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Paying for a Leaky Oil Tank

Attorneys and realtors are far too familiar with problems that can be caused by underground oil tanks. If a homeowner uses an underground oil tank to fuel his home and that tank leaks, the owner will not only be responsible for the cleanup, but may also be liable for the cost associated with the cleanup of surrounding properties. This responsibility is imposed by the New Jersey Spill Act, which is an environmental statute that creates “joint and several liability” for those individuals who cause or contribute to a spill.

A homeowner may also be responsible for damage from a spill or other contamination caused by a prior owner of the property. While the Spill Act may absolve an owner of liability for contamination caused by a prior owner (predecessors in title), there are certain exceptions to this rule. By way of example, a homeowner may face Spill Act liability, if the owner “knew or should have known that a hazardous substance had been discharged at their real property”. Such was the case in a recent matter decided by the New Jersey Appellate Division entitled State Farm v. Shea. In that matter, when Mr. Shea purchased his property, he did not perform a home inspection or an environmental inspection. When he looked at the home prior to purchase, he noticed a vent pipe in the back yard. He did not ask about it prior to the purchase. After his purchase, fuel oil was found in soil located on an adjacent property.

Mr. Shea was later sued, and it was argued through experts, that certain fuel oil migrated from his property onto his neighbor's property. Further investigation revealed that a prior owner buried an “above ground” oil tank on the Shea property, which had leaked. Mr. Shea argued that he should not be held liable, because he did not use the underground tank and had no knowledge of what may have occurred on his property prior to his purchase. He further pleaded ignorance due to the fact that he did not hire an attorney, as he had exercised the “South Jersey” option of closing title without one.

The Court rejected Mr. Shea's arguments. The Appellate Division held that Mr. Shea “knew or should have known” of the prior contamination, particularly since he had seen vents sticking out of the ground prior to his purchase of the property. As such, the Appellate Division imposed liability on Mr. Shea under the Spill Act. The Court rejected Mr. Shea's arguments, effectively holding that “willful ignorance” is not a defense. Mr. Shea chose not perform a home inspection, and conducted no investigation when he saw pipes sticking out of the ground. The Court also rejected his argument that he should somehow be protected because he did not hire a lawyer for his closing.

Not only should purchasers be aware of the perils of underground oil tanks, they should also be aware of the perils of not performing a home inspection. Had Mr. Shea performed a home inspection, he may have had a better defense. A home inspector may have recommended to him to perform an investigation of the pipe sticking out of the ground. Such an investigation may have then led to the uncovering of the buried tank prior to Mr. Shea's purchase. Similarly, had he used an attorney and choose not to perform a home inspection; his lawyer would have likely sent a letter confirming that he recommended that a home inspection be performed.

Feel free to call the attorneys in the Real Estate Department at Lavery, Selvaggi & Cohen, P.C. about concerns you may have with your property.