Found a buried oil tank while showing a cottage in Ontario. Here’s what buyers and sellers need to know about mortgages, insurance and removal.
Hey, I’m Jess! I’m an Ontario realtor specializing in waterfront, rural and recreational properties across cottage country. I wanted to share what happened to me and my clients last week - whether you’re buying or selling, it may help you avoid a costly mistake.
What Happened
I was showing a cottage to buyer clients. They loved it - it had all the right vibes, the shoreline was perfect and it was listed under their budget. As I was wandering around the exterior, I spotted two capped steel pipes sticking out of the ground. I let out a huge sigh - because if you’ve been around the block enough times, you know this often means a buried oil tank.
I didn’t want to scare my clients mid-showing, so I kept it calm: “These make me think there may be a buried oil tank. I’ll find out for sure, but this might be a problem for financing and insurance. I’m going to work on this before we get emotionally attached.” Which of course we did get emotionally attached, because it was THE PERFECT COTTAGE. Lol.
How to spot a buried oil tank:
- pipes poking out of the ground, usually capped, often near the foundation
- copper lines running from the foundation into the ground
- a patch of ground that’s raised, sunken or oddly bare
- any mention of oil heat in the property’s history
The lender problem:
My clients had 25% down, so there was no CMHC insurance to contend with. Their mortgage broker contacted all their lenders, and none would finance the property with the tank in the ground. Her summary: it would have to be fully removed by a TSSA technician before closing, with a certificate of removal and an environmental test showing no contamination.
Here’s the part the surprised the other side. The listing agent pointed out that testing may not be legally requiring when a residential tank is removed unless there’s a spill, and that may be true. But lenders don’t care what the minimum legal requirement is - they care about their risk. Legally required and bank required are two different things.
What Ontario’s rules actually say:
Fuel storage in Ontario is governed by the TSSA under the Technical Standards and Safety Act, not by the building code. Under the Liquid Fuels Act Handling Code an underground tank must be removed within two years of going out of use, and within three years under the Fuel Oil Code. Leaving a tank in the ground past that requires a variance application plus an environmental assessment.
If oil escapes, the Environmental Protecation Act’s spill provisions apply. The person in control of the pollutant (read: the property owner) has to report a spill to the Ministry and the municipality right away. Contamination that reaches a watercourse can bring in not only the municipality but the conservation authority - on a waterfront property, this matters.
What is costs:
The first thing I did was contact two local contractors to a) confirm what I was looking at and b) figure out next steps (IE the math). Both TSSA contractors quoted $20,000 - $25,000 to dig up the tank and take the mandatory soil sample. If the sample came back contaminated, remediation was estimated between $30,000 - $100,000 depending on the severity. My other fear? My clients getting sued even after the remediation if a neighbour could prove damage to their property.
Insurance is the second hurdle:
Insurers often avoid properties with oil tanks, and standard policies may not cover lears without an extra endorsement. If you can’t get home insurance, you can’t get financing. Get your insurers answer in writing before you remove conditions.
The options I walked my clients through IRL:
- the Seller removes the tank before closing at their cost, with a TSSA contractor’s letter confirming no contamination (or full remediation), plus a holdback in trust in case the soil comes back bad upon Buyer testing after closing. This was the safest option for the Buyer.
- Middle road: Seller removes the tank before closing at their cost and provides the Buyer with the letter. No holdback. The risk to the Buyer if takes possession and finds further evidence of contamination, or contamination is found by the municipality, conservation authority or a neighbour, they are now financially responsible.
- Buyer takes the tank as-is and handles it themselves. This is the riskiest, so the price has to reflect it.
The listing agent later asked whether my buyers would do a conditional offer, meaning the seller removes the tank and delivers a lender-acceptable certificate or the deal is void and the buyer gets their deposit back. If you go this route, the wording matters. I’d specify that the removal and sampling must be done by a TSSA-certified contractor and that the certificate matches exactly what the lender requires, with no grey area. The risk to buyers is mostly time and inspection costs, but that only works if the wording is airtight.
Advice for Buyers:
- walk the whole property, not just the house
- ask your realtor to look in the home’s heating history, the tanks age, and any removal paperwork
- call your mortgage broker before writing an offer, not after
- get insurance confirmation in writing
- make any tank condition-specific: who removes it, who certifies it, and what the certificate must say
- don’t let a beautiful cottage talk you out of doing your due diligence
Advice for Sellers with a buried oil tank:
My advice here is simple: deal with it before you list. Removal in a tidy, documented way costs way less than a deal that collapses mid-conditions, after you’ve already spent on updates, staging, and more. A removal certificate and clean soil results are a selling feature that widens your buyer pool to anyone with a mortgage, and it tells the market that they are dealing with considerate, honest people. And that’s who I want to buy a house from.
The outcome:
My clients decided to hit pause, but I’ll keep you posted!
Happy to answer any questions in the comments, or send me a DM.