Recorded lien AFTER closing

Recorded lien AFTER closing

Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes

I purchased a property in Miami Dade a few years back. A year after owning it, a new tenant moved in and when she tried to turn the water service on, she was told there was a lien for unpaid water. The water company wanted $3000 before they would turn the water on. I paid it immediately so that the tenant could have water but then it took month of emails and phone calls to get to the bottom of the issue.

It turned out that prior to me purchasing the property, there had been some illegal tampering and excessive water usage. This occurred when the previous owner held title. I do not know why the actual lien was not recorded until years later but that’s what has happened.

I do have a document in writing outlining the dates of the unpaid water usage and tampering and also naming the prior owner as the one responsible. I do know that this isn’t covered by the title policy as only recorded liens are covered.

I guess my only option then is to lodge a small claims action a against the prior owner. However she had the property within an LLC and she dissolved that LLC after she sold the property. I am therefore concerned about the ability to carry out a claim and collect. It was a single member LLC, so assumably a disregarded entity.

Can anyone advise the best course of action?

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Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
6y

If you bought an owner's title insurance policy, file a claim.  Title insurance covers liens that were missed at close from when you bought property back to when God created the Earth.

See this reply in the discussion

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  • Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
    6y

    If you bought an owner's title insurance policy, file a claim.  Title insurance covers liens that were missed at close from when you bought property back to when God created the Earth.

  • Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    "If you bought an owner's title insurance policy, file a claim. Title insurance covers liens that were missed at close from when you bought property back to when God created the Earth."

    Try, but I think you're wrong, they only cover RECORDED (including lis pendens) liens at close.  Happens with mechanic's liens that get recorded after close a lot.  Which is why we put a big disclosure in our PSA to that effect.

    In addition, standard title doesn't cover existing unrecorded items that only an ALTA survey would show.

  • Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    "However she had the property within an LLC and she dissolved that LLC after she sold the property. I am therefore concerned about the ability to carry out a claim and collect."

    Well, she may be judgment proof, but I don't think that's an out for knowing illegal behavior - Lawyer time.

  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    I would be surprised if there ever was a recorded lien since there's really no need for one. The utilities company simply refuses to turn the water on until the account is brought current. If you had discussed it with the company before closing they might have waived or reduced the bill since it was incurred by someone else but since you paid it and so much time has gone by I doubt they would refund anything but it never hurts to try. Failing that, go back and read the contract and see if you might have any recourse against the Seller. If I'm correct about there not being a lien, I believe title to the property is and was marketable and I don't know what your cause of action against the Seller would be. I think you had the ability to check with the utilities company before closing to verify if there was a balance due. I also believe that's generally part of a purchaser's due diligence. However, if you decide to sue for damages I would probably bring a small claims action and name the LLC and the individual who signed the contract and deed and see what happens. I'm not an attorney and this is not legal advice, just one man's opinion.

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    6y

    Unpaid water is typically a lien, recorded or not. 

    Gimer Law516 Reviews
  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y

    Tom, at least in Florida the issue is not black and white.  In general an unpaid utility bill is not an automatic lien on the real property.  See the Florida AG's Opinion at this link.  

    http://myfloridalegal.com/ago.nsf/Opinions/7393CFA46E08E7DF85256221004ACD3E

    I haven't updated the research but believe it's still good law.

    However, if the utility provider is owned by a municipality and the capitol improvements were financed by bonds, then the unpaid bill may automatically be a lien.  See this AG opinion.  

    http://myfloridalegal.com/ago.nsf/Opinions/5057851BD3C0F41285256577005DE3B8

    Again, I believe it's still good law.

    I had a rental property where the tenant left without paying the final water bill.  When I found the water meter locked I contacted the government owned utility and explained the tenant, who had contracted for the service, had left and the utility immediately had the lock removed and restored the service.

    I don't know the laws regarding utility liens in SC well enough to comment on their right to a lien, but I've always found it's worth a call to first to find out the statutory basis for a claimed lien and if I agree with their right to a lien to try and negotiate a reduction in the amount demanded.

