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Archive for the ‘Oil Tanks’ Category

Oil tanks in Vancouver Real Estate – Still a hard reality.

Wednesday, August 13th, 2008

A few weeks ago the Vancouver Sun ran a couple articles on oil tanks and even provided a few horror stories about experiences that certain home owners have had. Many people in the industry scoffed at the idea, and a local broker function, I heard the words, “the oil tank problem is pretty much cleared up in Vancouver now.”

Nothing could be further from the truth.

There are still thousands of oil tanks out there in the ground, and oftentimes even the owner of the home doesn’t know it is there!

WHY ARE OIL TANKS IN THE GROUND IN THE FIRST PLACE?

Oil tanks were installed in the ground of all homes build prior to 1962 (approx) when heating oil was used to heat homes instead of the natural gas we are all familiar with today. When the natural gas was installed and become the norm, many owners opted not to dig the oil tanks out of the ground due to the prohibitive cost, and instead usually just back-filled them with sand, or pumped them dry (as dry as could be) or filled them with cement. Rarely did owners have the environmental forethought to dig them out of the ground. As a result, they were left in the ground forgotten, as the property passed from owner to owner over the years, every trace of them disappeared… for a time being.

Several of those tanks are now rusted through, and the small amount of heating oil left in them is leeching into the ground and spreading throughout the property, contaminating the soil on the subject and nearby properties!

Nowadays, if banks get wind that an oiltank is in the ground on a property, they will demand that it be removed prior to the completion, or that a holdback be established from the sale proceeds to pay for its removal. This can be a deal killer in many instances where knowledge of the oil tank only arises a few days before the completion date.

If the vendor selling the house knows about it, they are obligated (in BC) to disclose this fact when they sell their home on the PCDS (Property Condition Disclosure Statement) which accompanies any MLS or realtor-involved sale. However, many sellers take the easy way out and fail to disclose the tank, or legitimately don’t know about it as the property may have changed times 10 times since the original owner who knew of the tank sold it, or passed on. The obligation is on the seller and the seller’s realtor to disclose the fact that the property has an oil tank on it. However, failing that, the buyer’s agent should always put the oil tank clauses in the contract on any homes build 1962 or earlier such that if there IS an oil tank, it will be the responsibility of the seller to take care of its removal.

The B.C. Fire Code demands that the tanks be removed and have environmental engineers assess the damage. The rules on how to deal with it vary by municipality, so check with your municipality to see what is required in your area.

I have worked with a pair of clients through an oil tank horror story, and had a few contractor friends of mine tell me their own stories, so I thought I would publish these stories for people to read and learn from. It is better to be informed as this is a potential environmental disaster, as my second story will demonstrate.

CONTRACTOR NIGHTMARE IN KITSILANO

One of my friends was working on a massive refurbishment of a single family dwelling in Kitsilano. The owner of the home was a general contractor that bought homes, fixed them up, and flipped them for a profit. He wasn’t just your average “flipper” of real estate. This guy added real value, and in this case they jacked the entire heritage home up into the air, and installed a basement underneath the house. Hardly a typical renovation!

As part of the renovation, they wanted to add some paver stones as a walkway around the side of the house. It was a very narrow lot, and the side of the house had a bunch of loose gravel and limestone crush. My friend was a general labourer on the job. The owner had decided he wanted to remove a lot of the loose gravel and limestone from the side of the house as it was uneven, and had my friend using a shovel, pick-axe, and wheel barrel to get the excess out so the pavers would sit flat on the ground. After taking about 6 inches off the top, there was a large sink-hole that they hit and the ground sunk a couple of inches and some water leached into the hole overnight leaving a lot of mud when they returned the following morning.

Dismayed, the owner had the guys dig all the mud out and they were going to put in some drainage rock. The city inspector was coming onto the property this morning to ensure the lifting of the house and installation of the basement was done according to code. It was during the inspection that my friend heard his shovel make a resounding “clonk” on something in the mud. The owner and city inspector came over when it happened as they thought they may have hit the water main servicing the house. As they uncovered more and more of the metal, it became clear they had run into an oil tank buried, unknown, on the property.

The owner looked at the inspector, who raised his eyebrows when the depth of the problem become evident.

“You are going to have to get that removed, and the environmentals done,” he said to the owner. The owner just nodded at this point, knowing there was no easy way out of this situation.

The following week a tractor and crew arrived and dug out the hole and took all contaminated soil and mud away in a large bin. Fortunately, the tank had NOT been leaking, but the problem cost $5,000 to fix when the cost of removal, disposal, and environmental studies had been done. In this case, the owner was a skilled contractor with healthy profit margins who could afford this type of thing to happen, but to the average family the $5,000 is a hard hit. Had the tank been leaking, it could be hundreds of thousands more.

BURNABY ENVIRONMENTAL DISASTER

One of my best clients was buying a piece of property in Burnaby at the bottom of a very large hill. The home was an older home build around the turn of the century with 6 rental suites in it. It was a character home, and surely had an oil tank at some point in the past, but no mention of it was made on any of the property disclosure statements and listings.

