Tenants didn't pay their utilities, now properties liened.

Tenants didn't pay their utilities, now properties liened.

Rental Property Investor · Los Angeles, CA · Member since 2009 · 22 posts · 12 votes

I recently purchased 5 duplexes in Tampa, FL. All leases state clearly tenants pay all their own utilities. (these leases where in place when we purchased) Seller confirmed tenants pay all their own utilities. All separate electric and water meters. We called City utilities and verified water accounts in tenants' names. Never put any accounts in my company name. Never received ANY correspondence from City utilities about non-payment. Investment plan was to whole-tail properties. We purchased off market, light clean up of units, addressed tenants immediate issues, had our management get things organized, remove bad tenant etc. We went to sell and the City put over $6000 in outstanding water bills for 6 of the 10 units as upcoming liens on the properties and now showing on HUD as expense to Seller(now us). Anyone dealt with this? Remember: we have written leases signed, stating tenants pay all utilities. We never adjusted their accounts etc. We never received any notices of non payment of water. City never turned off any water. This was all over 6 months in Tampa, FL. How can the City just lien my properties because tenants don't pay their water bills? It'd be like Ford liening my property because tenants didn't pay their car payment...?? We're in process of ordering docs from City of Tampa providing the information and history of these accounts to show that the tenants opened the accounts and didn't pay water. The $6000+ being held back in escrow until resolved. Can we be responsible for these amounts? Oh, and we purchased through lender and received clear title and insurance policy upon purchase. There was no outstanding water bills at our purchase.

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Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
7y
Unfortunately many areas consider the water bill to be an account that runs with the property. Why? because its the government's money and goddamn they will get it. In that situation, you are ultimately responsible for the water bill, with the ability to seek reimbursement from the tenant on your own. Of course, this is a great learning situation as you now know that your future due diligence should include confirming that the water bill is paid up before purchasing. I'm sorry that this does not help you now. Likely your only recourse is to get an attorney to go after all 6 tenants. (You may have more leverage if they still live there. Your post was unclear.) You can also contact the water company and plead with them for some sort of settlement.
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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    7y

    I don't think this is possible in my state.

    Have you contacted the water company to see what they say about the situation?

    You should consult an attorney to see what your options are.

  • Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    7y
    Unfortunately many areas consider the water bill to be an account that runs with the property. Why? because its the government's money and goddamn they will get it. In that situation, you are ultimately responsible for the water bill, with the ability to seek reimbursement from the tenant on your own. Of course, this is a great learning situation as you now know that your future due diligence should include confirming that the water bill is paid up before purchasing. I'm sorry that this does not help you now. Likely your only recourse is to get an attorney to go after all 6 tenants. (You may have more leverage if they still live there. Your post was unclear.) You can also contact the water company and plead with them for some sort of settlement.
  • Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @Brian Crowe . My city allows water to be placed in tenants name, but if the tenant moves out of the city then the water bill stays with the property. If the tenant moves within the city, the water bill moves with the tenant. I'm not liking your chances with the city. But, what are your choices of recouping that money from the seller and/or the tenants? Maybe a little better, but still not good. 

  • Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    7y

    Before we close my attorney makes sure all the water bills & taxes are paid or its subtracted from the settlement.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    this is very common in many markets.. when I was in Detroit for instance funding purchases for my vendors most had water liens on them from the previous tennats up to 8k per property in some instances and the properties were being sold for 6k and the bank had to bring in 2k to get the darn things out of their name. 

    its also common in cities that have MF and one meter .. 

    And AS @Pat L. mentioned in the upper east where this is really common.. its why closings take a little bit of time since they have to chase down utl bills that run with the land regardless if the tenant was suppose to pay.

    you can sue the tenants  but good luck with that one.. and lastly be thankful its only 6k. 

  • Lender · Huntington Beach · Member since 2008 · 120 posts · 57 votes
    7y
    That does not seem fair.
  • Member since 2019 · 24 posts · 12 votes
    7y

    @Rich Littlefield

    "That does not seem fair." 

