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In the Region/ When Buying a House

September 9, 2001, Sunday

In the Region/ When Buying a House, Beware the Buried Oil Tank


LET’S say you are a buying a home and let’s say, despite the current seller’s market, you find a house that you truly love and can afford. The inspector you hire reports the house is perfect. Your hand is hovering over the dotted line. And then suddenly . . .

Fear paralyzes you at the mention of a dark presence beneath the property. It’s an oil tank.

”The situation is very common in New Jersey,” said Mr. Lieberman of Princeton, a former state deputy attorney general who now practices real estate and environmental law. ”Panic, even hysteria, is pretty common, too.”

The state Department of Environmental Protection oversees about 1,800 residential oil tank cleanups annually. It does not keep tabs on the number and location of residential tanks. Larger commercial tanks must by registered and regularly inspected, but residential tanks of less than 1,100 gallons are exempt from the requirement.

Still, Mr. Lieberman said, ”it’s a fact that older homes with underground steel tanks have a good chance of developing a leak.”

”There are a lot of older houses in New Jersey, and many have buried tanks,” he said. ”Until the 1960’s people weren’t generally aware of the risks to the environment, so that’s what was done. Everybody buried their tanks.”

Today, the risk of soil contamination from an underground leak — and the high cost of cleanup — is well established. A buyer is not being foolish to be concerned if a tank is found, Mr. Lieberman said. The cleanup, under $10,000 on average, can easily go over $100,000 if ground water is affected.

Yet he asserts that uncertainty over an oil tank should never kill a deal. If a deadline for closing looms without sufficient information available, Mr. Lieberman advises clients to ”get creative,” i.e., negotiate.

Buyer and seller can agree, for instance, that both will have some liability if contamination is found after the sale.

They can also agree on extra tests for soil contamination before the sale and to put money in escrow in case previous leakage is discovered after the sale.

If no agreement is made before a sale is closed, liability is transferred to the new owner. Sometimes a previous owner can be sued for damages, Mr. Lieberman said. But the key to averting legal imbroglios, according to several specialists, is to have underground tanks checked as thoroughly as possible before the sale. Maybe even checked twice.

WHILE commercial-size tanks are regulated by the state Department of Environmental Protection, which requires inspection every three years, underground home heating oil tanks are ordinarily inspected only when taken out of use. A 1998 state law requires such tanks to be officially ”abandoned.” Before a tank is filled with sand, gravel or foam, it must be checked for leaks.

That inspection duty falls to local authorities, usually town health inspectors, who issue certificates of legal abandonment.

Even when the paperwork is in order, though, ”buyer beware” still applies, said Christopher Tiso, owner of a large inspection company operating in New Jersey, New York and Connecticut.

Mr. Tiso said his company, ATS Environmental, was often called in when a potential buyer received legal abandonment papers and perhaps also the ”remediation” contract from the company that closed the tank, but wanted to double-check. ”That’s smart,” Mr. Tiso said.

For the last few years, he said, ATS has been finding leakage in 30 to 40 percent of cases where a lawfully abandoned tank is rechecked.

”I can remember the first time,” Mr. Tiso said. ”It was a woman buying a house with her husband, several years ago. Everybody said, ‘You’re crazy to want a test,’ but she insisted. Even I tried telling her ‘Don’t use your money unwisely.’ We looked, and there was so much petroleum in the ground it was unbelievable. They had to remove the tank with all the sand in it.”

”It was a big, big mess,” he said, ”and I’m sure it wound up costing a huge amount.”

Mr. Tiso is quick to say he does not suspect foul play by individual sellers, local inspectors or tank closing companies. Many times, he said, sellers will not know of buried tanks because they were left abandoned by previous owners.

As for leaks, Mr. Tiso thinks they are just plain hard for any inspector to see with the naked eye. Inspections are usually done with the top half of the tank removed and the bottom half still in the ground.

”Often, pinhole leaks in tanks are virtually invisible against the dark background of the soil,” Mr. Tiso said.

The American Society of Home Inspectors recommends professional inspectors be used for precisely that reason. ”If you want more than casual visual inspection, tank tests as well as removal or abandonment require that you use an appropriate expert,” says Daniel Friedman in an article available at in the Heating Systems section.

A home buyer should choose the expert carefully, society officials emphasize. For one thing, tests may be performed for various purposes, requiring various levels of expertise and equipment.

There is a very simple test to see if water has invaded a tank. (Water combines with sulfur and other components in oil to become acidic and corrode metal.) There are air pressure tests, tracer tests, core soil boring tests, electronic probes, sonic probes, tests to measure the rate of corrosion, tests that distinguish whether a leak is in the tank or fill pipes (and tests that don’t make a distinction), tests that require 10 to 14 days for results, and tests that produce answers in two hours.

Remedies that inspectors might be predisposed to recommend is another issue. Mr. Tiso’s company performs inspection and tank location services only — and not tank abandonment — to avoid any possibility of conflict of interest. ”A lot of these mom-and-pop companies that sprang up in the mid-90’s seem to always say the best thing to do is remove the tank — and then they do the work,” he said.

On the other hand, R. J. Walsh Associates of Allentown, a well-established company, uniformly recommends that underground tanks be removed, noting the adverse effect a tank’s presence can have on property value, the often expensive tests to tell if the tank has leaked, and the fact that some insurance companies will not write homeowner policies for properties with tanks, or else exclude coverage for cleanup costs.

Many real estate experts strongly recommend insurance coverage for oil tank leaks. A few years ago, after some homeowner policies began excluding it, heating oil companies started to offer coverage for customers. ”They’re cheap,” said Mr. Lieberman of these policies, ”but there tend to be a lot of requirements attached. Usually they cover only the tank, and not the pipes. You may have to stick with the company for a year after closing a tank.

”I advise buying insurance, though,” he said. ”You just don’t want to be bare.”

GIVEN all these issues, which way should a home buyer go when faced with installing a new heating system? Mr. Lieberman tells clients he thinks the best choice is an aboveground oil tank, situated in a basement and surrounded by a low brick or cement berm. ”That way,” he said, ”if there’s a leak, it’s obvious, it’s contained, and it’s easily cleaned up.

Fiberglass and coated steel tanks have been developed that can be warranteed for 30 years, the New Jersey Fuel Merchants Association notes. The standard life of a buried tank is 10 to 20 years, depending on the level of the water table and other underground conditions.

But even if a tank is reasonably new and still functioning, it should still be inspected before sale, in Mr. Lieberman’s view. ”What you don’t see can hurt you,” he said. ”You’re buying hidden blemishes along with the gorgeous house and yard. Find out what you can.”

Copyright 2002 The New York Times Company

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