The scenario is becoming commonplace...
Sellers list their residence for sale. Buyers submit an offer conditioned upon the removal of a 25-year-old underground storage tank (UST) which is to be replaced with one or more new indoor tanks. Sellers have never had any problems with their UST. It will cost approximately $2,500.00 to remove and replace the UST. What is Seller's statutory, as opposed to contractual, obligation regarding the removal of the UST?
Three bodies of law regulate USTs: Federal, State and Municipal. The Resource Conservation and Recovery Act of 1976, as amended in particular by the Hazardous and Solid Waste Amendments of 1984 (HSWA), establishes a federal regulatory program for USTs. Under the Act, an "underground storage tank" is defined as "any one or combination of tanks (including underground pipes connected thereto) which is used to contain an accumulation of regulated substances, and the volume of which [is]ten percent (10%) or more beneath the surface of the ground" Heating oil is defined as a "regulated substance" under the Act. However, USTs which are used to store heating oil to be consumed on the premises where stored are not included under the definition of a UST. Therefore, the typical residential closing involving a UST would fall outside the scope of Federal regulations.
While Connecticut environmental regulations deal with USTs, they only apply to a "facility which serves any commercial, industrial, institutional, public or other building, including but not limited to hotels and motels, boarding houses, hospitals, nursing homes and correctional institutions, but not including residential buildings." (See Section 22A-449(d)-1(a)(2)). However, Connecticut Regulations do apply to a UST in excess of 2,100 gallons where the structure is not used solely as a dwelling. Again, the typical residential closing involving a UST would fall outside the scope of the State regulations.
Finally, some municipalities in Connecticut have stepped into the void and created their own ordinances dealing with USTs. The Town of Simsbury, for example, has enacted regulations (Chapter 139, Simsbury Code) controlling the modification, installation, maintenance and removal of USTs in connection with residential buildings of three units or less.
According to Simsbury Selectman Joel Mandell, a Levy & Droney Real Estate Partner, "The regulations have worked well. We've caused a lot of old, potentially problem tanks to be removed." Other towns are studying the need for similar regulations. However, according to Mark D. Vasington of the Connecticut Attorney Title Insurance Company, "such detailed local regulations are to date more the exception than the rule." He indicates that data compiled by the Connecticut Department of Environmental Protection shows that less than twenty-five percent (25%) of the local governments in the State have enacted specific ordinances governing the use and removal of USTs.
Even if no ordinance or regulation exists for the mandatory removal of a UST in your community, Sellers should be aware of specific permitting requirements which may exist in connection with the voluntary removal of their UST. For instance, the local fire marshal must be notified and be present when the tank is removed to check for possible contamination. If contamination is found, the owner will be required to remove and clean up the contamination. Homeowners should use a licensed contracting company to remove the UST. The company should provide a detailed fee quote in writing as to the nature and extent of the services to be rendered including any additional costs of potential cleanup. The company should also provide a written report regarding removal of the tank, whether any contamination was present, and disposition of the tank and contaminated soil.
At a minimum, Sellers should also be sure to make full disclosure of the existence of a UST as required by the Department of Consumer Protection in the Residential Property Condition Disclosure Report delivered to prospective Buyers. Should you have any questions, members of our real estate practice group will be happy to advise and assist you.
As a society, we have become much more environmentally sensitive over the years. It is likely, therefore, that the trend at all levels of government will be toward greater regulation of residential USTs in the future.
In summary, remember these important points:
- Federal and state laws do not govern typical residential USTs no matter how large.
- Local ordinances may apply. Check the Town code in which the property is located for references to USTs.
- As stricter laws are enacted, the costs of removal will increase. It may be less expensive to consider voluntary removal of the UST now as it may turn out to be more costly in the future.
- Replacement of an old UST with a new in-ground tank may not be in your long-term interests if laws governing USTs become more restrictive.
- As a Seller, protect yourself in the Sales Agreement against excessive removal and cleanup costs by allowing Seller to terminate the contract if those costs exceed a predetermined amount.