Have you been seeing the news about the massive oil spill that is threatening the Gulf coast? As I watched the events unfold on TV I was totally unaware that as a real estate investor I could also experience an oil spill in my back yard. Wow! What an eye opening experience when I became aware that this actually happens more than I could have ever imagined.
As active investors we may be purchasing older homes to renovate as buy and hold rentals or to sell to a homeowner. Few of us are actually aware of the serious implications and liabilities from old underground heating oil tanks on the property ,even if the property owner has no prior knowledge of their existence.
There are eight things I have learned and want to share with you so you will have the information you need to know before purchasing or selling an older home that may have previously used heating oil.
1. Always assume that older homes used oil to heat their homes in the past. Most homes built prior to the mid 60′s used an oil burning heating system with either an underground tank or an above ground tank.
2. Ask your home inspector or contractor to locate any underground or above ground tanks on the property and to note this on the inspection report. Old copper lines may also give clues that at one time heating oil was used. The existence or possibility of buried tanks should be addressed prior to purchasing the property. Even though the seller claims no knowledge on the disclosure form, it would be wise to add this as a contingency on the offer to purchase.
3. Old tanks can leak oil over time contaminating the soil and ground water. This contamination could go on for years before it is detected. If there is evidence of an underground tank you, as a potential buyer, should request that samples be taken to determine if the property has been contaminated by the oil tank.
4. If contamination is discovered, the property can not be sold until the contamination has been cleaned up to State standards. If a complete clean up is not possible then a Notice of Residential Petroleum must be filed with the county Register of Deeds office prior to the conveyance of the property. This will remain on the Deed. (Consult your county and state requirements).
5. Underground oil tanks that have been previously removed may still create a liability for the current owner if there is no evidence that soil samples were taken . The current owner is responsible for any cleanup.
6. Simply filling abandoned underground tanks with sand or foam will not relieve the owner from responsibility for contamination. A simple preliminary inspection usually costs about $200 and takes about an hour. Check your local area for companies that specialize in residential testing to advise you on the appropriate course of action. In most cases tanks should be removed from the ground and the soil tested. Only then can you assure a buyer that you have taken appropriate action to correct any problems.
7. Pay attention to the use of surrounding properties. Old gas stations or properties previously used for various commercial uses could potentially create problems with environmental issues and also problems directly affecting the value of your property also.
8. The cost to the owner can be several thousand dollars to simply remove the tank from the ground. If contamination is verified then the cost could easily be in the $10,000 range, depending on the severity of the problem. Check with your State for any financial assistance available. In North Carolina there is a Trust Fund which can reimburse in many cases up to 100% of the eligible cost for contaminated soil removal and any required assessments.
We are all becoming increasingly more knowledgeable about environmental issues, abandoned underground oil tanks and potential hazards from leaks. It is more likely that the seller will have to correct the problem prior to the sale being completed. These issues can have a negative impact on your ability to sell a property and can decrease the value as well. Knowledge of these often overlooked problems can prevent you from having an oil spill in your backyard and a real estate disaster.