I have an off market lead. It is a homeowner who just removed renters from a property. The renters had not paid the electric bill (in their name) for some time. The electricity is off. The owner thinks that the electric company will simply go after the renters and once he sells it (to me or someone else) the electricity will be turned back on. My thoughts are very different and this is an issue attached to the house, not some renters who have no attachment/funds. Someone here should know.
Simply call up the electric company and ask them. They'll tell you. Most of the times the electric bill follows the account holder. Not so with water bills and municipalities. Worst case scenario you and the seller agree to split the cost of the unpaid electric. Can't be more than a couple of thousand bucks, if that.
The story I'm told is when he went to the electric company they told him to pay it but would not give him the amount. He believes it to be over $1000... if it follows the renter, why would they not turn the power back on for the homeowner? This is new territory for me.
"They told him to pay it but would not give him the amount"? Good luck with that. If it does go with the renter they should turn the power back on. If I was you, I'd call the electric company myself and ask them what their policy is in such situations. You're not asking for any personal account information so they should tell you.
In my city, and all the cities around me that I’m familiar with, a delinquent electric bill would follow the tenant and have zero effect on the property. As @David Cruice pointed out, a water bill would likely be different (that would attach to the property in my area).
The only way to know for sure about this bill is to call the electric company and ask what their policy is. They should be able to tell you.
Sounds like this should "follow" the tenant. I only know the story I was told about the company saying pay up but not giving an amount. I should be able to find out what company and give a call.
@Jason D. would it be normal then for the utility company to ask the landlord/homeowner to pay the outstanding bill?
I will call the electric company today, however what @Thomas N. said is my fear. The electric company is not turning power on. The current owner is assuming they will turn it on once he sells the house (possibly to me). However the last thing I need is to take possession of a house that the electric company will not turn on power due to some multi thousand dollar bill that no one feels they have to pay. It's good to know the consensus is the bill follows the renters, we will see what the utility company says. Time to wait on hold for 45 mins to an hour! Lol
@Brian Pulaski I'm sorry this entire thread is a complete waste of time. You're asking us, when you can simply call the utility in question and find out. I'm not sure what a fellow investor, not from your town and with no experience or professional history with this exact utility company can offer you.
The first thing I ever learned about business "Take advice from the experts." In this case the utility. This is the part of due diligence when you actually have to do diligence. (Yeah, I did that on purpose).
Ask the utility. Please be smart enough to realize if you just call in you're talking to a minimum wage employee whose jobs is made a million times easier if they get you off of the phone. Ask, then ask again, and then get something that will actually hold up more than "Susie, the manager told me."
Now, for the utility itself, since it's tied to the SSN of the account holder, it should, in theory follow them. The next occupants of the home should be able to start new/transfer existing service to that address. However, you should be smarter than to take mine or anyone elses word for it who's posting on this thread.
The easiest way to find out, is just to call the utility and inquire about setting up new service at X address. Tell them you're looking to see if you have a deposit. It's a soft credit check, has no impact to your rating and they'll tell you right away if there's a problem.
If the balance is the responsibility of the home owner, then you two need to talk. I personally wouldn't be too willing to negotiate, but that's up to you.
Take advice from the experts. Get tax advice from YOUR CPA, legal advice from YOUR attorney, etc.
Anything you learn here or anywhere else for that matter should always be validated several times over...as a good rule of thumb.
Keep us posted @Brian Pulaski ...utilities are always a PITA both in needing service and for "gotcha" costs either through purchase or through ongoing operations.
The property I just purchased, I had probably 7 or 8 conversations with the previous owner because the bills simply didn't make sense, and of course they forgot or declined to disclose certain things.
Also ask yourself at the end of the day, lets say the bill is $1000 but this is a good deal and you want to make money. If you treat this like a closing cost of purchase, what's the impact to your overall bottom line in YR1? How about after 5 years, or 10? If its anything more than a fraction of a percentage, I doubt it'll impact it tremendously.
On said property, I am dealing with plumbing issues not even a month into ownership. But I've got $6000 set aside per year for CAPEX, maintenance, and vacancy (no vacancy so far). This stuff happens but if its a good deal and you're prepared for these things, at a reasonable rate, its just stuff to deal with. I can solve an electric bill, but new wiring, new plumbing...far more onerous. You know what I mean?
Account Closed I flip houses, so there is no multiple years for this to be made up. If the bill is $1000, $2000, $4000... and somehow is on me to pay if I want lights on and power, then it comes out of the bottom line.
Thanks for the replies
Folks, this is location-specific.
Most people think that only water/sewer bills are liens. The truth is that all sorts of utility bills can become liens if the local jurisdiction passes a law permitting it.
@Robert McDowell no this is O and R. I didn't make any progress with calling today, but the fact that the utility company would not put the power on for the owner makes me wonder why. Hopefully I can speak with someone about it soon.