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Does this sound right?

Posted by kudzu9 (My Page) on
Fri, Jun 19, 09 at 0:10

I live in the Seattle area. A friend of mine just purchased a home at auction that she intends to refurbish and re-sell. After she purchased it, she found out that the previous people who had owned it and walked away from the house had left unpaid about $5000 in utility bills (electricity, water, and garbage). She is being told by the utilities that she is now responsible for these bills, and she can't get utility services until she pays the former owner's bills. Does this sound right, or is it just some bureaucrat trying to get money out of her with no legal basis? Any advice?


Follow-Up Postings:

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RE: Does this sound right?

I can tell you around here there is no way that would fly. Once someone vacates a house, regardless of the reason, those bills (utilities, etc) are still debts owed by them and usually collections goes after THEM.


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RE: Does this sound right?

If the companies put liens against the property and not the owners, I would imagine your friend is responsible. But, this should have been found on the search that was done prior to purchase. Correct???


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RE: Does this sound right?

Utilities companies establish accounts against a name not a property. So, unless Seattle is different they have a social security number and other details which would allow them to begin collections against the prior owner. Your friend should be able to establish a new account with a simple deposit, if not just get an attorney involve or customer advocate group.

Can you imagine if you couldn't establish a telephone or mobile phone service because the prior owner of that number didn't pay bills. Or can't buy a used car because the prior owner never paid his gas credit card or state tax/fees for the license plate.


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RE: Does this sound right?

Years ago, a local rural water coop would refuse to connect the water for a new homeowner until previous balances were paid;

if the new homeowner argued for too long, the coop would pull the meter & charge the new homeowner something like $1500 to install another one.

They got away with it because they weren't a public utility;
they were a coop.

Your friend might call your state's attorney general's office.


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RE: Does this sound right?

Most municipalities that I'm aware of include water, sewer, & trash removal in the same category as real estate taxes & they DO lien the property. That would make the new owner liable to clear the lien in order to receive services. If the municpality provides the service...they can lien the property. For instance, if they clear your property of weeds because you're not maintaining the grounds...they can lien the property for that service also.

Electricity & gas have lien rights in some states. I'm unaware of any phone or cable company that has lien rights but that sure doesn't mean there are not any???

/tricia


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RE: Does this sound right?

My experience is that responsibility for utilities transfers with title. That is, you are only responsible for the utilities on and after the day you take title to the property. Before that, the former owner is responsible.

I think the utility company believes your friend needs the utilities to move in and will be desperate enough to pay. I've done this when the unpaid bill was in the tens of dollars since it's just not worth the fight. For a fix and flip, she is not moving in or selling immediately so she can wait. I would not pay a $5k bill without a huge fight.

This doesn't help her now, but when you buy an REO, or any house for rehab, you should call the utility companies to find out if there is any money owed. Banks are notorious for not paying their bills (taxes too, I'll add). The purchase contract must state who pays, whether or not a lien was filed.

Any liens against the property should have been uncovered by the title company. This is why you have title insurance. I'll guess the utility company didn't file a lien.


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RE: Does this sound right?

Here ya go...

Just like every other place I've ever worked or lived...Seattle's water & sewer charges follow the property & not the owner. So, if a balance remains unpaid they may lien the property & not release the lien until the account is paid in full. It doesn't matter who currently holds title to the property.

/tricia

Here is a link that might be useful: Seattle's water & sewer liens


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RE: Does this sound right?

"Just like every other place I've ever worked or lived...Seattle's water & sewer charges follow the property & not the owner. So, if a balance remains unpaid they may lien the property & not release the lien until the account is paid in full. It doesn't matter who currently holds title to the property."

Except that whomever auctioned the property did not convey a clean title.

Go after them immediately.

If you purchased a title insurance policy they should have found the liens. Call the title insurer immediately.


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RE: Does this sound right?

The property might well have been sold 'subject to' any existing liens. Happens all the time.

The title policy could also have been 'subject to'. If not listed as an exception then the title company should take care of the lien...assuming the purchaser bought title coverage.

/t


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RE: Does this sound right?

"If not listed as an exception...."

OH! What is that?
That's why it pays to have someone, who knows the technical aspects of real estate and the associated ins' and outs' of buying properties, especially "the good deals".
Good catch triciae.


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RE: Does this sound right?

In the nearby city, where I once owned an investment property, I had to go to city hall for what amounted co-signing for utilities for the person who was occupying my house. IOW, if the tenanats defaulted on their utility payments, guess who got to pay? What I'd love to know is how in the world did those companies allow an occupant to accrue 5K worth of charges and not shut their utilities off before the amount got obscene?


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RE: Does this sound right?

The utility company does not need to file a lien. Since they seem to have the power to refuse service as long as there is an unpaid bill listed against the property, they have all the leverage they need. Filing an actual lien, absent a law requiring it, would just be an unnecessary expense for them.


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RE: Does this sound right?

This is one of the pitfalls of buying at auction if you don't know exactly what you are doing. The buyer should have purchased title insurance and had a complete title search done.


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RE: Does this sound right?

I would check with the attorney general in your state. There are just too many various laws for us to give you advise that applies to you unless we know all the specifics (town and state, did you do a title search, are their liens on the property, who is the utility, etc.).


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