According to my husband who is a firefighter, they shouldn't be in the same structure as propane tanks vent fumes, and generators [electric] produce a spark when starting. If there are fumes and a spark, you can get an explosion. He said there should be a code so check with your fire marshall.

I may be wrong, but I thought each state had regulations about placement of propane tanks. You should be able to contact your propane dealer and have them come out with the regulations for your area.

We are in The Bahamas with few regulations. The situation has existed for 8 years, but the covering structure is about 1 year old. It is all outside the house, but shares a house wall.

This is the information we used recently when helping a customer with a tank. We are in U.S. - North Carolina - so this is specific to our state. It does help to see the issues but will not address what to do to make your set up more safe. Hopefully you can contact someone there that can give you guidance. Would make me nervous as well.

http://blueridgeenergies.com/customer-service/84-where-can-my-tank-be-located/

If you think about it, unless your generator is powered by hydro or wind, it is impossible to separate it from a flammable gas. This picture may make a point as to how important the specifics are in this case.

The roof and enclosure, however, are violations specifically spelled out in the usual codes.

The generator instructions normally say to locate it as close as possible to the fuel source (presumably propane), with no minimum distances shown. Transfer switches should have a minimum distance away from the tank and should be located near the electrical panel, not at the generator. An A/C unit in the vicinity of a propane tank is certainly not a good thing because of the relay contacts that spark every time the unit turns on. The generator itself should be built in such a way as to be able to run properly in the presence of the fuel it runs on with adequate ventilation. That doesn't mean that an inspector would allow a generator to be any closer than an A/C, but usually means that the min distance is also the max distance since the codes and directions conflict somewhat.

The National Fire Protection Agency (NFPA) Code 58 provides regulatory requirements as to the distance and location of propane tanks. The diagram below illustrates the tank size and distance requirements.

(a) Cylinders. (Portable Tanks)

Note 1: 5-ft minimum from relief valve in any direction away from any exterior source of ignition, openings into direct-vent appliances, or mechanical ventilation air intakes. Refer to 3.2.2.2(b).

Note 2: If the cylinder is filled on site from bulk truck, the filling connection and vent valve must be at least 10 feet from any exterior source of ignition, openings into direct-vent appliances, or mechanical ventilation air intakes. Refer to 3.2.2.2(d).

(b) Aboveground ASME containers.

Note 1: Regardless of its size, any ASME container filled on site must be located so that the filling connection and fixed maximum liquid level gauge are at least 10 feet from any external source of ignition (e.g., open flame, window A/C, compressor), intake to direct-vent gas appliances, or intake to a mechanical ventilation system. Refer to 3.2.2.2(d).

Note 3: This distance may be reduced to no less than 10 feet for a single container of 1200 gal (4.5 m3) water capacity or less, provided such container is at least 25 feet from any other LP-Gas container or more than 125 gal (0.5 m3) water capacity. Refer to 3.2.2.2(e).

I realize this is a very old thread, but I recently had the same exact question in California. I couldn't find anything in either state or local guidelines. All I found where the propane tank clearances from the house, a window, and property line. A local propane dealer said that a 500 gal tank needs to be 25 feet from an ignition source, like a well pump or generator. I don't know if that is codefied anywhwere or just a guidance, but that's the number I'm going with.