In a recent case from the Supreme Court of British Columbia, A Speedy Solutions Oil Tank Removal Inc. v. Horvath Estate the Executor of the Horvath Estate had entered into a contract to sell the estate real property in Surrey, B.C. for $456,000 (the “Horvath Property”).  However, the sale fell through when the buyers were told by an oil tank inspector that there was a possibility that an oil tank was located on the property.

It is very common in contracts of purchase and sale for British Columbia real estate to have an offer subject to the buyer obtaining and approving an inspection for an underground oil tank. Houses used to be built with oil tanks (used for heating) buried underground on the property as they were considered unsightly to be above ground.  Over time oil tanks have been phased out for heating purposes but most owners would keep the unused tank on the property where it would slowly deteriorate underground, and on occasion would start leaking oil into the surrounding soil.

Further investigation by the Harvath Estate revealed that there was an oil tank on the Horvath Property and the Executor entered into a contract with A Speedy Solutions Oil Tank Removal Company (the “Oil Tank Removal Company”) to remove the tank.  The proposed cost of the removal was $2,050.

Luck was not on the side of the Horvath Estate and once the Oil Tank Removal Company started removing the oil tank, it became apparent that there was soil contamination surrounding the tank.  The Oil Tank Removal Company then entered into another contract with the Executor to removal the contaminated soil.  The terms of that contract were that the first 10 tons of soil removed would cost $4,900 and each additional 10 tons would cost $4,500.

The run of bad luck continued for the Horvath Estate and Oil Tank Removal Company found that the contamination had spread to a neighbouring property and ended up removing 481 tons of soil from the Horvath Property and the neighbouring Property.

The resulting invoice received by the Executor for the removal of the soil was for $206,296.12 and included a 20% discount.

The Estate Property was sold about three months later for $435,000 and the Oil Tank Removal Company’s invoice remained unpaid.  This case was brought before the Supreme Court of British Columbia by the Oil Tank Removal Company to enforce payment of the invoice.

Although various arguments were put forward by the Executor for the non-payment, including that some of the non-contaminated soil was included in the 481 tons that were removed, the court concluded that the invoice had to be paid, less a small discount.  The Executor was ordered to pay $196,161.75, plus GST, 5% interest from the date it was issued and costs.

The facts of this case highlight the risk that Executors take when dealing with Estates and also serves as a reminder to prospective residential home buyers.  If the proceeds from the sale of the Horvath Property did not cover the invoice and there were no funds in the Estate, it could be possible that the Executor could have been personally liable for the difference.

If the original buyers who contracted to purchase the property had come across this issue after they purchased, rather than before, they would have added an additional $200,000 expense to the cost of their new home.

The removal of an oil tank can cause significant issues for home buyers and sellers alike due to the impossibility of gauging if contamination has occurred prior to removal.  It is always recomended to make an offer subject to an oil tank inspection prior to buying a home in British Columbia.  If an oil tank is found during an inspection you should seek legal advice as to your options as soon as possible.