Underground oil tank found...risks?

Question

I'm under contract on a rental house in Teaneck, NJ that has an under ground oil tank. Apparently, that's fairly common and legally it's on the seller to remove. Curious what the risks are. Seller has agreed to credit the purchase price for the removal and reconstruction of the patio that exists above the tank.

Have you encountered this? How should I mitigate the risk of contamination? Or will this be a big headache and I should walk while we're still in inspection?

My real estate agent says this is the 7th deal she's done in the area in the last year that's had an oil tank that needed to be removed. My uncle says he had a commercial property in Indianna that had oil contamination that has cost him over $1M over the years to continue dealing with. What are your thoughts? This will be my first rental, the numbers seem to work, interest rate was locked in 3 weeks ago.

Craig Clinton · Answer

Underground oil tanks are common in NJ. That's great that they are willing to pay for the reconstruction of the patio. Some sellers fight back on that. Odds are there is no contamination.....BUT, do not close without having the soil tested because it might be contaminated and that could possibly be VERY costly. Have you lawyer put in the rider to the contract that you have the right to walk away from this if contamination is found. Have the seller pay for the removal, test the soil, and wait for the results. If the soil is contaminated, its the seller's responsibility to remediate or give you a credit to cover the remediation (again, have it in the rider that the seller is responsible). Unfortunately, if it's contaminated, remediation and the state approving it will take a while.

Isaiah Miller · Answer

Im glad I saw this post when I did. I am also under contract on a rental house in Paterson, NJ that has an under ground oil tank. I've scheduled my inspection this week that also includes a tank sweep.

Dwayne Poster · Answer

Try finding an insurance company that will cover with a buried tank.

Michael Brattelli · Answer

@Lindi Nguyen I deal with underground oil tanks a lot in NJ. I recently bought an investment that had one. Ask the seller to remove it. Under NJ law, they need to get permits to remove it. Once the tank is pulled they NEED to test the soil to make sure there isn’t contamination that exceed epa limits. They take pictures and then the town comes out to confirm it’s been removed. Once you have passing soil results sent to the township they close the permit. Typically it takes 2 weeks for the permit, 1 day for removal, 2-3 weeks for soil results. If the soil results fail then they need to see how much cleanup is involved. This is not legal advice but I personally would not close until everything is passing and permits closed. Most of the time the tanks aren’t leaking but if they are it could be big $. I’ve seen cleanups in the $170k-$375k range. If you’re in Teaneck you probably have an attorney involved. Let them do their job and listen to them. You can always ask the seller to pay for your rate lock extensions.

Dave Skow · Answer

@Lindi Nguyen- instead of the seller credit - have the tank removed and patio replaced BEFORE closing

Lindi Nguyen · Answer

@Matthew Crivelli Agree, thank you for validating my thoughts. @David Smith Yes, we will be pushing on that liability to do so and to treat any potential leak on the seller. @Dwayne Poster Wow, thanks for sharing that experience. It helps confirm that I do not want to be the one assuming that risk. @Caroline Gerardo Thanks for bringing up these concepts. I will look into relock fees asap!

Caroline Gerardo · Answer

This process will take time. Don't keep extending your rate lock. Get the rate lock policy in writing. If you cancel the lock today and relock is there a fee? (assume bank wins if lower you cannot go down for free) If lender charges a relock fee then go to another lender.Research what the ownership history of the property and neighbors was going back as far as title records allow maybe also resource library and newspapers. Was there a garage there repairing/ plating/ gas stored/ paint dumped...

Dwayne Poster · Answer

I recently passed on a sale where the seller refused to remediate a tank. He finally sold for 100k under to someone who would assume it. A simple dig and haul runs around 5k, but we’ve had cleanups here that have run 150k +.

David Smith · Answer

Just remove it and see if it is leaking. How much is rent vs sale price

Matthew Crivelli · Answer

The state will dig until they find zero contamination in the soil tests they preform. So really no one knows what the true cost will be until they can figure out how bad and how long the tank has been leaking. Could be painless, also could be a nightmare.