Property Sales with Underground Oil and Gas Tanks

When the sale of property involves an underground fuel tank, the buyer should consider having the tank tested to avoid unknowingly taking on an environmental hazard that may require costly remediation. Many lenders or insurers will not enter the transaction unless a passing test result is provided. Such underground tank tests are not generally part of an engineering inspection or home inspection and must be performed by a specialist. These may often be done by a local fuel company.

Failure to test at the time of purchase may transfer the cost when the buyer sells the property. Typical remediation costs may be $3000-$10,000, so liability could be significant.

Tests typically include a pressure test or a soil test. The least expensive test is generally a pressure test of the underground tank, although there are risks with pressure tests, as they may cause the tank to rupture. A cautious seller may not permit such testing procedure.  A soil test is more costly, but generally the more desirable procedure. The cost may be as much as $3,000. If a leak is found, it must be reported to the DEC or DEP.

The issue of underground tank testing is included at the time of contract, setting forth an appropriate contingency and who will pay for the test, and even the negotiated remedy if the tank fails the test.

A typical remediation is to abandon the tank, fill it in and install an above-ground tank. The seller may also consider agreeing to a price concession in lieu of testing or remediation.

An experienced attorney can guide a buyer or seller though this and other real estate issues, mitigating the client’s risk and maximizing the economic benefit of the transaction.