As I was personal friends with this client, I agreed to meet him there for the home inspection as he wanted me to see the house he was buying, but also to let him know if any of the older homes features would restrict the available financing that he needed.

We stood in the back of the property with a view of the surrounding farm land and green houses when I turned to the house and noticed an old pipe hidden under a piece of flashing running along the side of the house and into the ground.

“Was there any mention of an oil tank on the property?” I asked casually.

Everyone around me froze and got uncomfortable. I knew there was no mention of it in the contract, nor on the disclosure, but the selling realtor looked white as a ghost.

“No, why?” asked the client.

I walked over to the wall and gestured to the pipe and explained that there were usually iron pipes that ran from the tanks to the furnace in the house. I followed the pipe to where it went into the ground, and about 10 feet from the house could see a threaded pipe of about 1.75″ diameter sticking out of the ground by about 1 inch. It was hard to see, and if I didn’t know what I was looking for, I wouldn’t have noticed it.

As soon as I pointed it out, all hell broke loose with the realtor claiming they had verbally told the buyer about the “possibility” of the property having an oil tank, and that they had all agreed to keep it out of the contract and have it dealt with quietly before completion. The owner also stated he was sure it was backfilled with sand and that there was nothing to worry about, but he was a 90 year old man owning 12 properties around the area and was sketchy on whether or not that occured with THIS property or some other. I realized I was walking on thin ice, and told them that with only 2 days until completion, we would need an extension and probably a price reduction to compensate my buyer for having to pay to have it removed. They agreed to a 2 week extension and a $10,000 price reduction. In hindsight, that was the worst deal we could have taken!

We had a company that specializes in oil tank removal come and take stock of it the next morning. He put a measuring tape down the hole, and it came up with 2 inches of clean heating oil on it. It had to come out. The bank, when they got wind of this, immediately said they would not fund the mortgage until the tank was removed and an environmental report furnished showing that any contaminator was gone and that no environmental threat existed as the house and land was their security. If it was contaminated, it could be a liability far greater than its value as an asset.

The following day a tractor and crew arrived and began digging. It took them 2 days to dig a hole big enough to get the massive 100 gallon tank out of the ground. It was larger than the usual oil tanks because it had to feed a massive 6 unit house. When they got it out of the ground, we found that it had several holds…. all about 2 inches off the bottom. The soil in the hole was black and greasy, and the smell of heating oil was thick in the air. The crew looked worried at how bad of a job this was going to be.

They decided to wait until the next morning to use a pump truck and get the oil out of the hole. When they returned the following morning, the hole was filled with oil, water, and fecal matter! What no one had realized was that they managed to break the sewage line on the property in the process, and given that the property was at the bottom of a major hill, all the groundwater had run down the hill and flooded the hole. As the oil is lighter than water, it floated to the surface and was now spread over the entire back yard. The buyer was grim when he saw the work the following day, and the pump trucks came and took three loads of contaminated water away to be destroyed.

Water was literally pouring through the sides of the soil, and the workers had to dig with their backhoe as fast as possible, with the pump trucks going crazy trying to keep the oil from further spreading the oil. Twenty five dump trucks and over thirty pump trucks later (not to mention $50,000 in cost) the job was done.
The entire back yard had been dug up and replaced, and the environmental company that came was worried that given the length of time, and the water table running under the property, that the full damage would never be known. It was possible, they hypothesized, that the tank had been FULL when the rust holes had appeared in the side and that it had drained down over the years so that only the 2 inches below the hole remained. If that was the case, the water table that poured under the soil and through the drainage rock beneath the house could have taken the oil far and wide. Given that the property was surrounded by farmland and greenhouses, this could (and may yet be) a disaster of epic proportions. However, testing of the surface soil of the surrounding properties showed no contamination, but an in depth study of all surrounding commercial, farm, and residential property has not been undertaken.

WHAT TO DO TO AVOID THESE PROBLEMS:

1. If you are a seller, get that tank out of there!
2. If you are a seller, disclose, disclose, disclose! Tell your buyer about it and save the legal hassle later.
3. If you are a buyer, and the home is built pre-1962, make sure the “oil tank” clauses are in the contract.
4. If they aren’t in the contract, make sure that all disclosures are there and indicated that no tank exists.
5. If you are a buyer, do a personal inspection of the property and have your inspector do the same

There are still some homes running on heating oil in Surrey, Burnaby, and North Vancouver (and a few other areas but these are the ones I still encounter them in), and as an investment I would just steer clear of these homes. Other opportunities exist. Unless you are dealing with a surface tank, or one that you know is not leaking, just walk away.

So, these are a couple examples of stories that involve oil tanks. I have a few more of them and they have killed a couple deals for a couple of my clients. Take the high road: disclose, and do your part for the environment and get it removed. You will be glad you did.