Thursday, October 1, 2015

So you think you know who owns the Propane in that there tank?

The NC OTP has changed... make sure you know who owns the fuel in storage tanks so you can properly educate your clients! -Eddie B-



Are "resold" contents of a fuel tank a fixture that is included in the purchase price?

QUESTION:  I represent the sellers in a transaction. The propane tank on the property is leased. Prior to closing, the sellers called the propane company and agreed to re-sell the propane in their tank back to the propane company. The propane company wrote a check to the sellers in payment for the propane and then locked the tank. After the buyers took possession of the property they received a bill from the propane company for the propane in the tank. They sent the bill to the sellers as they believe the propane that was in the tank on the date of Settlement was a "fixture" that was included in the purchase price they paid for the home. Are the buyers correct?

ANSWER:  Because of new language in the Fixtures paragraph of the standard Offer to Purchase and Contract (Standard Form 2-T), the answer may depend on whether the parties used the 1/2015 revision or the 7/2015 revision of Form 2-T.

In the 1/2015 version of Form 2-T, paragraph 2 lists the various items that are deemed fixtures and are included in the purchase price. The list includes "fuel tank(s) whether attached or buried and including contents, if any, as of Settlement". At the end of the laundry list of items, the parties are given a blank line on which to note any items that they want to exclude from the pre-printed list of fixtures. A "NOTE" at the end of paragraph 2 reminds parties, in all capital letters: "FUEL TANKS AND ANY FUEL IN THEM WHICH ARE NOT TO CONVEY SHOULD BE NOTED IN THE BLANK ABOVE."

If your sellers signed the 1/2015 version of Form 2-T, and did not note the contents of their propane tank in the blank space in paragraph 2, then those contents were conveyed to the buyers as a fixture and the sellers should pay the fuel provider's invoice.
In the 7/2015 version of Form 2-T,  the language describing the fuel tanks and their contents that are deemed fixtures has been significantly revised. That language now reads as follows: "fuel tank(s) whether attached or buried and including any contents that have not been used, removed or resold to the fuel provider as of Settlement."

Because of this new language, if the contract signed by your sellers was the 7/2015 version of Form 2-T, then they were free to re-sell the fuel in their propane tank to the fuel provider prior to Settlement (subject to their obligation under paragraph 8(c) of the contract to provide working utilities through the earlier of Closing or possession by the buyer). This means that if the buyers used the 7/2015 version of Form 2-T, any re-sold propane that was still in the tank on the date of Settlement was not deemed a fixture and was not included in the purchase price, and the buyers will have to pay the fuel provider's invoice themselves.

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