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Jason Dillard:

    If you bought an owner's title insurance policy, file a claim.  Title insurance covers liens that were missed at close from when you bought property back to when God created the Earth.

    Haha I wish! Unfortunately they only cover recorded liens and like any insurance company, they try to dodge paying out claims where and when possible.

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Peter Walther:

    I would be surprised if there ever was a recorded lien since there's really no need for one. The utilities company simply refuses to turn the water on until the account is brought current. If you had discussed it with the company before closing they might have waived or reduced the bill since it was incurred by someone else but since you paid it and so much time has gone by I doubt they would refund anything but it never hurts to try. Failing that, go back and read the contract and see if you might have any recourse against the Seller. If I'm correct about there not being a lien, I believe title to the property is and was marketable and I don't know what your cause of action against the Seller would be. I think you had the ability to check with the utilities company before closing to verify if there was a balance due. I also believe that's generally part of a purchaser's due diligence. However, if you decide to sue for damages I would probably bring a small claims action and name the LLC and the individual who signed the contract and deed and see what happens. I'm not an attorney and this is not legal advice, just one man's opinion.

     I just double checked now and it was indeed a recorded lien- recorded when I owned it but for the prior owners usage. What I find awfully strange is that the water company did turn the water on for me when I purchased it but would not turn the water on for the tenant many months later. So there was a long delay in the issue coming to light. The water company couldn't give an explanation about this, which was slightly frustrating. They just said that sometimes liens take a while to actualize. 

    And I absolutely did explain to them that this usage is not from me! I said I always pay my bills on time and I tried to mitigate the fine but they wouldn't reduce it at all. 

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y

    I had a rental property where the tenant left without paying the final water bill.  When I found the water meter locked I contacted the government owned utility and explained the tenant, who had contracted for the service, had left and the utility immediately had the lock removed and restored the service.

    I am amazed! You must have a lot of charm. Unpaid water charges stay with the property and therefor belong to the owner. I personally find this an unfair and incorrect system. They should belong to the person who's name is on the account. I once had a tenant who didn't pay their bill and the water service was cut off. The tenant then cut the lock on the meter and illegally used the water. The tenant moved out and I found out about the water charges which were now in the thousands with the all the added fines. 

    The expense then obviously fell to me. I did spend hours trying to negotiate and was able to bring the amount due down to a couple of hundred, which was purely for water usage and the fines were removed. 

    I now request tenants send me a copy showing their final water bill has been paid when they vacate. I don't refund the deposit until I see this proof. 

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    6y

    @Peter Walther In every state we cover, water is treated as a lien whether or not recorded. Pay current bill, escrow for usage, prorate final bill after closing. Here is the current law where the subject property lies:

    http://miamidade.elaws.us/code/coor_ch32_artvi_sec32-93

    Unpaid for 60 days... lien.

    Gimer Law516 Reviews
  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Nat C.:
    Originally posted by @Peter Walther:

    I would be surprised if there ever was a recorded lien since there's really no need for one. The utilities company simply refuses to turn the water on until the account is brought current. If you had discussed it with the company before closing they might have waived or reduced the bill since it was incurred by someone else but since you paid it and so much time has gone by I doubt they would refund anything but it never hurts to try. Failing that, go back and read the contract and see if you might have any recourse against the Seller. If I'm correct about there not being a lien, I believe title to the property is and was marketable and I don't know what your cause of action against the Seller would be. I think you had the ability to check with the utilities company before closing to verify if there was a balance due. I also believe that's generally part of a purchaser's due diligence. However, if you decide to sue for damages I would probably bring a small claims action and name the LLC and the individual who signed the contract and deed and see what happens. I'm not an attorney and this is not legal advice, just one man's opinion.

