Posted by IB (NJ) on December 02, 2003 at 12:50:11:
No sir. The foreclosing tax lien is $34k. That’s 34 thousand big ones my man. I’m going to go ahead and risk the $2k to have it removed with the hope that there’s no soil contamination. If the soil is contaminated, I will not be throwing good money after bad trying to get this thing cleaned up. Time to walk away.
Underground Oil Tank found on Property - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 08:56:42:
Hi All. I’m in the process of buying a vacant lot. After conducting a small environmental test (haven’t purchased it yet), I found an underground oil tank on the property. The testers can’t tell if it is leaking and thus whether or not the soil is contaminated. But they gave me an estimate for $2k to remove it. Plus they told me that if they remove the tank and find that the oil leaked into the soil then I’m looking at another potential charge of $10k. I’ve already informed the seller of this as we have agreed that I would buy the property and keep about $8k in escrow with the $2k (for tank removal) coming from the proceeds of the sale.
Has anyone had any experience in dealing with underground oil tanks? I have investors on this deal. To protect their interest, I’m thinking of having the seller deed the property and I’ll pay to have the oil tank removed (again, it’s coming out of her pocket eventually). Then after everything is done and the soil tests okay, advancing her the rest of the money. Your thoughts?
Re: Underground Oil Tank found on Property - Posted by TIM
Posted by TIM on December 04, 2003 at 19:16:53:
I HAVE A FRIEND THAT LEASED HIS STORE WITH TWO PUMPS ON IT. HE HAS OWNED THE STORE FOR 20 YEARS. THE EPA GUYS CAME OUT TO MAKE SURE EVERY THING WAS OK FOR NEW TENANTS.THEY FOUND CONTAMINATION IN THE SOIL. HE HAD TO DIG UP THE TANKS AND REPLACE SOIL. IT HAS BEEN A NIGHTMARE FOR OVER A YEAR AND HAS SPENT OVER 20,000 AND STILL GOING. IF I WAS TO BUY THIS PROP THE OWNER OF THE PROP WOULD BE RESPONSABLE FOR ANY CLEAN UP. TIM.
Test it! - Posted by Ken (NJ)
Posted by Ken (NJ) on December 02, 2003 at 18:29:45:
I agree with the legal strategy of the Land Trust with the beneficiary interest in escrow. That sounds like a good way to protect yourself, but check with a lawyer to be sure.
Personally, I would get the tank tested before attempting removal. I had a non-invasive test done where sensors were put around the tank and left there for a few days. The sensors, when looked at later in the lab, somehow detect if there are elevated levels of petrochemicals being emitted. While no test is 100%, it should be a good guide. If the test is clean, you should be good to go. If not, you know to pass on the deal. Any remediation would have unknown costs, but minimally run at least 10k, and usually more.
Ken (NJ)
Re: Underground Oil Tank found on Property - Posted by Gavin Wilkinson
Posted by Gavin Wilkinson on December 02, 2003 at 11:57:34:
I would not touch it. It is just not worth the risk. How many deals could you do instead of sitting in court for 10-15 years while some agency sues you and everyone else involved with it. When you are hit with a 2 million dollar lawsuit, even if it is groundless, are you going to sleep at night? I wouldn’t.
P.S. I have a cousin that makes a 6 figure income defending these kinds of cases.
Re: Underground Oil Tank found on Property - Posted by Nate(DC)
Posted by Nate(DC) on December 02, 2003 at 11:07:55:
Here’s what I’d do:
Agree with the seller that she gets 85K, LESS whatever costs are to clean it and certify it.
Have it cleaned, certified, etc BEFORE closing on it. You pay for it, but it goes towards her 85K.
Then, at closing, she gets the rest of the money.
Also, be darn sure you take this one in a single-asset LLC!!
NT
Re: Underground Oil Tank found on Property - Posted by David Krulac
Posted by David Krulac on December 02, 2003 at 10:28:50:
I wouldn’t have the property deeded until AFTER the tanks are removed and the soil is cleared of any environmental problem. The soil if contaminated must either be taken to a hazardous landfill or burned, either of which is expensive. The worst situation is where there was a gas station or some industrial use.
