The Risk of Buried Oil Tanks

I personally scan all properites for my clients for their protection.

What is a buried oil tank?

Many homes in Greater Victoria built before 1959 were originally heated with furnace oil. When natural gas became available, the furnace oil storage tanks, which were normally located underground at the front of the home, were abandoned and sometimes filled with sand or capped off.

Tanks rust, why were they buried?

The BC Fire Code at the time required all fuel storage tanks to be buried underground - this was the law.  The environmental impact of the tank being buried wasn't taken in to consideration.

My house was built after 1959, do I still need a scan?

Depending on the history of the area (is it in a new subdivision or older area but on a newly created lot), it's hard to say.  I know of a home that was built in 1967 and the previous owner decided to remove the oil tank from the basement and bury it in the front yard to create more interior space.  That tank was eventually removed in the early 2000s.

I know of a home built in 2012 that most likely has a 656 gallon oil tank buried in a portion of the backyard that onced serviced the home next door prior to the land being subdivided.  The older home's property was scanned and the tank on record was never accounted for - but I found the fill pipe leading under the fence to the neighbour's property.

The cost of scanning a property is not overly expensive in the overall home purchase or sale process.  Its best to be safe than having to worry about potential future liability.

Why do they need to be removed when I buy or sell a home?

Abandoned buried oil tanks start to corrode and rust over time.  The remaining oil can then leak out and flow onto the rest of the owner's property, the neighbour's property, in to storm sumps and waterways, resulting in contamination of soil and water. Apart from the environmental impact on the property and community, the owner can face substantial legal liability under various statutes and bylaws for such contamination.

Who is responsible for the removal of a buried tank?

The responsibility for the removal of the buried tank and remediation of any contamination falls on the current property owner.

The costs of such removal can be high depending on if there is significant soil contamination. The costs can be exponentially more the longer the tank remains in the ground and continues to leak.

In Saanich, Oak Bay and Esquimalt, it is very common to hear of unsuspecting home owners paying upwards of $60,000 to have oil tanks removed because of ground contamination.  In one instance, the ground was so contaminated the neighbour's home needed to be torn down due to a leak from a neighbouring property.

While such cases are rare, it does highlight the need to conduct due diligence when buying a home that may have an unused underground oil tank.

This is where I can help as I have saved my clients over $500,000 in locating buried tanks before they purchase their property.

As a Buyer, what are the Seller's obligations?

The seller will provide prospective buyers with the Property Disclosure Statement ("PDS") that can disclose of a number of potential defects, including the presence of an underground oil tank. If the seller declares that the property does not (to their knowledge) contain an UST and/or is not contaminated, which later proves incorrect, the seller can be liable. 

I always ensure the PDS is expressly stated to form part of the purchase contract. If there is a statement that there is no UST, then this becomes an actual warranty of sorts.  That way, if a buried oil tank is discovered on the property the seller will be liable for breach of contract. 

Similarly, if the seller stated in the purchase contract that there is no contamination at the property, the seller will be contractually liable to the buyer if contamination is discovered. Courts have held that sellers have a duty to disclose a latent defect that could be dangerous or a hazard to human health and failure to do so make them liable to the buyer for damages.

Buyers should be advised to make the offer subject to a satisfactory inspection that satisfies the buyer there is no buried oil tank and that the property is not a contaminated site.  

The buyer should also put in another condition precedent into the contract that if there is an UST, the offer is subject to the seller arranging, at their own expense, for the UST to be drained and removed and for the soil to be assessed for contamination and, if contaminated, the seller will ensure the soil and groundwater is fully remediated in compliance with all applicable statute, bylaw and BC Fire Code requirements.

The contract should also provide that it is a fundamental term of the contract that all the work will be done by a qualified tank removal contractor and that the seller shall provide to the buyer on or before the completion date all necessary written certificates and reports from the tank removal contractor and the fire authority that all work was completed in compliance with the applicable statutes, bylaws and BC Fire Code.

A buyer should be strongly advised, even in the face of competing offers for a property, to not remove any conditions without the UST and remediation work having been completed properly by the seller. Similarly, the buyer should not agree to take on the responsibility of the removal of the UST and the remediation of any contamination in exchange for a price reduction without fully realizing the potential liability that would ensue upon becoming the new owner.

As a Seller, what can I do to protect myself?

You cannot, as a seller, hide from the potential liability of a buried oil tank.  If you purchased your property and the previous owner did not disclose a buried tank to you, or your Realtor at the time did not properly advise you in investigating this, there is legal recourse available to you through the courts.  A number of local lawyers specialize in oil tank disputes when they involve previous owners.

The best thing to do is get ahead of the problem, don't buy a home with a buried tank on it.  If you happen to find one or are made aware of one during the sale process, it is recommended that it is removed prior to listing.  