     I just double checked now and it was indeed a recorded lien- recorded when I owned it but for the prior owners usage. What I find awfully strange is that the water company did turn the water on for me when I purchased it but would not turn the water on for the tenant many months later. So there was a long delay in the issue coming to light. The water company couldn't give an explanation about this, which was slightly frustrating. They just said that sometimes liens take a while to actualize. 

    And I absolutely did explain to them that this usage is not from me! I said I always pay my bills on time and I tried to mitigate the fine but they wouldn't reduce it at all. 

    If it was recorded perhaps you should file a title claim.

  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Nat C.:

    I had a rental property where the tenant left without paying the final water bill.  When I found the water meter locked I contacted the government owned utility and explained the tenant, who had contracted for the service, had left and the utility immediately had the lock removed and restored the service.

    I am amazed! You must have a lot of charm. Unpaid water charges stay with the property and therefor belong to the owner. I personally find this an unfair and incorrect system. They should belong to the person who's name is on the account. I once had a tenant who didn't pay their bill and the water service was cut off. The tenant then cut the lock on the meter and illegally used the water. The tenant moved out and I found out about the water charges which were now in the thousands with the all the added fines. 

    The expense then obviously fell to me. I did spend hours trying to negotiate and was able to bring the amount due down to a couple of hundred, which was purely for water usage and the fines were removed. 

    I now request tenants send me a copy showing their final water bill has been paid when they vacate. I don't refund the deposit until I see this proof. 

    Nothing special about me, the worst they can do is say no and sometimes they do but sometimes they say yes..

  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Tom Gimer:

    @Peter Walther In every state we cover, water is treated as a lien whether or not recorded. Pay current bill, escrow for usage, prorate final bill after closing. Here is the current law where the subject property lies:

    http://miamidade.elaws.us/code/coor_ch32_artvi_sec32-93

    Unpaid for 60 days... lien.

    The Miami-Dade Ordinance seems to fall squarely in line with the 94-57 AG's Opinion but I doubt Miami-Dade asked for an opinion on theirs.  Based on what I've read, if litigated I think it wouldn't hold up but most people wouldn't pay to find out.  I've had many arguments with municipal employees including County Attorneys about their right to a lien.  Sometimes I could convince them their position was wrong, sometimes I couldn't.  On the good side since they're claiming authority under F.S. 173 I believe the collection procedure is limited as set forth.  

  • Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    @Nat Chan the water company likely has a dispute process. Follow it. It’ll take months, but you might be surprised.

    I phoned with the water company here about a meter that read zero for 3 years with the prior owner. They kept telling me that the bill goes with the property. I filed my dispute, had an in-person review, where they told me ‘oh, it’s not your usage, you don’t need to pay’.

    Could have saved hours of hassle on both sides if they said that up front. But in the end, it was a $1,200 savings. Not enough to lawyer up over, but enough to fight it. Other than taking months, it was easy!

  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    6y
    Originally posted by @Tom Gimer:

    @Peter Walther In every state we cover, water is treated as a lien whether or not recorded. Pay current bill, escrow for usage, prorate final bill after closing. Here is the current law where the subject property lies:

    http://miamidade.elaws.us/code/coor_ch32_artvi_sec32-93

    Unpaid for 60 days... lien.

    Many agents I've dealt with find the process of confirming the status of utilities bills too onerous so the contract it out with a company that specializes in lien searches and bills either the Seller or Buyer 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Steve Morris:

    "If you bought an owner's title insurance policy, file a claim. Title insurance covers liens that were missed at close from when you bought property back to when God created the Earth."

    Try, but I think you're wrong, they only cover RECORDED (including lis pendens) liens at close.  Happens with mechanic's liens that get recorded after close a lot.  Which is why we put a big disclosure in our PSA to that effect.

    In addition, standard title doesn't cover existing unrecorded items that only an ALTA survey would show.

