Don't Let a Buried Oil Tank Bury You

Do you have an oil tank buried in your yard? It's a question which every home seller must answer and every home buyer wants to know — even if the tank has been abandoned and is no longer in use. 

At a recent inspection for a buyer, an inspector indicated that there may be an oil tank buried on the premises. He pointed out to the buyer certain capped pipes in the basement were an indicator that the home was previously heated with oil. We shared this with the seller's agent, and they were quite surprised to hear that there may be a buried tank. The seller had lived in the home for over forty years and was not aware of the buried tank. I explained that we would have a specialist come out to further investigate.

Although it is not a requirement to remove an oil tank, my buyer did not want to inherit the house with the buried tank and requested for it to be removed. The seller did so, and the closing took place. 

As it turns out, the buyer’s mortgage company requested official paperwork on the removal of the oil tank. When I spoke with the broker, he stated that the company would have never approved of a mortgage on a home with a buried oil tank.

As a broker, I’ve seen too many deals go bad over buried oil tanks and the arguments over who is responsible, indemnifications and possible long term effects.

Over the last year, I have heard that more and more insurance companies are unwilling to issue homeowner's insurance policies for properties that have an underground oil tank.

Oil tanks, usually made of steel, are prone to rusting. Rusting leads to leakage which can lead to pollution of soil and groundwater. The life of most oil tanks is somewhere between 10-15 years when they are buried. Some can even last as long as 20 years. Any longer than that, and you are taking a big risk.

The cost to remove the tank varies anywhere between $2,400-$3,600. If remediating an actual leak, the cost will be much more.

Due to the potential problems with the tanks, many home buyers are putting a contingency in their purchase and sales contract requiring the seller to have any underground oil tanks removed before closing.

Certain governmental programs actually provide grants to help homeowners remove their oil tanks and install new ones. Funds do run out quickly, but check with your oil tank replacement company, as most will help you obtain the funding.

Each town and village has its own rules and regulations when it comes to oil tanks. Some communities no longer allow a homeowner to decommission an oil tank — instead, they must be removed. Others allow you to abandon the oil tank. Some mortgage companies, however, will not approve a loan on homes with buried oil tanks.

So what to do?

Before you put your house on the market, check your home insurance policy and make sure you have added a rider to cover for oil tank spills of a decommissioned tank. This is different from insurance coverage of pulling an active tank.

If you want to be completely proactive, pull the tank before you list your house. This will wipe away any unforeseen delays if something is found because it can take a few weeks to a few months to rectify and you don't want to lose a buyer or be left in limbo in the meantime.

Also, get estimates. Be prepared to pull the tank if any issues are found. If the oil tank is pulled and oil is found in the tank or somewhere around the tank, the soil may be contaminated. If an oil tank fails, the New York State Department of Environmental Conservation will be notified, and there will be a record.

If it's more than just a little leak, a homeowner can face a cost of tens of thousands of dollars and is looking at months to resolve the issue. Please don't believe it's not possible to find oil in a decommissioned tank. Many homeowners are amazed this is even possible, but it is. Unfortunately, the oil tank may not have been cleaned or inspected properly.

Cover yourself and remember a decommissioned oil tank doesn't mean a safe one and can cost you dearly later in more ways than one. Really ask yourself whether is it worth waiting for that buyer who will accept an underground decommissioned tank, especially if it isn't insured. 

While there is no law against the transfer of property with an underground oil tank, it is increasingly difficult to do so. Even properly decommissioned tanks run the risk of having leaked at some point in time. The cleanup of contaminated soil is the responsibility of the homeowner — regardless of when the leak occurred. 

Bottom line: if you have a tank, take it out or make sure you are properly insured!

The cleanup process can be long, costly and complicated, even with a small fuel leak. Your insurance policy and community regulations will dictate how the cleanup must proceed, and the combination of these rules can uniquely affect individual properties.