Hopefully your problem will be the smallest possible.
David Krulac
Central Pennsylvania
Re: Underground Oil Tank found on Property - Posted by Robert TX
Posted by Robert TX on December 02, 2003 at 09:44:52:
I have dealt with quite a few investors that have had to deal with old tanks. The safest thing to do is to have the seller remove the tank and close the sale after the environmental company give you a “clean letter”.
While this might kill the deal, I had a client go this route several years ago over an anticipated removal bill of $20,000. The final cost to the seller for the removal and clean up ------- over $2,000,000. Once you take title to the property it is your problem to clean it up. You can lose not only your investment but your entire net worth. Every current and historic owner of a property is joint and severally liable for all clean-up costs. This liability can “pierce the corporate veil” and ruin you financially.
Also read the “assumptions and limiting conditions” of the environmental report carefully. Normally, these state that they are not liable even if they make a mistake and further, they may not have insurance to cover it even if you win in a lawsuit.
Good Luck.
Re: Underground Oil Tank found on Property - Posted by Frank Chin
Posted by Frank Chin on December 02, 2003 at 09:37:53:
IB:
I had a UST (underground storage tank) taken out a year ago. Check this thread where this was discussed:
http://www.creonline.com/commercial-real-estate/wwwboard5/messages/6734.html
Remember, I had to do it under the laws of NYS, which is not in total conformity to Federal Law. Check with the local town, and see which local, state agency is involved. We checked with the Fed’s, State and local folks to see what paperwork is involved.
Here in NYC, we have to get a permit from the Fire Department, and file some forms with the State environmental people and the fire department on completion of removal.
In my update post, I mentioned it ran me around $2,500.00, and no leaks were found.
Spoke to the consultant, and he said they didn’t expect leaks as the tank was indoors. If its outdoors, more than likely it will. Then you’ll have to dig out all the contaminated stuff, and truck to a hazmat sit.
Regulations are according to tank size. Their strict on anything over 2,500 gallons, and its exempt under 150, as I recall (under Federal Law). Mine was 275 gallons, above the exempt level, but way under the ones that they’re zeroing in on.
Frank Chin
Re: Underground Oil Tank found on Property - Posted by Hank FL
Posted by Hank FL on December 02, 2003 at 09:12:31:
I have no experience here, but opinions nonetheless.
Are you sure the tank wasn’t used for gasoline ?
MTBE spreads fast and furiuos - it’s water based.
Could these tank removal guys be pulling a bait & switch on you? Could that 10k number double or triple ?
The only thing is… - Posted by IB (NJ)
Posted by IB (NJ) on December 03, 2003 at 19:47:47:
I don’t want my buyer demanding that I remove the tank despite a clean bill of health from an inspector. If I was buying the property, I’d want the seller to remove the tank to be extra sure. She has no problem removing it so it’ll be removed next week. Thanks Ken.
Re: Underground Oil Tank found on Property - Posted by EZ Money
Posted by EZ Money on December 02, 2003 at 12:59:22:
The first response from Gavin is the one I would follow.
Now that it turns out the seller is in $$$ trouble everywhere, you have no recourse to empty pockets. I would not sour an investment pool on this thing. I know of a guy in So. Cal who bought an old gas station for auto repair. Tanks were pulled and the green light was given for the dirt. Later on some more ‘bad stuff’ was found, did it come from lifts or tanks or waste???
He has not made a payment in 10 years on the property.
They won’t foreclose, because they don’t want the property back. Someday the property will be worth some money, and I am sure it will get sorted out, but what a mess.
Re: Underground Oil Tank found on Property - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 12:51:17:
That’s EXACTLY what I’ll be doing. Thanks Nate.
Re: Underground Oil Tank found on Property - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 11:03:09:
Thanks David. Please read my response to Robert and give any available ideas on how you would handle it. Thanks.