    For new construction you can get early issue policy that will cover liens post close.. but you need to bring all your lien releases to title company and they have to sign off.. before they will issue it.. it was a pretty big deal coming out of the GFC  its calmed down now if the title company knows you/or your company well.. WE dont have to do it anymore but we surely did for about 5 years there.. it was standard practice to send over our lien releases along with the EM contract.  The Lenders to get Lenders title policy required the early issue endorsement.. I think in Oregon material men have 75 days post CO to file a legit claim.. after that its unlawful and they have to sue for unjust enrichment claim.

  • Investor · Colorado Springs, CO · Member since 2011 · 322 posts · 238 votes
    6y

    @Nat Chan

    Why buy title insurance if they don't cover you for claims such as you describe? I've bought homes without title insurance from the Trustee auction which requires me to do some due diligence and buy a $5 O&E report from the title company. Never had an issue. ( don't construe this as advise) In fact as long as I've been investing in REI I have never come across any stories where a title company covers a loss. @Jay Hinrichs do you have any stories where a title co covers a loss?

  • Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
    6y

    I have had a title company pay off a missed lien that was about 100k.  I've done 500 transactions so that's not that frequent.  However, it was easier to roll the premium in as an expense for each deal, over coming up with 100k that one time.  If you have the ability to cover a big expense, stay self insured and don't buy title insurance.  It's like me not insuring my paid off truck that's worth 60k and knowing I may have to replace it out of my pocket.  I might wreck it, so it's insured. 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Marcello Di Gerlando:

    @Nat Chan

    Why buy title insurance if they don't cover you for claims such as you describe? I've bought homes without title insurance from the Trustee auction which requires me to do some due diligence and buy a $5 O&E report from the title company. Never had an issue. ( don't construe this as advise) In fact as long as I've been investing in REI I have never come across any stories where a title company covers a loss. @Jay Hinrichs do you have any stories where a title co covers a loss?

    OK what I am talking about is called EArly issue title insurance and might be just an Oregon thing.. one main reasons is the lenders require it on new construction.. BECAUSE properly file Materialmen liens are super liens they jump ahead of everything but tax's and IRS or state income tax liens. 

    Foreclosures are totally different.. your buying without title insurance and we know that.. I have bought hundreds of properties at trustee sherrif sales none with title insurance of course.. and i have bought well over 200 properties of sub too pre foreclosure with NO title insurance.  its a risk we take. 

    I have had in 45 years  3 title claims that all paid off..  2 were land lock situation.. one just cleared this summer after 3 years of litigation the title company paid for.. 10 acres 3 buildable lots value 600k.. land locked value Zero.. :) ..  They sued the neighbor and worked out an arrangement with the state to get me an insurable access.. I suspect they paid well over 50 to 75k in legal fee's for me. 

    Another was also one where they missed he right away and they bought me a right of way not sure what it cost them on that one.

    Had one last year in Indy were they missed that the house had major code violations and had to be either moved or demo'd..  they paid me off on that one 90k .. 

    So 2 of the title claims last 5 years..  the other one was about 20 years ago..   On the props I bought without title insurance I did fine on.. never lost on those.. I have lost on foreclosures though.. again another story for another thread..  lots can happen .. cheap E O reports don't catch everything that's for certain.. but when your buying like we were if we lost  on a deal was not the end of the world.. some investors that would be devastating..  

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Mike McCarthy:

    @Nat Chan the water company likely has a dispute process. Follow it. It’ll take months, but you might be surprised.

    I phoned with the water company here about a meter that read zero for 3 years with the prior owner. They kept telling me that the bill goes with the property. I filed my dispute, had an in-person review, where they told me ‘oh, it’s not your usage, you don’t need to pay’.

    Could have saved hours of hassle on both sides if they said that up front. But in the end, it was a $1,200 savings. Not enough to lawyer up over, but enough to fight it. Other than taking months, it was easy!

     Now that is great advice, Mike. I hadn't even thought about lodging a complaint with the utility company. Realistically, I think they are the party most at fault here because this situation occurred out of their inaction and deviation from correct procedures. 

