Advice on Underground Oil Tank filled with Sand

[Carlos Rodrigues]

Goof afternoon BP, I have a deal that come to me but I have one concern. I'm planning to put a offer on this one multi in my area, Kearny NJ. I do have a concern with a underground tank filled with sand. What should I do concerning this? I would like it removed and a soil examination. Could/ should I add a contingency claus on the contract? If so how would I word it? Also how much would it cost to remove one? Anyone ever dealt with a similar situation? 

Thank in advance!

[Tim Pagano]

Ok I've dealt with leaky oil tanks across the river in Nutley.  If you know there is a tank in the ground they you can bet that there will be oil in the ground with a pretty high reliability.  When they pumped out the old oil then filled that tank with sand they never got out all the oil.  Most of the companies that were doing it were fly by night concerns and reselling the old heating oil.

You need to be informed about tanks here in NJ.  It's no joking matter.  I'm not afraid of them but you need to exercise caution.  Good NJ RE attorneys are very familiar with oil tank issues.  It is not a matter of if an underground tank is going to leak in our area but when will it leak.  Surprisingly the older tanks installed prior to the 70's are more durable than the thinner walled tanks of the 70's and later.  Look at how old your house is.  It might give you and indication. 

Second, find a tank service that does a core sample.   I had one home where we did a pressure test on the oil tank and it passed.   The subsequent buyer did a core sample soil test and found oil in the ground.  That held up the sale for over 6 months.  

Let's talk about how you are going to CYA.  First during your inspection you have the right to do a soil sample test.  Get it.  Also sweep the property for any additional tanks in the ground that the previous owner didn't find or doesn't know about.   Now the current owner will not want you to poke into the ground because that could open up a whole can of worms for the seller if things go wrong.  They will offer to pull the tank and re mediate the problems if there are any.  Then they will most likely turn to the lowest bidder and in the middle of the night they will pull the tank and forget to deliver all the proper documentation. To protect yourself you're going to need a copy of what the post cleanup soil sample test results at closing, a document that proves that they properly disposed of the contaminated oil and sand that was in the old tank, a document that delineates the proper disposal of the tank itself.   Your attorney should have these documents as part of his due diligence.  

Let's talk about cleanup costs.  The ground underneath Kearny is most likely a combination of clay and shale which is a good thing because the oil doesn't spread too far in relative terms.  The average cleanup a few years ago ran about $25k.  As you mentioned though that's not a set in stone kind of cost.  Also if the tank is underneath a driveway there is the possibility that it's spread onto the neighbor's property and that will need to get cleaned up as well.  

With that said you need to do a bit of homework because your test will reveal a great deal good or bad.  Here's the official NJ site that deals with homeowner tank issues.  

http://www.nj.gov/dep/srp/unregulatedtanks/

Learn it and love it.  Underground oil tank removal  can be a process.  It can be inexpensive or expensive.  Do not take on a project like this unless you know you have the funds to cover lifting the neighbor's house and cleaning underneath it.  I'm sure the current owner hasn't had oil tank insurance for years and not all insurance companies cover leaky tanks.  

I can guarantee you that every NJ RE attorney worth his salt has in their due diligence a line covering this sort of liability.  You want the paperwork trail available when you sell this investment.  I'm not saying that you shouldn't do the deal but you don't want someone else's headaches.  It's all just a paper chase, but you want the expense to land on someone else not you.  Be patient with the seller.  If you have any questions PM.