Public utility lean?

I purchased a HUD home early in 2009 to rehab and flip. I got all the utilities switched over in to my name and turned on. The rehab went well and the home is currently listed for sale.

I just received a letter from the City of Toledo's Dept. of Public Utilities indicating that I owe $1,200 for unpaid sewer, water, and garbage.

The letter indicates that they will certify the unpaid amounts to the County Auditor and it will be added to the property taxes.

Number 1.) I have records documenting all of my payments
Number 2.) I've owned the property for 9 months, there's no way I could have accumulated $1,200 in bills even if I wasn't paying.

Obviously, these fees are from either the owner (prior to HUD) or HUD.

I can't be held responsible for this bill, right?

The water company never indicated that there was any outstanding balance on the account when I had the utilities switched in to my name.

I'm going to call the dept. of public utilities today, but does anyone have any additional advice?

Thanks in advance! :D

Edited: 06/26/2010 at 10:24AM

Jamie Keeton

Title Representative · Fort Lauderdale, Florida

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Icon_minipost Nov 05 '09, 09:01 PM

Hey there!

Hopefully I can get you started in the right direction. First, you will want to get a breakdown from the utility company that shows the time period that the invoice covers. You also want to find out when this invoice/bill was first released or made available. If it was before you took ownership then you might have something to work with.

There are several questions that you will want to look at.

1) Was this bill available and/or assessed at time of closing or prior to?
If yes, then you should contact the closing agency to determine why they didnt pay these on the seller side of HUD at closing, it is very possible that they missed this utility invoice. This would be your best case scenario and what we hope for.

2) If the bill was not available prior to closing and wasnt released by the utility company until after you took ownership, you would need to check in your purchase contract to see what it states about future "invoices/assessments". Some contracts state that any future invoices not due or assessed at time of closing will be the buyer's responsibility. If that is the case, then you have a hard argument to make in your defense.

Some closing agencies also have a hard time getting all utility invoices from the cities so they sometimes generate a "Hold Harmless" that protects them from being responsible for any missed utilties, so check your closing documents to see if anything of this nature was signed by you at closing.

I hope this helps...

Edited: 06/26/2010 at 10:24AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Nov 05 '09, 09:04 PM

Contact the title company who did the transaction. They should have researched and found these bills, and, if they are from the previous owner, gotten them paid as part of the transaction. If they did research them, were told there were no bills, though, these could be excluded by their title policy.

In many areas, water bills are "lienable" and can result in a lien against the property. That's the case here. In that case, yes, you can end up stuck with the bill. Don't know about sewer. Trash is not lienable here, but if its provided by the city, it might be there.

Certainly call the city and get their explanation. Then call the title company. You may need to get your own lawyer involved.

Edited: 06/26/2010 at 10:24AM

Jon Holdman, Flying Phoenix LLC

Roy H.

Real Estate Investor · Monclova, Ohio

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Icon_minipost Nov 05 '09, 09:16 PM

Thanks for the help so far!

I'm looking at my purchase agreement now and all the addendums I had to sign. I have a form from the National Home Management Solutions.

Towards the end of the document, it states "The Broker is responsible for getting final water and sewer readings and bringing evidence of any unpaid water and sewer balances to settlement."

So based on that, those should have been taken care of by HUD prior to closing, right?

The entire bill is lienable here in Toledo.

Edited: 06/26/2010 at 10:24AM

Ralph S.

Real Estate Investor

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Icon_minipost Nov 05 '09, 09:18 PM

I doubt you have much to worry about, if it is audited, and they discover you didn't own the property when these upaid utilities were incurred, you shouldn't be charged. I'd call and just let them know when you purchased the property. It's public record and they can confirm on their own. They probably billed you in the hope you would just pay the outstanding balance.

I've pushed back when a tenant vacates and leaves the electric company holding the bag for unpaid electric. They send me a bill, and I simply explain I'm not obligated to pay anyone else's bill, and they will have to chase after the tenant, not me.

