Recently, a reader wrote to me concerning a new house that he was thinking about buying. The house is now heated with natural gas. However, he knew that at one time the house had been heated with oil and there had been an underground oil storage tank. The problem is that nobody had any documents indicating whatever happened to the old tank. The reader asked whether he should close on the house or take measures to protect himself.
This is a very common issue. Many houses have been converted from oil to natural gas. The conversions may have occurred recently, in which case documentation will likely not be a problem, or decades ago. Decades ago may be a problem because people did not then keep the kinds of records concerning tank removals.
Home purchasing is often premised more on emotions than legal or historical considerations. People simply love their new home-to-be, and do not want to hear about the "what ifs."
But everyone needs to understand that when they purchase a home, they not only purchase all of the desirable aspects of the home, but also all of the blemishes and liabilities. That means that any oil contamination which was not properly addressed and still remains onsite becomes the responsibility of the new owner.
And heaven forbid what happens if the oil contamination has leaked into the groundwater. That can really become an expensive proposition to cleanup.
I once represented a homeowner who had a leaking tank and spent nearly $200,000.00 just to remove the dirty soil. While that was unusual, and most cleanups seem to me to be much less, the point is that this can be costly.
So, you can love the home you want to buy. But, buy the home with your eyes wide opened. A purchaser of a home that once contained an underground storage tank wants to know with certainty that the tank was properly removed, that the tank was properly disposed of, and that all contamination was fully addressed in accordance with applicable laws.
Since tank issues can be important issues, legal advise in addressing this risk is appropriate. People may tell you that it is not necessary. If they do, ask them whether they will pay for the clean up if you end up making a bad call. The odds are that you will be fine. But, problems here can be costly. Skimping on legal advise doesn't make sense.
Absent strong documentation which satisfies your attorney that you have nothing to worry about, you might decide that some environmental testing is in order to determine whether any contamination is still present. In fact, you might very well discover that the tank itself is still present. Not long ago, the common practice was to abandon tanks in place by emptying them and filling them with cement or dirt.
It is possible that price may have to be renegotiated under the circumstances. It also possible that the walk away provision in your contract may have to be revisited. Or, money may have to be kept in escrow.
Sometimes, insurance can be purchased to address some of this risk.
The purpose of this article is not to cover every possible resolution to address this issue. The point is to simply red flag the issue so that purchasers make sure that it is fully addressed to the satisfaction of their attorney.
On the other hand, and this is also very important, uncertainty about previous buried oil tanks should not kill any deal. Uncertainties require creative responses by motivated buyers, sellers and their lawyers. A lawyer who simply tells you to just walk away because an uncertainty arises is not doing his or her job. Insist on creative solutions. If everyone is result oriented, everyone can still get what they want and the oil tank issue can be properly and adequately resolved.