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Underground gas tanks - buy and sell issues

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Latest post Thu, Nov 30 2006 1:00 PM by diecuts. 7 replies.
  • Sat, Nov 4 2006 3:08 AM

    • diecuts
    • Top 500 Contributor
    • Joined on Sun, Oct 29 2006
    • MI
    • Posts 67

    Underground gas tanks - buy and sell issues


    I own a newer manufacturing plant in the suburbs.
    My old plant in the inner city is now my warehouse.
    The building next door would make a better, safer warehouse as it is closer and fairly new (15 yrs).

    I have been reluctant to sell the inner city property as it has one underground gas tank now filled with sand and under 6" of reinforced concrete. I might be responsible for the $ to remove the tank completely if it is 'discovered" which would probably cost more than what the property is worth.
    The inner city officials are unlikely to find it, they have bigger issues. Is there a way to sell it "as is" and transfer the liability?
    On a related issue Unfortunately....
    A close inspection of the property next door has also revealed gas and oil tanks, pumps long gone but I have found the metal plates and caps, 4 to be exact. The owner wants to sell the building quickly as he needs money for another deal. The tanks don't seem to be a problem now but how should I protect myself when making an offer for the property? An environmental soil survey?

    When I bought this building, $40,000 was taken off the price to pay for cleanup of an employee dumping 7 qts of oil in the soil after working on his car, dug it all out and brought in new soil. I paid for a soil survey, they paid for the cleanup.

    However, the property next door is just a potential spill...Perhaps MI state and federal laws address unused storage tanks and their disposal.

    Any experience in this area? Thanks

  • Sat, Nov 4 2006 9:51 AM In reply to

    re: Underground gas tanks - buy and sell issues


    You want protection when you buy another property but you want to shaft whoever buys yours.

    You can bet your tank will eventually be discovered, the buyer will sue you and possibly bring criminal fraud charges, and the EPA will own you for the rest of your life.

    Good luck.

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Sat, Nov 4 2006 11:23 AM In reply to

    • diecuts
    • Top 500 Contributor
    • Joined on Sun, Oct 29 2006
    • MI
    • Posts 67

    re: Underground gas tanks - buy and sell issues

    A clarification.... perhaps I do want it both ways but I hate to get shafted by law changes over a period of many years.

    The inner city property underground tank was disposed/handled per the legal code years before my time, in the 1960s, with sand etc. I bought it in a tax sale from the city in the 80s who said essentially 'as is'.

    An old previous employee at the plant now long gone revealed the existence of the tank when he came by looking for a job. He pointed out the cap.

    The tank appears stable as is. Removing the cap finds nothing but sand and no fumes, etc.

    The EPA, as you say, will eventually find out about it. Not sure how as it is an enclosed yard and, beyond a 3" metal cap under 6" of dirt, it is invisible, just another parking lot.

    Is there a way I can legally transfer the liability?

    Estimates to remove are around $50,000. Property is worth $20,000 on a good day.

    Other than the tank, it is a very sound building.
    I get a purchase inquiry about once a month.

    Another option is to open it back up as a manufacturing facility, employ some needy folk, and just live with it until the law changes again.

    I want to get out of the liability but on agreeable terms all the way around so I don't feel "dirty".

  • Sat, Nov 4 2006 2:34 PM In reply to

    re: Underground gas tanks - buy and sell issues

    Under Michigan law, if you are aware that you have a UST on your property, you are required to register it with the state (costs about $100 to register). The UST on the property you already own sounds like it has been "closed in place" and if all the paperwork was done correctly, it likely can stay where it is and won't have to be removed. You can check this by looking up your property address in Michigan's UST database online at this link:

    As far as the property that you are interested in buying next door, you would be very unwise to buy any property that has a history of industrial or manufacturing use without first having a Phase I environmental assessment report done. I would imagine that anyone interested in purchasing your property will also pay for an environmental assessment. The assessment may cost you around $1,500 to $2,000, however, it could possibly save you from purchasing a property that may have $100,000+ in cleanup liability. I would recommend looking up both properties in the database and copying down the "facility ID" nos. for both. You can call or go in to your Michigan DEQ office and ask to review the files for your property and the property next door to see if the USTs are registered, if there were any releases or if there has been any cleanup work done in the past. Here is the link to Michigan's UST program web site.,1607,7-135-3311_4115_4238---,00.html

    Do your homework first. If you sell your property without disclosing the UST and the owner's find it later and there is some problem with it, you will still be liable for the costs.
  • Sun, Nov 5 2006 12:59 AM In reply to

    • diecuts
    • Top 500 Contributor
    • Joined on Sun, Oct 29 2006
    • MI
    • Posts 67

    re: Underground gas tanks - buy and sell issues

    Hi Janet,

    Very helpful advice , the MI site on underground tanks is very thorough.

    Neither property is listed in their data system for the tanks.

    The inner city property tank was put in the ground in the late 40s, filled with sand and covered over with cement in the 60s. No paperwork. It was a small tank used to supply two plumbing trucks as it was originally a plumbing supply warehouse. This data is from the local Homeowners Civic Assoc.