    Agreed.  One of the best pieces of advise we received when starting out with our rentals was to keep the utilities in our name and bill the tenants for those utilities (the tenant pays for all utilities).  We do not see how the homeowner is responsible for the usage of the tenant but we also do not want liens placed on our homes.  So, in this manner we know what is going on and have control over the results.

  • Real Estate Broker · Detroit, MI · Member since 2014 · 384 posts · 149 votes
    7y

    @Brian Crowe I have had a lot of experience with this. One of my buyers had to pay a $14k bill that was not discovered until after closing. Another client had to pay $8k because the pipes burst in a vacant home and the water just ran. In both cases even with significant push back the owners had to pay the bill. The municipality has total control!

  • Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    7y

    Now you know why many landlords have the utilities in their name, even if they back bill the renters monthly.  

    You should just pay it before they add interest or penalties to the bill.  Its yours now.  Try court to get a judgement against the tenants, but good luck collecting on it.

  • Joey AndersonPro Member
    Investor · Tampa, FL · Member since 2016 · 5 posts · 6 votes
    7y

    @Brian Crowe

    Talk to an attorney.

    For future reference, as somewhat already mentioned, is to make sure that there are no liens on the property prior to sale. Once you have a tenant, have them provide an up to date statement of there water bill upon renewal and/or vacating before returning their deposit.

    Hope you get it resolved!

    -Joey

  • Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
    7y

    That’s an insane amount of water not being paid.  

    You need to check with the city and find out if that is legal for the area.  Seems like the city is trying to retrieve money and they know they won’t get it from the tenant. So next best thing is from the landlord.  If you push you will most likely get it removed.  

  • Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
    7y

    another reason why california is nice.

    I asked the util companies what happens when tenants don't pay their bills.

    They said they go after the tenant. Here, the utility companies do credit checks and require SS#. That's the way it should be.

    They wouldn't let unpaid bills run out of control like that, into the thousands$$$$.

    util companies should run like wireless phone service providers- got good credit? we'll give you service. Got crap credit? you pay a deposit.

  • Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    Somebody wasn’t practicing due diligence ! Don’t ever assume tenants are doing the right thing . Now you understand why landlords pay the water bill themselves In Areas where it’s lienable

  • Scott RohwederPro Member
    Investor · Lakeville, MN · Member since 2016 · 10 posts · 6 votes
    7y

    @Brian Crowe I had the same thing happen. By the time I found out, the city had already added the expense to my tax bill. Since then I have added to my lease agreement that I will not return a tenants deposit until I verify with the city that all utility bills are closed out.

  • Scott RohwederPro Member
    Investor · Lakeville, MN · Member since 2016 · 10 posts · 6 votes
    7y

    @Brian Crowe, I forgot to mention that some cities will send the property owners a “ghost bill” if you request it so you can monitor if tenants are paying the bills. This is also helpful in giving you a heads up if your tenants are having financial issues.

  • Realtor · Concord, NH · Member since 2017 · 48 posts · 30 votes
    7y

    @Brian Crowe Im sorry to hear that! In my state of NH, it's the responsibility of the tenant and does not fall back on the landlord, as long as the lease clearly states tenant pays utilities etc. Thats why the tenants call and get the electric put on in there name, so I thought.  Good luck, I hope this is easily resolved. 

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Brian Crowe the rules on this vary by state and even city. There are many places where unpaid water bills will get attached as a lien. I have read several discussion threads on BiggerPockets where people ended up with several thousand dollar bills. I have read some where the water bill went back two years! My guess is the reason they let it go months and allow large bills to accrue is because they know they can put a lien on the property, so they don't care. Any other service that has to actually collect money will turn it off after non payment.

    In my city they cannot lien a property and require deposits for water. If the tenant doesn't pay the bill, they shut it off.

    The $6000 worth of water for 6 units over 6 months seems excessive to me. That averages $166 per tenant per month, which would be very high for my area unless it included yard watering, pool fill, excessive baths, etc. 

    It is possible they are trying to stick you with water bills that were accrued before you took ownership, which you should be able to fight.

    Lesson learned here for people buying properties is check local laws on utility billing. If you are investing in an area where unpaid bills can become liens, it is best to verify bills are current when taking ownership.

