Sellers demanding fuel costs at closing

With the recent soaring cost of propane fuel, we’re receiving more Legal Hotline calls about disputes involving unused gas in propane tanks. Typically, the seller is demanding that the buyer pay a pro-rata share of the most recent bill to fill the tank. The buyer argues that pro-ration of propane or any heating bill is not required by the Standard Agreement of Sale and that he is entitled to all remaining heating and cooking fuels at the time of settlement.

Sellers have claimed support from paragraph 4(c) of the Standard Agreement which provides for the pro-ration of “water and/or sewer fees, together with any other lienable municipal service fees.”  Buyers correctly point out, however, that under the Personalty Clause in paragraph 7, “any remaining heating and cooking fuels stored on the property at the time of settlement” are included in the sale.

With propane bills often exceeding $1,000, it’s understandable that the seller may want to recoup part of the expense. The prudent listing Realtor® will address this issue when reviewing paragraph 7 of an offer. Whether the seller will seek to modify this provision of the offer depends on a number of factors, including the amount offered, length of time on market, the quantity of fuel remaining in the tank and so on.

Some propane suppliers can also confuse the issue. One supplier I spoke to advised that if a selling homeowner elects to “sell” the remaining propane, the supplier will purchase it at fair value. The company will not remove the remaining propane but allow “its propane” to remain in the tank and then will offer to sell it to the buyer. While the seller may have promised that all remaining fuel becomes the property of the buyer, the provision cannot be enforced if the fuel is not owned by the seller. Whether the buyer will prevail on a breach of contract action is less than certain and space does not permit a full analysis of the competing claims and defenses that would be heard. And as far as I know, propane companies are not inclined to visit a property before settlement and take out the propane that it is “buying” back from the seller. If a company is willing to do so, I suppose the seller would have a very good argument that he owed the buyer nothing as the agreement provides only that the “remaining” fuel be conveyed to buyer.

However the issue may be resolved between a buyer and seller, the lesson is that Realtors® need to address the matter with their respective clients so there are no questions as to how the transaction will proceed and no recrimination when a buyer or seller is unhappy.