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Do Property Sellers Have to Disclose a UST?

real estate agent going over deal memo with buyers

The presence of an underground storage tank (UST) can delay or permanently affect a developer’s plans, and it can pose environmental and even health risks to property inhabitants.  Once you buy a property with an abandoned UST, you become responsible for it.  A UST can thus significantly impact a real estate deal.  Are sellers required to disclose the presence of a UST to prospective buyers?

The Seller’s Disclosures in the Sale Contract

The first place to look to determine the seller’s disclosure obligations is the contract of sale.  Buyers should, as a matter of course, require that the seller indicate whether there is or ever was a UST on the property.  If there was a UST on the property that has been removed or abandoned, the buyer can also request that the seller provide documentation (photos, soil analyses, NJDEP certifications for the contractor, etc.) sufficient to prove that the removal or abandonment was conducted properly.  If the seller has no documentation, either party can hire a consultant to test the soil for contamination.  A seller is bound by the disclosures in the contract, and a false disclosure can lead to the contract being canceled or a subsequent lawsuit for breach of contract or fraud.

Whether or not there is such a disclosure, a prospective buyer can request an inspection or the results of a prior inspection.  If the inspection reveals the presence of a UST, the buyer and seller (and real estate agent, if part of the transaction) can negotiate to determine whether the sale will still go through, if the sale price will be affected, and who will be responsible for the tank’s removal.

Selling Property “as is”

Many sellers will try to get around disclosure requirements by selling a property “as is.”  Selling a product “as is” puts the responsibility on the buyer to do a proper inspection and discover any drawbacks that affect the value of the property.  Such provisions are typically accompanied by a clause allowing the buyer to cancel the contract if their inspection finds any major defects that the buyer is not willing to accept.  Often these post-inspection cancelation clauses specifically reference USTs.  Under New Jersey law, selling a property “as is” does not, however, alleviate the base requirement that the property is fit to live in or otherwise habitable.  Rather, it more accurately tells the buyer that the seller will not conduct any repairs on the property as part of the sale.  The “implied warranty of habitability” means that sellers must disclose any known, latent, material defects, even if the property is sold “as is.” 

A latent defect means one that might not ordinarily be discovered by a typical, thorough inspection by the buyer, whether because it has been actively concealed or because it is simply difficult to discover (for example, that the roof leaks during heavy rain).  The seller cannot intentionally misrepresent, fraudulently conceal, or even negligently conceal something that would not be found during a normal inspection.  This includes an underground oil tank.  If a normal inspection might not uncover the UST, and the seller knows this, then the seller must disclose the presence of the UST or potentially face civil liability, regardless of the presence of an “as is” clause.

Call in the Professionals at Lutz to Handle Your Underground Storage Tank Issues

If you are a real estate owner looking to properly remove a UST prior to sale, get help from trusted advisors with years of underground storage tank experience.  For advanced, professional assistance, call Herbert Lutz & Company, in Florida at 954-971-5222, or in New Jersey at 908-862-8888.

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