This Week's Q & A

Q: Several months ago, our condominium association decided to remove our underground oil tank as a preventative measure. We discovered during the removal process that the tank had been leaking for some time, possibly as much as a year or more, so the clean-up costs ultimately totaled about $25,000. That work now has been completed and certified as acceptable by all the appropriate regulatory bodies, but I have several questions about the implications for our association:

Has the removal of the underground tank increased the value of our units?
Will the removal, and the fact that the tank linked prior to removal, have any possible repercussions for future owners? Are we required to inform prospective buyers of the removal and the spill?
Finally, should we notify the insurance company that provides the blanket coverage for our association that we no longer have an underground tank and that our new tank is aboveground, in the basement?

A: The removal of the leaking underground tank has not increased the value of your units, unless you consider a jump from zero (their approximate value before you took care of the problem) to something close to market value today an increase. The previous existence of a tank that is no longer in place on the site of a spill that has been cleaned and passed muster with state environmental authorities, should not have any implications for future owners.

As individual owners, you have no legal obligation to disclose this information and I don’t see any moral imperative to disclose a problem that not longer exists. If a buyer asks specifically if there’s ever been an underground tank or an oil spill, you should respond honestly, and then present the documents indicating that the site has been given a clean bill of health.

Notifying your insurance company (which may or may not have been aware that the underground tank existed in the first place) probably isn’t a bad idea. The removal of the tank is unlikely to affect your premium, and, as I’m sure you’re aware, your policy won’t cover the tank removal or site clean-up costs. But the pollution exclusion clause that is standard in most insurance policies does not apply to damages suffered by third parties. So if it turns out that oil from your leaking tank polluted an adjacent property, your policy should cover those liability costs. There’s no requirement that you notify your insurer of the successful tank removal and clean up, but there is also no particular reason not to do so.