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Marcello Di Gerlando:

    @Nat Chan

    Why buy title insurance if they don't cover you for claims such as you describe? I've bought homes without title insurance from the Trustee auction which requires me to do some due diligence and buy a $5 O&E report from the title company. Never had an issue. ( don't construe this as advise) In fact as long as I've been investing in REI I have never come across any stories where a title company covers a loss. @Jay Hinrichs do you have any stories where a title co covers a loss?

     Marcello, I couldn't agree with you more. To be honest, I'm not a big believer in any kind of insurance because I've seen countless people file legitimate claims and be denied for frivolous reasons. 

    I have always bought a title insurance policy with every property I purchased but it certainly does leave you wondering 'why bother'. If you actually read through the policy, there are so many exclusions. I've had plenty of issues come up post-closing. You sit down and read the policy and your issue isn't covered. 

    And yes, with everything on public record, you can easily to your own title search and map out the whole chain.

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Jason Dillard:

    I have had a title company pay off a missed lien that was about 100k.  I've done 500 transactions so that's not that frequent.  However, it was easier to roll the premium in as an expense for each deal, over coming up with 100k that one time.  If you have the ability to cover a big expense, stay self insured and don't buy title insurance.  It's like me not insuring my paid off truck that's worth 60k and knowing I may have to replace it out of my pocket.  I might wreck it, so it's insured. 

     Wow, what was the 100k missed lien?

    I think the $500 or so title insurance policy is a negligible and necessary transactional expense. Possibly if you're picking up dozens of 10k properties, you could run your own title search if you have plenty of years of experience. 

  • Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    6y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Marcello Di Gerlando:

    @Nat Chan

    Why buy title insurance if they don't cover you for claims such as you describe? I've bought homes without title insurance from the Trustee auction which requires me to do some due diligence and buy a $5 O&E report from the title company. Never had an issue. ( don't construe this as advise) In fact as long as I've been investing in REI I have never come across any stories where a title company covers a loss. @Jay Hinrichs do you have any stories where a title co covers a loss?

    OK what I am talking about is called EArly issue title insurance and might be just an Oregon thing.. one main reasons is the lenders require it on new construction.. BECAUSE properly file Materialmen liens are super liens they jump ahead of everything but tax's and IRS or state income tax liens. 

    Foreclosures are totally different.. your buying without title insurance and we know that.. I have bought hundreds of properties at trustee sherrif sales none with title insurance of course.. and i have bought well over 200 properties of sub too pre foreclosure with NO title insurance.  its a risk we take. 

    I have had in 45 years  3 title claims that all paid off..  2 were land lock situation.. one just cleared this summer after 3 years of litigation the title company paid for.. 10 acres 3 buildable lots value 600k.. land locked value Zero.. :) ..  They sued the neighbor and worked out an arrangement with the state to get me an insurable access.. I suspect they paid well over 50 to 75k in legal fee's for me. 

    Another was also one where they missed he right away and they bought me a right of way not sure what it cost them on that one.

    Had one last year in Indy were they missed that the house had major code violations and had to be either moved or demo'd..  they paid me off on that one 90k .. 

    So 2 of the title claims last 5 years..  the other one was about 20 years ago..   On the props I bought without title insurance I did fine on.. never lost on those.. I have lost on foreclosures though.. again another story for another thread..  lots can happen .. cheap E O reports don't catch everything that's for certain.. but when your buying like we were if we lost  on a deal was not the end of the world.. some investors that would be devastating..  

    Fascinating stories, Jay. When is your book coming out?

  • Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes
    6y

    100k was an open mortgage from 2 owners back in chain of title.

  • Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y
    Originally posted by @Tom Gimer:

    @Peter Walther In every state we cover, water is treated as a lien whether or not recorded. Pay current bill, escrow for usage, prorate final bill after closing. Here is the current law where the subject property lies:

    http://miamidade.elaws.us/code/coor_ch32_artvi_sec32-93

    Unpaid for 60 days... lien.

    Not in Portland.  Besides if it's unrecorded, how is it a lien WRT to how title handles it under standard title?

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