Changes in "Offer to Purchase" form highlight growing concern over residential USTs
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A Legal Moment

Underground Fuel Tanks:  Don't Be Left in the Cold

Changes in the "Offer to Purchase" form highlight a growing concern over residential USTs

    As part of the July 2013 revision to the standard form Offer to Purchase and Contract, in the section allowing buyers to make inspections of the property, the drafters added fuel tanks to the list of items a buyer may choose to inspect on the property. The form specifically states that the buyer may want to conduct “[i]inspections to determine the existence, type and ownership of any fuel tanks on the Property.” Buyers always had the right to conduct this type of inspection, but the addition of an express reference to fuel tanks highlights growing concerns over underground fuel tanks.

    In our market, and nationwide, many residences use fuel oil stored in underground tanks for heating. These tanks are reaching the end of their useful lives and are leaking or at risk of leaking. In other states, one cannot complete a residential closing with an underground fuel oil tank without either having it closed and filled by a qualified professional or purchasing tank insurance to cover losses from potential future leaks. According to one local insurance broker, the insurance industry is sensitive to this risk in North Carolina, probably because of its experience in other states. Three out of eight of his homeowners’ insurance underwriters will not insure residences with underground fuel tanks.

    The worst case scenarios in a residential transaction are the discovery of a leaking underground fuel oil tank, or the discovery of contaminated soil in the location of a tank that has been removed. In the event of such a discovery, the homeowner, or the environmental consultant who made the discovery, must report the leak or contamination to the N.C. Department of Environment and Natural Resources (“DENR”). At that point, the homeowner will most likely be responsible for cleaning up the contamination and taking any other required remedial action. The assistance of an experienced environmental consultant will be invaluable in complying with testing and cleanup requirements. The goal in this process is to obtain a No Further Action Letter from DENR and a Notice of Residual Petroleum for filing in the Office of the Register of Deeds. The Notice becomes part of the chain of title for the property.

    DENR also provides financial assistance through its Noncommercial Trust Fund. The Fund pays up to $1.5 million for reasonable and necessary costs related to cleanup with a 20% co-payment for costs greater than $1 million. Residential cleanups should rarely come anywhere close to the $1 million level. There are also brand new deductible requirements.  For leaks discovered prior to August 1, 2013, there is no deductible. For leaks discovered after August 1, 2013, there is a deductible of $2,000 or $1,000 plus a 10% co-payment, whichever is less. Unfortunately, as of October 28, 2013, the Fund had paid out all funds appropriated by the General Assembly. There is an ongoing revenue source that will allow for the payment of six to ten claims per month, but DENR expects new claims to be deferred two to three months.

    For additional information on underground storage tanks, DENR has a very helpful website which you can access at:

    If you need additional insurance information on policy underwriting or tank insurance, you should contact a qualified broker.  The following brokers provided helpful information for this article:

Madison Insurance:
Morrow Insurance:
   This article was written by Greg Gregory, an attorney and shareholder at Marshall, Roth & Gregory, PC. Greg's practice encompasses all forms of real estate transactions.
   Feel free to contact Greg ( to receive more information on this topic or to suggest topics for future editions of 'A Legal Moment'.  Or visit our firm's website at:

   You may not rely on this content as legal advice for any specific situation, but should instead contact an attorney for specific advice
Copyright © 2013 Marshall, Roth & Gregory, PC, All rights reserved.
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