Thanks Robert - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 11:02:02:
your post was a life saver. The only thing is that the seller doen’t have the money to cover this expense (she’s losing this property to foreclosure and just lost her primary residence to f/c a year ago). So I’m trying to figure out how to get this done while minimizing my risk.
I’m actually getting the property for a good deal. The fmv is about $125k and I’m buying at $85k. I guess the $2k I would put up to have it removed (again, without me owning it) would be worth it? Your thoughts?
Re: Underground Oil Tank found on Property - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 10:58:05:
Thanks for the interesting thread Frank. Looks like I need to make a few calls myself to the state responsible for dealing with this issue. I’ll keep everyone posted.
Re: Underground Oil Tank found on Property - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 09:34:35:
Thanks for the response Hank.
It’s definitely an oil tank as the feed pipe is sticking out of the ground.
The company is one that is affiliated with a company that I’ve dealt with on several of my deals. This is the first time out of the last 3 deals that they came up with a tank. The tank would be removed and the soil sent out to the state for testing. Should it come contaminated, the company would have to provide written proof from the state confirming that.
My real concern is for my investors. I don’t want to get them involved in a a big environmental mess or legal wrangling when it comes time (if necessary) to get their money out of escrow.
Re: The only thing is… - Posted by Ken (NJ)
Posted by Ken (NJ) on December 04, 2003 at 08:07:16:
I wanted to clarify my point. The purpose of the tank test is not to avoid removing the tank, but to see if the deal is feasible. A clear test will result in your knowing that you can (probably!) remove the tank without complications, and have a good idea of the costs from that point. A test with a bad result would let you know to pass on the deal. You can’t budget accurately for a leaking tank, as no one has any idea how much soil would need to be removed and replaced. I had a similar situation and the remediation firm told me it was a minimum of 10k and would go up from there depending on what they found. Of course, this remediation is all done with licensed contractors and heavy state DEP involvement, so it is neither fast nor easy.
In my opinion, opening up the tank exposes you to liability. A quick test will let you know whether to proceed or pass on the deal.
Ken (NJ)
Re: Underground Oil Tank found on Property - Posted by IB (NJ)
Posted by IB (NJ) on December 02, 2003 at 14:29:59:
Thanks EZ. But this is a market where the underground tanks are common. I can’t afford to run away everytime I come across one. It’s a resdential lot that previously had a 2 family house on it. I would definitely follow Gavin’s advice if the land usage was anything but residential. Thanks again.
LLC… or a Land Trust w/LLC - Posted by JT-IN
Posted by JT-IN on December 02, 2003 at 23:12:59:
IB:
The idea of coupling the Single Asset LLC, being the Beneficial Interest of a Land Trust is a good one, however, I’m not sure what is gained here.
Let’s examine the benefit of the Land Trust first… Privacy… and Portability…that is pretty much it.
In the LLC, the portability issue is also quite good, and the privacy, depdending upon who set up the LLC can be excellent as well… Maybe better, if an Atty is used as your Agent of Record.
In a case such as you have here, let’s play a little devils advocate here… Let’s say that title was vested to a Land Trust, and the the Ben Int was held by the LLC. Now lets say that there is major financial calamity; to the tune of a million dollar claim. Don’t think for a minute that the Claimant in any such case won’t subpoena the Trustee in this case, and under oath, learn about anything that they want to know… My point is this… When using a LT to play keep away, the fact that title has transferred to avoid a DOS situation from a Lender, the LT does a marvelous job. when huge $$$ is at stake, I rather doubt that a LT will keep you from any amount of scrutiny over a large claim. They are NOT going to give up and go away… which is the hope of a LT stonewalling a suitor. If we were talking a 5K claim, then maybe that is different. However, again my thinking is that the single asset LLC will accomplish the exact same thing, if set up correctly.
Just a mental exercise, mostly… Of course you will do as you see best. For me, I would not involve the LT in a situation like this, as I would simply go with the LLC holding title…
Good lcuk on getting this to turn out. I Just wanted to share my thoughts on the comparison of the two dimensions discussed here.
JT-IN