One of the biggest unforeseen issues for Detached Houses is the potential of an underground oil tank somewhere on the lot. Most Buyers aren’t aware of this issue as they start looking for their dream home, but it’s an issue that requires some further research and an appropriate response in a contract. The existence of a buried oil tank can be easy to deal with, but there is potential for it to turn into an expensive nightmare.
What is an Underground Oil Tank?
An oil tank is exactly what it sounds like – a tank of oil that was typically buried in the backyard to provide fuel for the oil burning furnace. These tanks were made of galvanized steel and would be filled when needed by tanker trucks.
These tanks were used up to the 1960s, at which point the Lower Mainland switched to gas furnaces and started decommissioning the tanks. At this point, some tanks were removed but most were drained, left in ground and all but forgotten about. Some oil tanks were above ground which made for easy removal.
If a tank is found, it must be removed with appropriate municipal permits using the services of an accredited Oil Tank removal company.
It is possible that a lot may have had 2 underground oil tanks, but that is a very rare scenario.
What’s the Issue with Underground Oil Tanks?
The big issue with oil tanks is the cost of removal and the potential soil contamination, in addition to mortgage considerations.
The Owner of the property should be liable for the removal and remediation, though speak with a Lawyer if you need current legal advice.
The fact that the current owner should be liable is why you, as a potential Detached House Buyer, needs to ensure that any possible tanks are discovered prior to you taking possession of the home. This ensures the current owners pays for and handles the removal and any issues.
(1) Mortgage Issues! Most Mortgage Lenders won’t lend on a home unless the tank has been removed. Ensure you clarify with your Mortgage Lender if they’ll lend on a property that has an oil tank discovered during your due diligence that won’t be removed until after the Completion Date.
(2) Insurance Issues! Most insurance companies won’t insurance a house with an oil tank, or they will exclude any issues caused by an underground oil tank. If a tank is discovered during due diligence but won’t be removed until after the Completion Date, ensure your understand your insurance options.
(3) Contamination Issues! When oil tanks were decommissioned, the tanks were drained and left in the ground. As the tank aged over time, it’s possible that the tank corroded and started leaking oil that can contaminate the soil nearby, and worse, water ways or sumps The City of Vancouver (and other municipalities) have strict rules with regards to the removal to ensure proper safety and environmental standards. If the soil is contaminated, especially if the contamination was significant, it could end up costing you tens of thousands (there have been cases where it has cost a homeowner over a hundred thousand dollars) to remove the tank, remediate the soil and potentially replace decks that were removed to make way for the tank removal. There is potential for the oil to leak onto your neighbours property, storm sumps and waterways.
(4) Detection Issues! Oil tanks can be difficult to detect given the placement of the tank. Over the decades since the oil tank was last used, many owners owners may have built decks, driveways patios or gardens over these tanks which makes detection tough. Some oil tank scans can’t see underneath these items so your Oil Tank scan might give you a false negative.
How do you Know if a Property has an Underground Oil Tank?
There are a couple ways to figure out if a property has an oil tank. Which method you use depends on your desire for certainty and the Seller’s situation.
Tanks were typically buried within a few feet of the house and a few feet deep, though they can be anywhere on the property.
There are many accredited oil tank companies that offer a few different types of tests.
(1) Visual Review and and Metal Detector – This method use a metal detector to find a tank, in addition to a visual review for clues that an oil tank was once on site (vent pipes, filler pipes, feeder lines, etc). These methods are the cheaper option and quite common, but aren’t as thorough in terms of detection.
(2) Ground Penetrating Radar – This method sends high frequency electromagnetic waves into the ground to detect any anomalies in the strength of the reflected wave. GPR scans are performed on the entire property (all debris and unattached items should be moved out of the way) and can scan 8 feet deep.
Many Sellers will have an oil tank scan done prior to listing their property, but I find they often choose the cheaper method. If you’re a potential Buyer, it’s my opinion that a GPR scan is worth the extra money given the higher level of certainty.
What is the Process to Remove an Underground Oil Tank?
If an underground oil tank is found, you’ll need to obtain a quote from a few different oil tank removal companies, apply for a municipal permit to remove the tank (which will require inspections by the City), dig a hole larger than the tank (which may require removing a deck, garden etc), emptying any remaining oil in the tank, searching for leaks and testing the soil, pulling the tank out and replacing any contaminated soil with new soil. The entire process can be done in a couple days if there is no contaminated soil, but the process gets a lot more complicated if contaminated soil is found.
Here is some information from the City of Vancouver about Underground Oil Tank Removal.
How Can Buyers Protect Themselves?
Anyone purchasing an older detached home in Vancouver should ensure they are doing their due diligence to detect a tank prior to removing any conditions on your offer, but you can also include specific clauses in the contract to ensure that if a tank is found after the Completion Date, that the Seller is responsible for paying for the removal and remediation.
Keep in mind that even if you have a clause in the contract in which the Seller pays for any issues, you may not be able to find the Seller after the Completion Date (what if they moved to a different country? changed their name? etc) which is why you want to do as much due diligence as possible prior to the Completion Date.
Some Sellers may also choose to lower the purchase price in exchange for the Buyer to take full responsibility for removal, but think very hard about that scenario as the cost to remove can vary significantly from a few thousand dollars to over a hundred thousand dollars! Don’t forget that your mortgage lender and insurance broker may not be okay with the Buyer handling the removal.
How Can Sellers Protect Themselves?
Even if the Seller us unaware of an underground oil tank, it is possible that the Seller is responsible for the removal and remediation years later, so it is in the Sellers best interest to have a scan done prior to listing, and dealing with the tank immediately if there is one. Not only can dealing with a tank sooner rather than later decrease the odds of a major issue, but it can prevent an unexpected and costly phone call a few years later.
Here is some information from the Province of BC regarding Site Remediation Liability for Underground Oil Tanks.
I have companies to recommend for both detection and removal, so ask me if you’re looking for a qualified and trustworthy company and make sure you understand your rights and responsibilities.