Can You Sell a House With an Underground Oil Tank in New Jersey?

If you're preparing to sell a home in New Jersey and the house is heated by oil from an underground tank, you may be wondering:

Is having an underground oil tank illegal in New Jersey?

And perhaps more importantly:

Do I have to remove it before I sell my house?

The short answer is no — an active residential underground heating-oil tank is not automatically illegal in New Jersey, and New Jersey does not automatically require a homeowner to remove one simply because the property is being sold.

That doesn't mean an underground oil tank should be ignored, however.

An underground tank can become an important issue during a real estate transaction because of environmental concerns, inspections, disclosure requirements, insurance, financing and, most importantly, the possibility that the tank has leaked.

Here's what New Jersey homeowners should know.

Are Underground Oil Tanks Illegal in New Jersey?

No.

The New Jersey Department of Environmental Protection (NJDEP) classifies residential heating-oil tanks as Unregulated Heating Oil Tanks, commonly called UHOTs.

According to NJDEP, the UHOT program includes residential heating-oil tanks of any size, and an unregulated heating-oil tank may be either aboveground or underground.

The word "unregulated" can be confusing. It does not mean there are no rules associated with the tank.

Rather, residential heating-oil tanks are not regulated under the same state underground-storage-tank program that applies to many commercial tanks. NJDEP becomes particularly important when a discharge or contamination is discovered.

Official source: New Jersey Department of Environmental Protection — Homeowner's Guide to the Unregulated Heating Oil Tank Program

Does an Underground Oil Tank Have to Be Removed When You Sell Your House?

Not automatically.

This is one of the most important distinctions for New Jersey homeowners.

NJDEP specifically addresses this question in its Unregulated Heating Oil Tank FAQs.

NJDEP states that if there is no indication of a discharge, there is no state requirement that the tank be removed.

NJDEP also acknowledges that real estate and other professionals may recommend removal when preparing a property for sale.

Those are two different things.

A seller may decide that removing an underground tank makes the property easier to market, but that does not mean New Jersey law automatically requires removal simply because ownership is changing.

Official source: New Jersey Department of Environmental Protection — Unregulated Heating Oil Tank FAQs

Can You Sell a House With an Active Underground Oil Tank?

Generally, yes.

If the underground tank is actively supplying heating oil to the home's heating system, the presence of that tank by itself does not prevent the homeowner from putting the property on the market or selling it.

However, the practical question is often not simply:

"Is the tank legal?"

The better question may be:

"Will the buyer, insurance company and other parties involved in the transaction be comfortable with it?"

An underground oil tank can create additional questions during a real estate transaction even when the tank is active and there is no known leak.

The Homeowner's Insurance Issue

Insurance can become an important consideration.

The New Jersey Department of Banking and Insurance warns homeowners that pollution liability from leaking oil tanks can become extremely expensive.

Insurance companies handle oil tanks differently. Coverage, exclusions, surcharges and underwriting requirements can vary, and factors such as the tank's age and condition may affect how an insurer evaluates the property.

Therefore, a buyer considering a home with an underground oil tank should investigate insurance availability and coverage early rather than waiting until shortly before closing.

Sellers may also want to review their existing homeowner's policy to understand what coverage, if any, exists for the tank and a potential petroleum discharge.

Official source: New Jersey Department of Banking and Insurance — Information Regarding Oil Tanks

New Jersey Sellers Should Disclose Known Oil Tanks

A seller should not attempt to conceal the existence of an underground oil tank.

New Jersey's Property Condition Disclosure Form specifically asks sellers whether they are aware of tanks on the property, either aboveground or underground, used to store fuel or other substances.

The form also contains questions concerning underground storage tanks, whether a tank has been tested and whether documentation such as test reports or closure certificates is available.

New Jersey sellers also have an obligation to disclose known material defects.

For that reason, sellers should answer disclosure questions truthfully and provide available documentation concerning an underground oil tank.

Official source: New Jersey Division of Consumer Affairs — Property Condition Disclosure Form, N.J.A.C. 13:45A-29.1

Also reference the official New Jersey Seller's Property Condition Disclosure Statement.

What Happens If the Underground Oil Tank Leaks?

This is where the situation becomes much more serious.

NJDEP's primary concern with residential underground heating-oil tanks is a discharge of heating oil into the surrounding soil or groundwater.

NJDEP identifies potential signs of a tank problem that can include:

• Unexpected or unexplained increases in oil consumption
• Water entering the underground tank
• Persistent oil-burner problems
• Stressed or dead vegetation around the tank
• Fuel-oil odors away from the burner
• Oil staining
• Oil or sheen appearing in a sump, French drain, drainage area or nearby water

If a discharge is discovered, New Jersey's environmental requirements come into play.