Unless a prospective purchaser is willing to acknowledge the presence of a buried tank and is puchasing the property knowing this fact, you'll be on the hook for potential future costs if there has been any leakage.

The seller has provided a letter from the Fire Department saying there isn't a tank on the property. Do I still need to investigate?

YES!  Fire department records and letters from other tank scanning companies should NOT be relied upon if you are thinking of buying a home - we need to do our own research.  

I have seen the City of Victoria Fire Department provide plenty of letters to customers, (for a fee as well!) stating that they do not have records of oil tanks in their files....but....I've found records in their files!  Letters from fire departments and tank scanning companies are not worth the cost or even the paper they are written on in relation to being reliable enough for you to make an informed decision.

What about tanks that have been rendered inert? Are they ok?

This is another example to support getting tanks out of the ground as quick as possible.  In the recent past, tanks that were "previously rendered inert" (which meant they were exposed, cut open, pumped, cleaned and filled with sand) were allowed to be left in the ground and, at the time, considered propertly remediated.  

However, as time went on and environmental regulations tightened, they now have to come out of the ground as well.  There are even cases of previously rendered intert tanks having $15,000+ worth of contamination underneath them.  Do not purchase a home with a rendered inert tank still on it - have it removed ahead of buying or selling a home.

What about insurance and mortgage implications?

For residential purchases, lenders will normally insist, before approving any funding commitment, that the buried oil tank be removed in accordance with the applicable statutes, bylaws and BC Fire Code and the soil has been tested for contamination and remediated as necessary.

Buyers should not remove any financing condition until they receive written confirmation that the lender has approved of the UST removal and remediation process, is satisfied with all required reports issued by the tank removal contractor and is still prepared to provide mortgage financing for the purchase.

Buyers and sellers will not be able to obtain financial protection from a residential title insurance policy as the policy will have exclusion for any environmental damage, including that caused by a leaking oil tank, even if the owner had no idea the oil tank was there.

Are there any exceptions to leaving a tank in the ground?

I've personally scanned hundreds of properties and located oil tanks.  Only in two cases were tanks (or a portion of a tank) allowed to remain in the ground after they were pumped out.  

A very limited exception may be granted by the fire department where the removal of the UST is impractical because it is located under a permanent structure or its removal would endanger the structural integrity of nearby buildings or protected trees. 

Interested parties would still have to render the tank "inert" in accordance with "good engineering practices." This includes arranging, at their own expense, the remaining oil to be pumped out, the tank to be filled with sand and all piping to be capped, as well as arranging for the removal of contaminated soil and replacing it with clean fill. 

In addition, written verification of such work must be provided by a licensed contractor to the fire department or Ministry of the Environment.

How are buried tanks located on properties?

There are a number of different ways people search for buried tanks.  The most common way for Realtors to investigate the potential for buried tanks is to call the local fire department to see if there are any records and/or to reach out to one of the local utility scanning companies to do a search.  Some of these searches are free and only use a simple metal detector.  If you're being told that is sufficient, you're not being given good advice as a buyer or seller.

When I do my buried tank research, I reach out five resources including the local fire department and a tank scanning company.  I also have my own equipment to scan properties as a second set of eyes.

Equipment used to detect tanks range from deep seeking metal detectors, Ground Penetrating Radar, conventional metal detectors and magnetic location devices.

How are buried tanks removed?

Property owners should always hire an experienced and qualified contractor in oil tank removal. If an underground oil tank is found and has to be removed, then, upon obtaining a tank removal permit from the applicable municipal fire authority.

The area is excavated and the top of the tank is exposed.  It is then cut open and the top removed.

The remaining oil has to be pumped out and taken to an approved recycling/disposal facility and transported with a properly insured company.

Once the tank is pumped empty, it is wiped clean by hand on the inside, cut in half and the two parts are removed with an excavator.

The soil must be assessed for contamination. If contamination is present, soil and groundwater must be properly remediated at which time the site is secured and shut down until additonal permits are applied for.

The property owner must obtain a report, and photos, from the tank removal company, detailing the removal process, what was pumped out of the tank, a receipt from the facility where the tank was taken to and the amount of soil brought in. 

The report should confirm that the tank was removed in accordance with all applicable statutes, bylaws and the BC Fire Code and, in the event of contamination, that the soil and groundwater have been remediated in accordance with the standards prescribed in the EMA and further testing is not necessary. This report can then be provided to prospective buyers in the future as evidence that the UST has been dealt with.

MLS® property information is provided under copyright© by the Vancouver Island Real Estate Board and Victoria Real Estate Board. The information is from sources deemed reliable, but should not be relied upon without independent verification.