    If I invested in an area that could lien the property on water, I would pay the water myself and include it in rent.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Joe Splitrock:

    @Brian Crowe the rules on this vary by state and even city. There are many places where unpaid water bills will get attached as a lien. I have read several discussion threads on BiggerPockets where people ended up with several thousand dollar bills. I have read some where the water bill went back two years! My guess is the reason they let it go months and allow large bills to accrue is because they know they can put a lien on the property, so they don't care. Any other service that has to actually collect money will turn it off after non payment.

    In my city they cannot lien a property and require deposits for water. If the tenant doesn't pay the bill, they shut it off.

    The $6000 worth of water for 6 units over 6 months seems excessive to me. That averages $166 per tenant per month, which would be very high for my area unless it included yard watering, pool fill, excessive baths, etc. 

    It is possible they are trying to stick you with water bills that were accrued before you took ownership, which you should be able to fight.

    Lesson learned here for people buying properties is check local laws on utility billing. If you are investing in an area where unpaid bills can become liens, it is best to verify bills are current when taking ownership.

    If I invested in an area that could lien the property on water, I would pay the water myself and include it in rent.

    in some markets the utl providers simply wont shut off the utls they don't want people freezing to death or dying.. so they never shut them off. and well you guessed it professional tenants know it.. !!!

  • Specialist · Nashville, TN · Member since 2019 · 187 posts · 83 votes
    7y

    @Brian Crowe

    There are two kinds of water accounts:

    Lienable and not lienable.

    Not lienable are on the tenant.

    The ones that you are talking about are ones that are lienable, usually if you deal with tenants you should be aware of it and put the utilities on the property name and charge the tenants separately for it.

    Just pay it and take it as a learning experience, it will be a waste of time suing the tenants.

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Joe Splitrock:

    @Brian Crowe the rules on this vary by state and even city. There are many places where unpaid water bills will get attached as a lien. I have read several discussion threads on BiggerPockets where people ended up with several thousand dollar bills. I have read some where the water bill went back two years! My guess is the reason they let it go months and allow large bills to accrue is because they know they can put a lien on the property, so they don't care. Any other service that has to actually collect money will turn it off after non payment.

    In my city they cannot lien a property and require deposits for water. If the tenant doesn't pay the bill, they shut it off.

    The $6000 worth of water for 6 units over 6 months seems excessive to me. That averages $166 per tenant per month, which would be very high for my area unless it included yard watering, pool fill, excessive baths, etc. 

    It is possible they are trying to stick you with water bills that were accrued before you took ownership, which you should be able to fight.

    Lesson learned here for people buying properties is check local laws on utility billing. If you are investing in an area where unpaid bills can become liens, it is best to verify bills are current when taking ownership.

    If I invested in an area that could lien the property on water, I would pay the water myself and include it in rent.

    in some markets the utl providers simply wont shut off the utls they don't want people freezing to death or dying.. so they never shut them off. and well you guessed it professional tenants know it.. !!!

    I know in some colder climates it is illegal to shut off gas or electric during certain months for that reason, but usually water isn't included.

  • Rental Property Investor · Los Angeles, CA · Member since 2009 · 22 posts · 12 votes
    7y

    @Mario Am - Wow, got it. How have I never heard of lienable and non lienable accts?  I should have answers back shortly from City.  I don't think it's going to be the outcome I'm after.  Now I'll know to always ask about the account types. Thank you.

  • Specialist · Nashville, TN · Member since 2019 · 187 posts · 83 votes
    7y

    @Brian Crowe you do not choose the account types, every city/county/state chooses it for the water consumer. Depends where you at.

    Goodluck

  • Investor · Melbourne, FL · Member since 2017 · 159 posts · 116 votes
    7y

    One of the last houses I purchased recently had money owed to county utilities from 2 and 3 owners ago.  This was found during title search.  Seller had to pay them at closing.  I keep utilities in my name and collect with the rent extra money for an escrow fund.  At lease end tenants get refunded  or pay any remaining balance owed for water/sewer/ trash.  Not much extra work and one less thing to worry about at lease closeout.

