Undisclosed Sewage Treatment Capacity Charge

5 Replies

Hi BP Family!  I'm writing to get some insight from any landlords who may have experienced a similar situation as myself.  About 1 year ago, my husband and I bought a rental property (single family home) from a flipper.  We rented out the house and all was well.  Recently, we received a past-due Sewage Treatment Capacity Charge for the rental, mailed to our primary home, totaling ~$500 (includes late fees, etc.).  The statement threatened a lien if left unpaid. The total sewage charge will cost ~$9,000, payable in 15 years on a quarterly basis. 

I immediately did 3 things:  1.) I phoned the Sewage Dept to obtain some history/background and explained that this is the first time we're ever hearing about such a bill; 2.) I emailed our realtor and sent him a screenshot of the bill and asked how the Title co. didn't catch this; 3.) I paid the ~$500 bill in order to avoid any further penalties.  

What I learned from these calls is that the "former, former" owner (the owner before the flipper who sold us the house) in fact signed a document agreeing to the sewage capacity charge.  However, the flipper (last owner before us), bought this property at auction and never made any payments toward the sewage charge.  Our realtor also consulted with the Title co. and came up empty-handed.

My reason for writing this is two-fold:  1.) I want to warn other investors to be mindful of such a charge and perhaps ask their realtor to be as thorough as possible to help ensure these charges are brought to light before the transaction ends; and 2.) see whether any other landlords have any clever ideas for possible courses of action we can take aside from what we've already done.  

Obviously, we'll have to raise the rent on the tenants come renewal....Anyway, thanks for reading!

@Ana Marie B. It seems to me that this might have come up in a municipal lien search, or at least in the settlement where we (and I think everybody) requires final water, sewer and gas bills to be paid off from the proceeds at closing.

From the way you've described the charges, it sounds like a sewer betterment charge, which should have been disclosed in the listing and should also have shown up on the municipal lien certificate (MLC).

Somebody dropped the ball.  It sounds like it was your attorney or title company.

Check your owners title insurance policy for specific exceptions — this agreement should be listed if it runs with the land. 

Sometimes the terms of these agreements are expressly included (or at least referenced) in the deed as well. 

@Charlie MacPherson and @Tom Gimer - Thanks for responding.  I agree that the title company dropped the ball.  We purchased this property in WA where it's not customary to use attorneys.  Would you or anyone else have advice on other steps we can take from this point on? 

Our realtor recently requested a copy of the title report and unfortunately, it shows nothing about this sewage charge.  Very odd.  The Sewage Dept. rep. did tell me that this "septic to sewage" conversion process started back in 2010 (long before we owned the property), but that due to a "billing cycle breakdown," they didn't know to bill our property until an audit in Jan. 2017.  Essentially whoever owned the property at that point in time was responsible for the past-due sewage bills from Oct. 2016 onward.  

@Ana Marie B. It might be time to run this by your attorney.  

In principle, it seems to me that the prior owners would have some liability for charges incurred during the periods in which they owned the property.  You will most likely have to pay the betterment moving forward.

If the town doesn't agree to chase the prior owners, they may stick you with the bill, just because they can.  Then you'll have to chase the prior owners and try to collect from them yourself.

One good thing about a "septic to sewer conversion" is that you won't have to worry about a failed septic system again - though for safety and liability sake, you may want to fill in the old septic if it hasn't already been done.

This bill should be pro rated and adjusted between the owners of the property over the 15 years from when it originally became due and payable. That means the annual payments are yours to bear until 2025 or so, but others should pay for the period prior to your ownership.

If it makes financial sense to hire an attorney and send a demand letter to prior owners, I would do that.