Can sellers be held liable if an underground storage tank, for fuel oil, if it’s discovered to be leaking?

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Can sellers be held liable if an underground storage tank, for fuel oil, if it’s discovered to be leaking?

After signing a contract with the sellers it was discovered they had an underground storage tank holding fuel oil for the house heating system. Upon discovery and learning about potential environmental problems we, being the buyers, requested the tank to be tested for leaks. The seller’s lawyer declined our request. Now we either back out of the deal even though we are a week from closing or we get stuck with a potentially expensive oil clean up. What options do we have at this point to protected ourselves from a possible environmental hazard we did not create?

Asked on October 9, 2017 under Real Estate Law, New York

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You could sue the sellers for fraud to try and recover any costs you incur due to this, if you choose to go ahead with the sale. If you can prove that the sellers knew or reasonably must have known of the tank but failed to disclose it pre-contract, that knowing or intentional misrepresentation (by non-disclosure) of a hidden material (important) condition which they knew (or must have known) of would be fraud and would entitle you to compensation. Sellers have an affirmative obligation to disclose major problems or issues of which they are aware, if such issues are not readily visible when a buyer views the property; an underground fuel tank should fall under that rubric, and they would have to disclose to you the existence of the tank and anything relevant they know about it's condition or status.
Of course, suing does not always get you compensation: if the sellers move and you can't locate them, you can't sue; if you do sue and they are insolvent or have declare bankruptcy, you may be only a fraction, if anything, of what you are seeking; and you'll have to incur litigation costs, which will eat into anything you recover. Suing is not a guaranteed way to fully offset any costs you will be liable for.
Alternately, you could pull out of the deal and sue them costs you incur in so doing (e.g. the cost to rent someplace to live and store your goods) due to their fraudulent nondisclosure. With that threat, you may be able to negotiate some protection from them if you do go ahead, such as them escrowing part of the purchase price to pay for any cost you incur, with the money being released to them if/when the tank issue is successfully resolved.


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