Underground Oil Storage Tanks (UST)

What is it?

Many homes in the Greater Vancouver area built before 1957 were initially heated with furnace oil. When natural gas became available, the underground oil storage tanks (USTs), usually located in backyards, were often filled with sand or capped. However, as these tanks corrode over time, residual oil can leak, contaminating the property, neighbouring properties, storm sumps, and waterways, leading to significant financial and legal liabilities.

Seller’s Responsibilities

The current property owner is responsible for UST removal and soil remediation, which can be costly. Ignoring a UST can lead to exponentially higher expenses. Sellers typically provide a Property Disclosure Statement (PDS) to prospective buyers, disclosing potential defects, including USTs. If a seller incorrectly claims there is no UST or contamination, they may be liable for negligent misstatement or breach of contract. Sellers must disclose any latent defects that could pose hazards, as failure to do so may result in liability for damages.

Actions for Sellers:

1. Disclose the presence of a UST.

2. Arrange for a qualified contractor to remove the UST and remediate any contamination, providing proof to the buyer.

3. Alternatively, negotiate a price reduction with the buyer, but note the seller remains liable under the Environmental Management Act.

Regulatory Requirements

  • BC Fire Code and Municipal By-laws: These regulations mandate the removal of out-of-service USTs and the replacement of contaminated soil with clean fill.
  • Exceptions: Rarely, fire authorities may allow USTs to remain if removal is impractical due to structural concerns. Even then, the tanks must be made inert, which involves pumping out remaining oil, filling the tank with sand, capping all piping, and removing contaminated soil. Licensed contractors must verify the work.

Legal Implications

  • Environmental Management Act: Owners must remediate properties if contaminants exceed allowable limits. This can include neighbouring properties if contamination has spread. Owners may seek cost recovery from previous owners, but success depends on finding them and their ability to pay.
  • Common Law Nuisance: Owners can be held liable for failing to prevent oil seepage to neighbouring properties.

Buyer Protections

Buyers should be cautious and proactive to avoid inheriting UST-related liabilities.

Steps for Buyers:

1. Inspection Contingencies: Make the offer subject to an inspection that confirms the absence of a UST and contamination.

2. Magnetic Survey: Engage a specialized UST inspector to conduct a magnetic survey.

3. Condition Precedents: Include contract clauses requiring the seller to handle UST removal and contamination remediation, with all work verified by qualified contractors and regulatory authorities.

4. Completion of Work: Ensure the seller provides all necessary certificates and reports confirming compliance with regulations before finalizing the purchase. Buyers should avoid waiving these protections, even under competitive bidding conditions, to prevent assuming significant liability for UST-related issues.