Are you buying or selling a property that has a fuel oil/storage tank?

By Ridhima Pathak

Defining Fuel Oil Storage Tanks

Fuel oil storage tanks are governed under the Technical Standards and Safety Authority (TSSA) which regulates the fuel industry. A fuel oil storage tank is a large container that is used to store oil designated to heat or fuel a property. This type of heating mechanism was commonly used between 1930 to 1980. Newer properties have progressed to natural gas in their homes for the purposes of heating, cooking, fireplaces, dryers etc. Natural gas is a more environmentally friendly and an energy efficient method to distribute heat in a home that is maintained through underground pipelines by utility companies.

Nonetheless, if you are buying an older property, it could be the case that the fuel oil storage tank still remains on the property so it is important investigate further. There are specific types of storage tanks as follows:

An aboveground Fuel Oil Storage Tank is installed on the top of the ground within a building or secondary containment.^[i] Provided that the tank is installed to code, it will be approved by the TSSA. The tank must not be leaking and there is no age in which the tank must be replaced.^[ii]

An underground Fuel Oil Storage Tank is a container that is buried a few feet below the ground and contain fuel oil to be used in appliances, such as furnaces and boilers. Tanks that are in basements are not considered underground tanks. Be aware that underground oil tanks in particular can corrode, rust, or contaminate the soil and groundwater so these types of tanks inherently have more risk than aboveground fuel oil storage tanks. As they are underground, it is more difficult to determine if they are leaking so you should get the underground tested for leaks by contacting your fuel supplier.^[iii]

As per TSSA, a fuel oil storage tank that has a capacity over 2500 litres must be registered for fuel supply by submitting an Underground Fuel Oil Application Form to the TSSA. Once approved, TSSA will provide you with a registration number that you can provide to a fuel distributer for supply.^[iv] The registration of a fuel oil storage tank is to ensure that the tank is installed, maintained, and operated as per regulations and compliance. A qualified inspector would need to attend to the property to locate the tank. More information on inspections can be found on the TSSA website.

Ontario Regulation 213/01 Fuel Oil requires for the removal or upgrade of underground tanks accordingly. As per Section 7 of the Code, property owners must maintain these tanks and are required to undergo an inspection by a Fuel Oil distributor once every 10 years to ensure compliance with the regulations and code. If a tank is 25 years or older or has an unknown age, it must be removed. Please note that only a TSSA-Registered Petroleum Contractor is qualified to perform the removal of an underground tank. Furthermore, if the tank is no longer in use, then Ontario regulations require that it be removed. TSSA may however issue a variance for an underground tank to be abandoned in the ground, but an application must be submitted to the TSSA and it takes 21 days to review.^[v]

It should be noted that fuel oil tanks that were installed and compliant with regulations prior to 1971 fall under grandfather provisions, are deemed to be approved. Nonetheless, the ongoing maintenance requirements still apply.

What to know as a Seller

Property owners have a legal obligation to oversee the upkeep of fuel oil storage tanks and address any leaks or spills that may arise during their ownership. Aboveground tanks may require a minor clean-up from a spill, but underground tanks could result in significant environmental harm that could affect groundwater systems. As a seller, you must assess the condition of the fuel tank that you intend sell by how old it is and the maintenance that has occurred over the years.

If you were permitted to have an underground oil tank on your property in Ontario, then you are responsible for the maintenance and upkeep of the tank as well as have a comprehensive inspection every ten years.

Case law further enforces that current homeowners are fully responsible for reasonable care to inspect and maintain a fuel oil system as such homeowners could be held liable for any leaks or damages (Donleavy v. Ultramar Ltd., 2019). Homeowners may further facilitate the inspections for potential buyers and provide all necessary documents on the tank’s history so that any concerns a potential buyer may have are addressed prior to closing. Buyers will likely request certain warranties and representations relating to the fuel oil storage tank so it is important for the Seller to ensure the Seller is compliant.

What to know as a Buyer

We always recommend that buyers negotiate the removal of any fuel oil storage tank within their offer to purchase and that such removal be facilitated prior to the closing date. The alternative is that the buyer assumes the risks associated with owning the tank such as:

1. leaks from the tank have the potential to contaminate the soil and nearby residences in your vicinity;

2. the costs of cleaning up the soil and any related environmental damage could be very significant;

3. potential difficulties with reselling may arise in the future with cautious buyers and changing legislation;

4. the responsibility for tank removal may fall upon you; and

5. property insurance may not provide the appropriate coverage. We highly recommend that a property be thoroughly inspected prior to purchasing.

If removal of the tank is not negotiable, we would recommend including specific clauses to ensure that the tank was installed as per Code and have the Seller provide a declaration that the tank is empty and that they are not aware of any leaks that took place during their ownership.

If you have questions related to storage tanks, contact Ridhima Pathak at ridhima@sorbaralaw.com, a trusted associate in our real estate department.