Advice re: oil tank in NY state

17 Replies

Hi everyone!

I've been negotiating the purchase of a triplex in upstate NY (Hudson Valley) and we're soooo close to coming to an agreement on the terms, but a half-buried oil tank is throwing a wrench in things. I'd love your thoughts!

Here's the deal:

There is a small half-buried oil tank under the front porch of the home that has not been used for decades. The current owner didn't do his due diligence on the tank when he bought the place, so there's no documentation on it. He has offered to have the tank removed, but is unwilling to have the ground tested to confirm there has been no contamination (he plans to "take a look at the soil" after removing the tank, and has offered to let me do the same). He says that in the unlikely event there has been some leakage, he will "dig out some of the soil and replace it."

I understand his position - if he gets the soil tested and there's been contamination, he will be legally required to have it remediated at a potentially large expense. With no test, there's no legal requirement to do *anything.* 

But obviously, my *** is on the line if I buy the place without getting the ground tested. Once the tank is removed, it won't be readily apparent that there ever was a tank in the ground, but I'm really not interested in lying to future prospective buyers.

If I don't buy the place, I'm guessing the owner will remove the tank and then sell to someone else who isn't savvy enough (or doesn't care) to ask about any previously removed oil tanks.

What would you do?

@Megan S.

Are you using a lender (i.e. placing a mortgage)? Have you disclosed this to them?   It is likely they will want it remediated before funding.

Here the owner would be obligated to disclose the oil tank to any future purchaser.  If he didn't and the purchaser learned of it afterward there would be cause for recourse {purchaser would have to demonstrate the Vendor was aware of the tank}.

1(506) 471-4126

What type of soil is it ?  If its clay the oil doesnt go  far . Sand and it can really be a problem .  Heating oil smells , you can get a good idea just with your nose .

Originally posted by @Matthew Paul :

What type of soil is it ?  If its clay the oil doesnt go  far . Sand and it can really be a problem .  Heating oil smells , you can get a good idea just with your nose .

Diesel/heating oil does have a distinctive smell, but if a leak occurred sometime in the past and there is no active leak or oil present in the tank, you may not smell anything until you disturb the contaminated soil.  Even if you are unable to smell the oil, there could be enough oil in the soil for it to be considered "contaminated".

If the vendor does not wish to have the tank professionally removed (and soil remediated), then get your own quotes and negotiate an accommodation in the purchase price.  Depending on your lender, the remediate may have to occur prior to Close.

We've had USTs removed in the past and, unless there has been a significant leak, the remediation costs are not that expensive.

1(506) 471-4126

Assuming it has not been used for decades I would have no concerns. I would have him remove the tank, assuming no permit is required to do so, and forget it was ever there assuming it is a good deal. I would do a personal sniff test and leave it at that. No oil smell no worries. I would be more than comfortable and confident there would be no future issues. Not a problem for me as a investor as the chances of future issues is extremely low. Once that is behind me its out of sight out of mind.

Based on your hesitation I would advise you walk away from the deal. If your concerns and standards are such then you need to seek out real estate that has no adverse conditions.

I have to agree, I wouldn't worry. Have him remove it though for sure.

Michael Knaus, Contractor in PA (#PA123146)
570-520-0971

@Megan S.

We've had buried oil tanks with previous buyers we were working with in Westchester and Orange Counties. We always make it clear that it is the sellers responsibility to get this done and have it tested. All the attorneys we have worked with in these areas make it a point to advise their seller clients that they need to do this in order to sell. Most banks wouldn't allow it either. 

Ceasar Rosas, Real Estate Agent in NY (#10301210194)
(646) 338-7267

@Ceasar Rosas have you had to do any remediation in OC New York? I have seen a few potential flips with underground oil tanks. I wouldn't be opposed to buying one if I knew the costs for removal and possible remediation. What kind of costs have you seen for this work?

@Brian Pulaski

We've seen them range from from 2 to 4 on average. We had buyers on 2 in Orange and 3 in Westchester. 1 in South Salem I believe cost about 12k because they found a leak. Are you doing flips in Orange?

Ceasar Rosas, Real Estate Agent in NY (#10301210194)
(646) 338-7267

Thanks everyone! I am using a lender and I haven’t disclosed the oil tank. I guess I assumed it’s up to them to do their due diligence during their inspection/appraisal?

Originally posted by @Megan S. :

Thanks everyone! I am using a lender and I haven’t disclosed the oil tank. I guess I assumed it’s up to them to do their due diligence during their inspection/appraisal?

 I bet that's not how the application and lending agreement you signed with the lender reads.   

1(506) 471-4126

@Ceasar Rosas I am actively hunting down my first flip out this way. Good to see those numbers as a budget idea though, thanks!

@Megan S. Good luck on the deal!

I wouldn’t let the oil tank scare me away from a good deal.

I also wouldn’t take on someone else’s problem unless I knew the downside. The seller doesn’t want to do a soil test BC he probably knows the companies are legally bound to report a bad test. Same thing with the tank removal guys. Here in westchester you need a lic to do it. Not sure about upstate.

I would ask him if he’ll have a company abandon it and purchase the insurance policy they offer after removal, my removal guys offer a policy that’s covers liability if the tank leaks. Like 200$ a year.

If he says no ask why not. Money? Offer to put up some cash. If he’s not willing to do it with you offering to help why is that?

I’ve taken out three oil tanks. 2 smaller tanks were 800. The bigger 575 that was under a deck and 50 years old was 1400. None of them leaked. But the guy that owned the company said that he’s seen oil tank and soil abatement cost 100k.

He’s in westchester. Very reasonable and a good reputation if anyone wants his#

Sadly, the place is already priced at the very high end of what I can afford (with a 25% down payment), so I can't offer to throw cash at the seller. Regardless, he made it clear he's unwilling to have the tank "officially" removed (for the reasons mentioned previously re: not wanting to have to report a leak if there is one). 

I heard from him yesterday that he can't guarantee he'll be able to remove the tank until March or April, and I really don't want to wait that long to close the deal, so I think we're at an impasse. Boo.

Thanks again for your feedback, though - much appreciated!

@John Hickey Was going through this post and might need a tank guy, could you provide your contact? Thanks

@Megan S. This is an insurance question as you are required to disclose this info to your insurance company.  Knowing that there is an oil tank on the property let alone one that is half in-ground exposes a HUGE liability risk to you and to your insurance company.  This is a Misrepresentation of this risk if you know its on the property and do not tell them.  Your insurance company would generally require the tank to be removed prior to you taking ownership of the risk AND the seller should be providing you a copy of the environmental report that the Testing Company provides them.  

IMO I would run for the hills without the tank removed and the environmental report in hand :)   I can't imagine buying the building and come to find out that you have to clean it up, then having the possibility that your insurance company declines to cover a claim because it was not disclosed at the time of binding.

Hope it works out.

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