NJDEP requires notification when a discharge is discovered, and the owner must retain an appropriately qualified environmental professional to investigate and remediate the contamination.

Depending upon the circumstances, that professional may be a Certified Subsurface Evaluator or Licensed Site Remediation Professional.

Official source: NJDEP Unregulated Heating Oil Tank Program

What If the Seller Decides to Remove the Tank?

Some homeowners decide to remove an underground oil tank before listing or during the sale.

Underground UHOT removal must be performed by an appropriately certified underground-storage-tank closure contractor.

NJDEP recommends obtaining quotes from certified contractors and verifying their certifications.

During removal, the contractor and municipal inspector can evaluate the tank and excavation for evidence suggesting that oil escaped into the surrounding environment.

Potential evidence of a discharge can include:

• Holes in the tank
• Soil staining
• Oil contacting soil or groundwater
• Petroleum odors
• Elevated field-instrument readings
• Detectable petroleum contamination from laboratory testing

If evidence of a discharge is discovered, the situation transitions from a tank-removal project into an environmental-remediation matter.

That distinction can significantly affect a real estate transaction.

Do You Need an NJDEP No Further Action Letter If the Tank Didn't Leak?

Not necessarily.

This is another area where homeowners sometimes become confused.

NJDEP explains that for an unregulated heating-oil tank, a No Further Action letter, or NFA, is associated with situations in which a discharge was discovered and remediation was completed.

If an underground heating-oil tank is properly closed, no evidence of a discharge is found and the tank passes the municipal inspection, NJDEP states that an NFA letter is not necessary.

Homeowners should retain all available permits, inspection documentation, tank-removal records, environmental reports and other paperwork associated with the work.

Official source: NJDEP Unregulated Heating Oil Tank FAQs

Should You Test an Underground Oil Tank Before Selling?

There isn't one answer that's right for every property.

A homeowner may consider several approaches before selling:

• Continue using the active underground tank. If there is no known problem, the homeowner may choose to sell the property with the existing heating system.
• Have the tank evaluated or tested. Testing may provide additional information about the tank, although homeowners should understand what the testing involves and discuss the implications with qualified professionals.
• Remove the underground tank. A homeowner may decide that removing the tank and replacing it with an aboveground tank or another heating source could make the property more attractive to some buyers.

Each option has advantages, costs and potential risks.

Before deciding, a homeowner may want to speak with an NJDEP-certified tank contractor, environmental professional, insurance professional and, when appropriate, an attorney.

A REALTOR can help the seller understand how the presence of the tank may affect the marketing and real estate transaction, but environmental, engineering, insurance and legal questions should be directed to the appropriate licensed professionals.

Buying a New Jersey Home With an Underground Oil Tank

Buyers shouldn't automatically assume that the presence of an underground oil tank means the property has contamination.

But they also shouldn't ignore it.

A buyer considering such a property may want to determine:

• Whether the tank is currently active
• Approximately how old the tank is
• Where it is located
• Whether municipal permits or records exist
• Whether the tank has previously been tested
• Whether there have been previous underground tanks on the property
• Whether environmental testing or remediation has ever occurred
• Whether an NFA or other environmental documentation exists
• Whether their homeowner's insurance company will insure the property and under what conditions

Depending upon the property and contract, buyers should consider obtaining advice from qualified environmental professionals during their due-diligence period.

Selling a New Jersey Home With an Underground Oil Tank: Start Early

If you're thinking about selling a New Jersey home with an underground oil tank, discovering the issue before you're days away from closing can make the process much easier to manage.

Gather whatever information you have about the tank.

Look for installation records, permits, oil-delivery records, previous testing, inspection reports and environmental documentation.

Municipal construction records may also contain information about previous tank installations or removals. NJDEP specifically notes that homeowners can contact their municipality and use an Open Public Records Act request to obtain available tank-removal permits.

Then discuss the situation with your real estate professional and the appropriate environmental and insurance professionals before deciding how you want to proceed.

The presence of an underground oil tank does not automatically prevent you from selling your New Jersey home.

Knowing what you're dealing with before the property goes under contract is usually much better than discovering it in the middle of the transaction.

Thinking About Selling Your South Jersey Home?

If your property has an underground oil tank — or another issue you're concerned could complicate a sale — preparing before listing can help you understand your options and avoid unnecessary surprises.

I'm Derek Doernbach, REALTOR with Century 21 Action Plus Realty, serving homeowners throughout Atlantic County, South Jersey and the Jersey Shore.

I can help you look at the real estate side of the situation, develop a strategy for bringing the property to market, and help coordinate with the appropriate professionals when specialized environmental, insurance or legal advice is needed.

Call or text Derek Doernbach at (609) 403-3315.

Visit DerekDoernbach.com to learn more about buying or selling real estate in South Jersey.

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