  • Investor · Tampa, FL · Member since 2016 · 679 posts · 288 votes
    7y

    Hello Brian Crowe. You sound like a Rental Property Investment Group? You bought duplexes in Tampa Code 26-36 at our Utilities Department which is Water and Sewer. I look at messages about Tampa in Bigger Pockets and I have not researched enough to know if there is a FAQ Section that has these requring concerns with Code etc. We need one as I only answer these kinds of questions. I sold a 12 year Rental House, 3/1/5 that I worked on by myself for 9 months, in May for an $80,000 Profit that I will use my CarryForward Deductions to make it Tax-free. I found that in my Title Search that there were 7 Liens for past Water bills that were due. No one knows or wants to know what these are and how to deal with them here in Tampa. I use Stewart Title which is the only company in Tampa that is also the Title Insurance Company. My Sale needed approval by the next Mortage Company and they will not until those Liens are removed by the Utility Department. I needed a solution quick. In your case you may have used Cash or Hard Money or Investors Money or something that did not bring up the Liens and stop the Sale. Now, your stuck. You need to go to the Utility Department site. Open the two rules for Code Section 26-36. The one will show you what their Legal Department defines as their Right to charge the Owner for Tenants past Water Bills. The second will show you that they have a 4 Year Statute of Limitations which they will never obey. The next step is to call and find the lady who is responsible for this problem. I don't remember her name and number. You have to call and call and demand for the Manager if they stall until you get the contact person. Then, you have to prove that you were not the occupant of the duplex at the times of the unpaid bills. That means you have to have the signed Leases and maybe a Rental Manager contract to send her. She will give you printed readout of the dates and amount owed and you match them to the Tenants that were occupying each duplex apartment at that date. Once documented with an amount that you agree to because of the dates you have to get her to do her JOB. One probem is that you can have one Apartment that went vacant for a month or two while it was beging cleaned etc. and then rented again, but, Water and Sewer stayed on in the old Tenants name who didn't pay the bill for three months and moved. The City does not care to change their Code and only wants to get whomever ends up with the Lien to pay for the Deadbeats bills. So, it is "Divide and Conquer." It is a one on one, individual basis that they choose to do this Scam. The City of Tampa does not give a Hoot about us. You live in CA. You know what a nightmare downtown LA and SF are. I grew up in Palo Alto. When you get frustrated with the lady if she does not work this out for you and give you an official letter of Forgiveness, you have to call the Manager. I ended up with Stewart Title guy on a Conference Call with the Manager and the Lady to get a promise that the letter of Forgiveness was in the mail so I could make my Closing date. I hope that is enough. 

  • Rental Property Investor · Los Angeles, CA · Member since 2009 · 22 posts · 12 votes
    7y

    @Michael Haynes  Wow, thanks for the input.  Thing that is crazy is I know I sound like a newbie.  I live in CA now (don't invest out here), but I'm from Tampa and I've owned, flipped etc. hundreds of units in Tampa and all throughout FL. I even owned a property management company at one time. I've been doing this 12 years.  Can't believe this has never happened and never came up. I have to give a LOL just from typing this out. Ok, so I closed with a big, national hard money lender and did full title search with a very reputable company in Tampa I've done 100s of transactions with.  These water liens are ONLY from when I've owned the properties.  I have leases that tenants pay all utilities including water, that rolled over to me when we purchased. Yes, I called City of Tampa BEFORE I closed on them and made sure all utilities where in tenants names and not prior owner.  I always buy buildings that have separate water meters so I don't have to pay people's water if they wash cars for the neighborhood out front or take 5 hr showers etc. Someone posted on this thread that I should have checked every month if the bills were being paid. HA! We're a decent sized company and don't play parent to each tenant if they are paying their bills or not.  City would not have told me anyway as I was not the account holder! I had property management in place anyway.  Give me a break. If Tampa let these tenants call in, set up an account with their SS#, put down a deposit WHY would they not just cut off their water if they don't pay it!!  At least they should send a note to the ownership that the water is behind after 60 days.  Tampa just let it go for 7 months without saying anything, then Bam, stick me with tenants' water bills at the end.  Dumbest thing I've ever heard.  I'll take it as a $6000 lesson, but if you are hinting that it's someone not doing their job etc, and playing to the side of the "oh, poor tenants" I'm coming in hot. Thank you for the informative information.  

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