The problem is that many oil tanks are corroding from the inside out, so the failure is not readily visible. This often occurs from condensation that builds up inside the tank. Since oil is lighter than water, the water goes to the bottom of the tank and causes corrosion. The first sign of a bad tank could be an odor of oil in the air. There might be rust or corrosion where the legs are welded to the tank. Other symptoms could include a leak in the fuel filter or the nozzle becoming plugged.
Insurance companies are concerned that an old oil tank can leak and spill hundreds of liters of heating oil into the home, or into the ground. Spilled oil can quickly contaminate soil and ground water. If the leak finds its way into a sump pump or floor drain, the spill will undoubtedly make it a very expensive clean up. With outside storage tanks, where rust and corrosion are more common, a spill can contaminate the soil or make its way into the nearby streams or rivers. What may seem like a simple clean-up can in fact be a complicated task to replace the leaking tank and supply lines, remove contaminated soil, replace the foundation and treat groundwater. The cost to repair a leaking oil tank can range from several hundred to several thousand dollars.

Many underground oil tanks have reached the end of their useful lives and are beginning to corrode, rust and leak. Increasing homeowner insurance claims resulting from leaking oil tanks are very expensive and can lead to high insurance rates, or even refusal of coverage. It is a homeowner’s legal responsibility to properly maintain the oil tank and clean up any spills or leaks that may occur. Leaking underground storage tanks may create several hazards including:

• Products and product vapors can generate a potentially explosive mixture;
• Products can enter surface water;
• Products can enter drinking water;
• Products can contaminate surrounding soil;
• Products can damage property.

Problems with underground oil tanks may complicate the process of applying for homeowner’s insurance and, in extreme cases, may adversely affect real estate transactions themselves.

Prior to closing, contact the fuel oil supplier for the home and determine if the basic or comprehensive inspections of the tank and oil-heating appliance have been completed. The fuel oil supplier and/or heating service contractor should have information about the servicing and inspection program that is in place for the home.

Realtors should expect questions regarding the age of the tank, location and proof that the tank installation meets safety requirements. Purchasers should expect to be asked, by their insurer, to provide this type of information when applying for insurance.

In British Columbia, The B.C Fire Code now requires the removal of any underground oil tanks that have been out of service for more than two years. Licensees who are involved with the sale of a property that contains, or is thought to contain, a buried oil tank should be aware that this is a concern and should also be aware of their duties with respect to disclosure.