A Real Estate Dilemma: What to do With Underground Oil Tanks
Underground oil tanks are still around. Advice on what buyers/sellers/owners might want to consider doing to protect themselves.
While there is no law against the transfer of property with an underground oil tank, it is increasingly difficult to do so — especially in a buyers' market!
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.
In other words, if you buy a house with an underground tank and a year later you pull the tank to convert to natural gas and there is a leak, then YOU are responsible for the cleanup. There will be no going back to the prior owner for help with the cleanup and there will be nobody to blame!
And the subject of underground fuel oil tanks is one that I run into more often than people might think. These are the kind of questions and comments I hear:
- "My oil tank is underground and it has insurance; why do I need to remove it?"
- "I am negotiating a contract on a home with an underground tank, what do I need to know about it?"
- "There is a decommissioned tank in the back yard, all the permits are on file at the township office."
- "Can we ask the seller to pay for the soil test?"
- "We haven't had any problems with our tank, we are not going to take it out of the ground."
When I first started in real estate, the only thing I needed to know when selling a home with an oil tank was the number of a reputable inspection company. We held our breath during the tank inspection and exhaled when the soil reports came back clean.
Then, during a transaction on West Oak Street in Basking Ridge, we were days away from closing and my client (a first time home buyer) called me in tears: "I just got a call from my homeowners’ insurance company — they have a new policy against insuring homes with underground storage tanks." That was the beginning of the end!!
Then, about five years later, I had clients in attorney review for a purchase of a bank-owned property with an oil tank that had been properly decommissioned with permits back in 1997. While we were waiting to see if the bank would remove the tank, we did some research about homeowners insurance. And we learned that although a home with an underground storage tank is eligible for a standard homeowner’s insurance policy, that policy is with the stipulation that contamination issues will not be covered.
As a current homeowner with a tank, you may be grandfathered by your insurance company. But some companies, such as mine (N.J. Manufacturers), recently have sent communications to homeowners offering that a special rider be purchased to cover potential contamination issues.
As a buyer, it is in your best interest to include a clause in the contract stipulating that the tank be removed. As a seller, it makes the most sense to remove the tank prior to listing the property.
Removing it before listing the house eliminates the issue completely. If you, as a seller, wait for a contract, you could hold yourself up waiting for soil test results.
While I don’t have any specific data around how many underground storage tanks still exist in Basking Ridge — decommissioned or active — I can tell you that I come across this issue very frequently.
I complete between 20 and 25 real estate deals a year and show many houses in the process. I’m willing to be that almost half of the homes that are (or had been) fueled by oil still have tanks underground (decommissioned or active). It is possible to not know if you have a tank. Sometimes it is possible to see where a tank may have fed into a house.
There is funding available from the state for removal costs as well as for costs associated with clean up. For more information on NJDEP funding, go online, or call 609-777-0101. Another resourceful website is the New Jersey Economic Development Authority. (Under the "Applications" tab, click on "Underground Storage Tank Funding Programs.")
What else is happening with Basking Ridge real estate?
There have been 18 contract sales in town since the beginning of the year, and there have been 52 new listings as well since then. The following properties closed during the month of January, comparing the listing and selling price:
23 Hadley Court; $834,900/$815,000
217 Irving Place; $244,900/$230,000
109 Woodward Lane; $319,000/$295,750
203 Alexandria Way; $224,900/$215,000
23 S Dexter Drive; $595,000/$575,000
196 Irving Place; $299,900/$298,000
1 Paine Court; $499,900/$495,000
251 Penns Way; $287,500/$282,250
54 Alexandria Way; $284,500/$275,000
20 Stacy Lane, $749,000/$720,000
441 King George Road; $639,000/$620,000
15 Tamarisk Court; $1,089,000/$999,000
3287 Valley Road; $699,990/$687,500
75 N. Maple Ave.; $525,000/$500,000
49 Spencer Road; $459,000/$465,000
347 Lyons Rd; $769,000/$725,000
14 Rockridge Court; $1,899,999/$1,845,000
378 Grist Mill Dr.; $1,085,000/$999,000
26 Alder Lane; $729,000/$685,000
The statistics published by the National Association of Realtors and Jeffrey Otteau indicate that although December contract sale numbers were down as compared with the same time last year, they weren’t down as far as they were when comparing December 2010 to December 2009. I absolutely believe that we are on the upswing. It is going to take a while, but if you are a buyer looking for your “forever home,” it is a great time to buy!