(a) Contract Clauses - View Entire Section
(XXV) Health and Environmental Concerns - View Subsection
(6) Underground or Above Ground Heating Oil Storage Tanks
[05/09/2013 The following section was updated with new information]
[11/17/2011 The following section was updated with new information]
Licensees involved in the listing or sale of a property that contains, or may contain, an underground or above-ground heating oil storage tank (OST) should be aware that the presence of an OST can, because of the potential environmental concern, expose sellers and buyers to significant financial loss and liability. If the presence of an OST is either known or suspected, both buyers and sellers should be advised to seek the advice of an environmental professional as well as legal advice about their obligations and potential liabilities.
Many homes built before 1970 were heated using oil that was stored in an underground or above-ground OST. When homes were later converted to natural gas or electricity, underground tanks were not usually removed from the property; instead, the tanks were commonly left in place, filled with sand and capped. OSTs that remain buried may have rusted and corroded. If oil remained in the tank, leaking of that remaining oil could cause (or may already have caused) contamination of the property and adjacent properties.
What to do if you are representing a seller
If a seller is aware of an unused or abandoned OST, the seller has an obligation to disclose this fact in cases where the OST constitutes a material latent defect. While an unused or abandoned OST may not be necessarily considered a material latent defect under all circumstances, it seems clear, at a minimum, that a court would find an OST to constitute a material latent defect if actual leakage could be shown to have occurred. Of course, any representation about an OST on a disclosure statement made by the seller must be accurate, and a licensee acting for a seller must not be party to a representation that he/she knows to be incorrect. A seller may need to consult an environmental and legal professional as to whether the tank in question is a material latent defect.
Where a seller is not aware of an unused or abandoned OST, but the licensee has reason to believe that an unused or abandoned OST may be present on the property, there is at least a possibility that an OST, if found to be present, would be considered to be a material latent defect. The courts have also held that a licensee acting for a seller has a duty “to check the completeness and accuracy of all information which it is usual and customary for brokers to verify.” Accordingly, it may be prudent for a licensee to advise the seller-client to take the steps necessary to determine whether in fact an OST is present, so that the later discovery of a tank, either before completion or after the sale of the property, does not leave the seller exposed to significant potential liabilities and expenses.
What to do if you are representing a buyer
If a licensee representing a buyer has knowledge that a property contains an unused or abandoned OST, the licensee has a duty to make this fact known to the buyer-client and to advise that the presence of the OST can, because of the potential environmental concern, expose the buyer to significant financial loss and liability. If, on the other hand, a licensee acting for a buyer is not aware of an unused or abandoned OST, but suspects (or reasonably ought to suspect) the presence of an OST based on such factors as the age of the property, then section 3-3(1)(h) of the Rules requires the licensee to use reasonable efforts to determine whether an OST is present. If the licensee’s own efforts do not answer the question, then section 3-3(1)(d) of the Rules requires the licensee to advise the buyer-client to seek any necessary professional advice, such as the advice of an environmental engineer or consultant, and possibly legal advice as well.
What to do if you are acting as a limited dual agent
A licensee acting as a limited dual agent has a duty to be impartial to the interests of both the seller and the buyer, and must ensure that any advice about the presence or suspected presence of an OST given to one party is also given to the other. The duty of impartiality means that if an OST is discovered after acceptance of an offer, the licensee cannot provide advice to either party, and should recommend that both the seller and the buyer seek independent legal advice.
What to do if an OST does exist
Where it has been determined that an OST does exist, licensees and their clients should be aware of BC Fire Code provisions for the decommissioning of an underground OST that require the use of good engineering practices when removing, abandoning in place, or temporarily taking out of service, an underground OST. Additionally, licensees should refer their clients to the BC Ministry of Environment Fact Sheet entitled Residential Heating Oil Storage Tanks, which sets out concise and valuable information and advice. This Fact Sheet, and other useful information and links, can be found at the Ministry of Environment’s website at www.env.gov.bc.ca/epd/remediation/residential-heating/index.htm.
Further, licensees must ensure that they or their clients enquire at their local government (city/municipal/district/regional) office as to any bylaws, restrictions or permit requirements concerning unused or abandoned OSTs, as local governments have differing requirements and provisions for enforcing the removal or abandonment of underground or above-ground OSTs (usually administered by the local fire department). This is particularly important in areas where underground or above-ground storage tank removal enforcement is a priority.
Lending institutions and insurers should also be consulted as they may also have corporate policy regarding underground or above-ground OSTs.
When drafting contracts with respect to properties containing underground or above-ground OSTs, licensees should familiarize themselves with the information found in the Safety, Health and Environmental Disclosure Clauses section of the Professional Standards Manual, which can be found online at www.recbc.ca/psm/safety-health-and-environmental-disclosure-clauses/.