chose to remove it just because the seller said he’d pay half.
I’m in Virginia so maybe other states are more strict about it.
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Lawrence P. Schnapf
New York, NY · Member since 2019 · 155 posts · 58 votes
6y
was the 'No leak or environmental damage" based on visual observation or sampling? there can be overfills and spills that migrate into the soil and groundwater beyond the USTgrave. Is groundwater used?
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Lawrence P. Schnapf
New York, NY · Member since 2019 · 155 posts · 58 votes
6y
tank could be leaking even if its still contains product. there is an easy paste test to determine if there is water in the tank. if water is in the tank, it could mean there are small holes allowing product to escape.
should always take soil AND groundwater samples unless groundwater is deep (20 feet or more).
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Lawrence P. Schnapf
New York, NY · Member since 2019 · 155 posts · 58 votes
6y
no obligation to remove tank just disclosure for residential properties with heating oil tanks, just disclosure. but seller may have reporting obligations if leak suspected. tank owner would be responsible for cleanup.
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Nikki Cuozzo
OP
Member since 2019 · 16 posts · 2 votes
6y
Thank you everyone!!
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Lawrence P. Schnapf
New York, NY · Member since 2019 · 155 posts · 58 votes
6y
First- Home heating tanks are exempt from federal regulation and usually exempt from state regulation unless they exceed a certain capacity (typically 1,000 to 2,000 gallons). The typical home UST ranges from 250 or 500 gallons which tends to fall below the regulatory threshold. Usually, only heating oil USTs associated with commercial properties are regulated. thus, most home heating oil tanks may and often are taken out of service without any oversight from state regulators.

Second- the rules that are in effect for heating oil tanks are usually less stringent than for diesel or gasoline tanks since heating oil tends to thicker and may not migrate as far. as a result, many states just require tanks to be cleaned out. they may also require the tanks to be filled with sand or concrete to prevent collapse. but sampling may not be required.

Third- the key to determining if a tank has leaked is to collect soil samples from around and beneath the tank (groundwater also if groundwater is shallow). another quick way to see if a tank is leaking is to "dip" it with a stick that has a paste that turns color in the presence of water. generally, if water has gotten into a tank, it can mean oil has leaked out of the tank (although a certain amount of condensation may be present even where there is no leak so this is not a infallible test).

Fourth- if there is currently a tank in the basement, ask the owner if there used to be a buried tank (a/k/a underground storage tank).

Fifth, If the tank has impacted the soil, the cleanup generally varies from $25K to $50K though the costs will depend ont he depth of the contamination. i once had a home with a heated pool that had pressurized piping and used diesel. the contamination went down 40 feet and the consultant went crazy excavating the soil to the tune of $400K!!!

Finally, do use a tank contractor to investigate a home UST but instead an environmental consultant who understands the UST rules and regulations of the particular state
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Sean McKennaPro Member
Flipper/Rehabber · Goffstown, NH · Member since 2019 · 80 posts · 59 votes
6y
@Lawrence P. Schnapf
Dude, NO.
Heating oil is diesel fuel. It is Number 2 fuel. Sometimes it is also blended with number 1 fuel (kerosene) to lower the gel point or pour point.
No.2 fuel is dyed red to discourage it from being used in diesel road vehicles to discourage tax evasion. If you run low on heating oil. You can go to the gas station and buy diesel and put it in your oil tank to get you to the next fill. Diesel at the gas station is so much more expensive because it has road tax added and has a lower sulfur rating to meet road regulations.
UST’s are highly regulated as an environmental concern. Some states have banned the use of them for home owners.
I don’t know where you got all your misinformation. Home heating oil has the same potential to contaminate ground water as gasoline.
I’m not going line by line correcting this. If anyone has questions about underground storage tanks please check with someone from your home state that is licensed and knowledgeable in fuel storage tanks. Your local fire department will be very knowledgeable in these topics also.
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