You can also check the HUD-1 Settlement statement from when you purchased the property. Any outstanding taxes, city utilities, etc. that were outstanding at that time of sale should have been listed and paid from the seller side of the HUD-1.
Your special warranty deed should provide title without the possibility of such prior debts or liens, and the title policy would require all such outstanding debts be paid either before closing or with the sellers funds after closing.

Edited: 06/26/2010 at 10:24AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Nov 05 '09, 09:46 PM

I have to disagree with Ralph on this one. If its lienable, and there's nobody else to pay, you're going to get stuck with it. I also have pushed back on the electric company on bills for tenants who bugged out, and didn't have to pay. But that's not lienable. Water is, and I've been stuck with tenant water bills.

Your purchase contract doesn't matter as much as the closing documents. Dig out the packet from the closing and go through that. Ideally, the bill would have been found and paid out of closing. This can be a hassle, though, and take time. The title company just might have some money in escrow for this bill, or, it might explicitly be the responsibility of the listing agent or the seller. They may also have included a time limit, which I doubt would be nine months. Look though those document and call the title company, once you've verified its really not your bill.

If you've not paid any bills for these services during the nine months you've owned the property, a $1200 bill is not out of the question. With lawn sprinklers, a Feb-Nov water/sewer/trash bill of $1200 would be quite reasonable here in Denver. I seriously doubt your water is nearly as expensive in Ohio, though, but you could have a leak.

Edited: 06/26/2010 at 10:24AM

Jon Holdman, Flying Phoenix LLC

Ralph S.

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Icon_minipost Nov 05 '09, 11:19 PM

I have to agree to Jon's disagreement, simply on the basis of being a lienable item as opposed to a collections affair, but I still don't think the OP should or need be held accountable in the end.

The buyer is not responsible for the outstanding property taxes (another lienable item) at the time he purchased the property from HUD.

When I was playing Realtor in WI, taking a water meter reading myself, as listing agent, and getting the final water/sewer/garbage billing onto the HUD-1, along with making all the utility name changes, etc., was all part of the
program. It went right along with collecting lien waivers from any contractors that had done work on the property in the six months prior to the sale (another lienable item and a title insurance requirement),

That so many people; broker(s), lawyer(s), title/escrow people missed this one item that is part of every real estate transaction I've ever been involved with has to be viewed as a gross error and ultimately should fall on someone else's shoulders, be it the broker(s), lawyer, title company or their errors and omissions insurance policy.
IMHO.

Edited: 06/26/2010 at 10:24AM by Ralph S.

Roy H.

Real Estate Investor · Monclova, Ohio

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Icon_minipost Nov 05 '09, 11:24 PM

Thanks again to all that have responded.

The title company was very apologetic. They asked me to scan and email a copy of the bill. 30 minutes later I received an email indicating that they've been in touch with the Dept. of Public Utilities and that the title company is awaiting an OK from HUD to pay the bill.

I'll keep my fingers crossed this is a quick and painless process from here on out... I'll keep you posted!

Thanks again.

Edited: 06/26/2010 at 10:24AM

Roy H.

Real Estate Investor · Monclova, Ohio

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Icon_minipost Nov 06 '09, 01:16 AM

double post. sorry.

Jamie Keeton

Title Representative · Fort Lauderdale, Florida

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Icon_minipost Nov 10 '09, 02:26 AM

That is great news. If HUD says "no", require the title company to cover the payment. Sounds like they are confirming there was an over sight. Good job!

Edited: 06/26/2010 at 10:27AM

Roy H.

Real Estate Investor · Monclova, Ohio

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Icon_minipost Nov 19 '09, 09:57 PM

Everything is all set. Payment was sent last week, water company received.

Now I just need to sell the darn house!

Also.. I have no idea why/how I misspelled "lien" in the subject line.

Edited: 06/26/2010 at 10:35AM