Rental Property Investor · Dallas, TX · Member since 2015 · 77 posts · 39 votes
I currently have a duplex under contract in Northern NJ that has an oil tank underground in the front yard. Per my attorney, this should be a deal breaker if the seller isn't willing to remove. Since oil tanks and older homes are new to me, I wanted to ask -- how big of a deal is an oil tank? Should I really walk away if the seller won't remove it during the inspection contingency period?
Michael S. if they won't remove the tank, ask to have a contingency on soil contamination. Get someone who's certified to check soil samples and if it's good, then you might want to take into account taking out the tank yourself if you truly want the property but be sure to get an estimate on that as well and ask if a credit can be given back from the seller. Note: I am not an attorney and this is not legal advise. Speak with your attorney about all your options if you truly want the property. But oil tank leaks are a serious thing as remediation depending on the extent could cost 100k or more.
Yes. Sale contingent on removal. Once there is a leak and the EPA is involved your property can become worthless or even worse a clean up cost nightmare.
Thank you all for your advice. My attorney has asked the seller to remove. Will see how this goes, but am concerned about it impacting my ability to get a loan if the seller says no.
Another question -- the test revealed that both neighbors have oil tanks in their back yards. Should I be concerned with oil contamination that would be a result of spills from my neighbors?
A standard oil tank removal will be about 2-3k with permits, testing, etc. no too bad.
If a leak is found, the price will head up to 10-50K, maybe even more. A friend had to excavate UNDER his house because of the way the oil contamination ended up. Some insurance will cover, some they won't, but regardless the headache is immense.
Good luck!
Check if this holds in your area as available option, but in my area, as long as the tank has not leaked you can have it decommissioned and left in place. I've sold many properties with UST, both resi and comm. Resi UST testing and decommissioning usually costs $800-$1,200 depending on property access and tank size. They just drain the tank and fill it with a type of cement slurry.
If oil is the current energy source though you'll also have to factor in a new energy system, furnace, etc... But if it's in use and not leaking, you're not REQUIRED to decommission or remove it.
Also, as far as I know, contamination from UST is the liability of the person that owned the property at the time the contamination existed. If contamination existed for 20 years and you owned it for the most recent year, the other party is liable for their 19 years worth. Now how that all actually plays out with insurance, attorneys and courts in individual cases, and at what costs in money and time, that's the rub.
There is usually an insurance policy on the tank, to cover leaks, as part of the price of the fuel, so check with the seller on that.
I would certainly recommend making your deal contingent on a clean leak test (and decommissioning if that's what you choose) and have your deal effectively read such that if the test comes back with water in the tank, ie the tank has leaked, then you can walk from the deal and get your EM back.
The existence of a UST, especially if in use and not leaking, in no way needs to be a required deal killer though. If it's in place, not in use and not leaking, then you test and decommission in the ground.
As far as a loan, if it's in use it's fine, that's the energy source. If it is not in use and not decommissioned they will probably require that, as that process ensures to them that it didn't leak, because the contractor wont decommission a leaking tank. If it leaked you just walk away anyway unless the cleanup cost is worth it to you.
In New Jersey decommissioning an underground tank and leaving in place is not an option. Lenders will not provide financing. It used to be standard practice to empty tanks and fill with sand or gravel but that was not an insurance that there was not a leak and that the ground was not contaminated. If abandoned tanks are found during inspection lenders will require it be removed and certification obtained proving there is no ground contamination.
The hysteria about UST is overblown but its on the seller. If they're being cheap you can maybe offer to pay for the removal but I would mention you ARE NOT responsible for any leaks once they start digging. Usually if there are leaks, its small. Sometimes there are $100,000 nightmares but those are rare. My first property had a UST. I found a contractor, got a price, gave the seller the quote and they took care of it. Walk if they won't though.