    The property next door is still in prelim purchase negotiations at this point, the owner hasn't mentioned the tanks but we have been negotiating for only a year so he still may be forthcoming.

    As mentioned, I found the tank caps and a caretaker of the property confirmed that they were tanks for industrial cutting oil. For 30 years, this plant did nothing but skim thousands of Ford transmission plates smooth with horizonal mills. Cutting oil is used and now we know where it was stored. Use of the tanks ended in 2003 when the tenant moved down south and did not renew the lease with the building owner. I suspect the owner may not know about the tanks as he is based in AZ. He also owns about 20 other properties in this industrial park and has many more in AZ according to the realtor. He wants to buy a med. bldg in AZ and needs cash, hence the sudden interest in selling MI properties, hard to do as MI is in a slump.

    A Phase I environmental assessment will be part of the process if negotiations heat up.

    Once a tank is listed in MI, there is a $100 'annual' fee per tank whether empty or full. That means next door is $400 per year in fees unless the tanks are removed. Definitely something to consider when negotiating a purchase price.

    Thanks again for your advice.

  • Tue, Nov 28 2006 8:24 AM In reply to

    • Drew
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    re: Underground gas tanks - buy and sell issues

    Old tanks can be a royal sleeper. I know of one local deal that fell apart when the buyer found a long abandonned fill pipe! And environmental laws are written so as to be able to go back against any holder in due course of the property for cleanup costs!

    I think you want to spend a hours or so's paid consult (also invokes privacy that way) with a darn good environmental law specialist. And for that matter if your lawyer orders a test it is likley covered by attorney client privledge and not subject to discovery by others , just in case it show what you don't want to know.

    #1 It may be that an oil tank long abandonned and filled under prior law falls into a different legal bucket. (I recall my church made some old undergrounfs tanks go away just before the legal door closed a few years back) But if you lands are contaminated you still have a problem.

    #2 As to active and unfilled tanks on the proposed site you have major exposure problems. You may be able to use the exposures to drive the price down? But I sure would use a legal empty bucket to buy/hold the property that way you exposure is limited to the assets in the bucket--you want to be most careful not to expose any other things you hold to the holder in due course of the site at risk.

    #3 In some states there are all sorts of gimmicks and tax incentives for the adaptive reuse of industrial brown fields--beyond me, but worth checking.

  • Thu, Nov 30 2006 2:29 AM In reply to

    • diecuts
    • Top 500 Contributor
    • Joined on Sun, Oct 29 2006
    • MI
    • Posts 67

    re: Underground gas tanks - buy and sell issues

    Thanks for the advice Drew.

    On #1, the long abandoned tank, it is probably best to let it be forgotten. It is under a driveway so it will probably never be built upon. Sand and rust won't hurt anything.

    On #2, I like the suggestion of distancing the transaction from other assets, must mention that to the lawyer.

    Further details; there are six monitoring wells around the 4 tanks, probably checking for leakage. An old employee mentioned that they were checked last year.

    All this is a big surprise to the realtor (emailed him today about it) and owner of the property. He owns 40 bldgs and is out of state.

    The property was going for 1.1 million, they were considering my verbal suggestion of $725,000.

    You can bet that will be going lower, more in the range of $600,000 as removal of the tanks from one estimate I received mentioned it could be around 150,000 or more.

    Apparently the tanks were installed without the owner's knowledge.

    The company that installed the tanks 20 years ago is a billion dollar conglomerate. Perhaps the owner could go after them.

    #3 is off the table at this time, my guess is there is no leakage and no brown field as the tanks are obviously being monitored by someone.

    Of course, if they found a leak, would they really want to do the right thing and fix it?

    Say something and pay for it via cost and paperwork, or say nothing and avoid a mess.

    Still, the tanks are a ticking time bomb. It needs to be defused to everyone's satisfaction, with no liability coming my way, then perhaps a deal can be worked out.

    That deal will be tricky.

    Reminds me of a local gent who sold a building for 1.2 million less the clean up costs. The costs were large. He ended up paying the new owner some serious money!

    Any hints on dickering besides having a good lawyer for the fine print??

    Can the owner have the former leasee pay the cleanup costs?

    Suggestions and comments welcome.

  • Thu, Nov 30 2006 1:00 PM In reply to

    • diecuts
    • Top 500 Contributor
    • Joined on Sun, Oct 29 2006
    • MI
    • Posts 67

    re: Underground gas tanks - buy and sell issues

    Hi all,

    By chance, the company that installed the monitoring wells in the past was doing another one today.

    It turns out that the tanks were on the property just North of the building I am interested in.

    The tanks were removed 3 years ago.

    The test wells are to monitor for potential leakage during the removal process.

    THey use 6" cast covers similar to tank covers, hence the confusion.

    The realtor has a signed document from the Environmental Agency placing all liability if leakage is found on the owners of the property where the tanks were removed.

    Said company has deep pockets and accepts the potential liability in writing without argument.

    End result... time bomb defused!!

    Thanks to all for your suggestions.

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