Are You Responsible for the Previous Owner’s Unpaid Water Bill?

When you purchase a new home, the last thing you want is to be saddled with the previous owner’s unpaid utility bills. Unfortunately, in some cases, new homeowners have found themselves facing exactly that predicament.

If the prior owner failed to pay their final water bill, can the utility company come after you for it? Here’s what you need to know about your potential liability for the previous owner’s water debt.

How Unpaid Water Bills Can Become Your Problem

In most areas, water service is provided by a municipal utility company or other local governmental entity. These public utilities have special powers that private companies don’t have.

One of those powers is the ability to place a lien against the property for any unpaid water bills. Just like a mortgage or property tax lien, this encumbrance attaches directly to the home.

If the lien isn’t paid, the utility company can foreclose on the property in order to recover what they’re owed. This means you could actually lose your new home over the previous owner’s unsettled water bill.

Your Liability Depends on the Final Meter Reading

Whether or not you’ll be held responsible largely comes down to the final meter read at the time of sale.

• If the meter was read – You should be in the clear. The final bill will reflect the seller’s actual usage up until the time you took ownership. As long as they paid that bill, you shouldn’t owe anything additional.

• If the meter wasn’t read – Any usage that occurred between the last reading and the sale date will be erroneously billed to you. Depending on how long that gap is, it could add up to a hefty bill.

Unfortunately, final readings don’t always happen during real estate closings. TheClosing water may have been shut off, making it impossible to get a read. Or the utility company may not have sent someone out in time for settlement.

Either way, the buyer ends up being charged for more than their share of usage.

Steps Buyers Can Take for Protection

As a buyer, there are precautions you can take to avoid being stuck with the seller’s water debt:

• Review the title report – The preliminary title report should list any existing water liens on the property. This will tip you off to potential unpaid bills.

• Schedule a final read – As the buyer, you can request that the utility perform a final meter reading a day or two before closing. This ensures an accurate final bill for the seller.

• List as a closing requirement – Add language to the purchase agreement stating that a final meter read and payment of the last bill is required prior to closing.

• Inspect payment records – Ask to see the previous 12 months of water bills paid by the seller to spot any gaps that would indicate missed payments.

• Place funds in escrow – If there’s any doubt about unpaid bills, you can have the closing agent place extra funds in escrow to cover any last-minute liens that arise.

Options for Disputing Previous Balances

If you do end up being billed for the previous owner’s usage, don’t assume you’re out of luck. Here are some ways to contest those charges:

• File a dispute with the utility company and provide evidence that you just purchased the home. Request that any prior balances be charged to the previous account holder.

• Check if the utility company has an policy about unpaid bills and new customers. Some have restrictions on trying to collect from new owners.

• Hire a lawyer to fight the utility company’s claim against you. An attorney may be able to successfully argue that you shouldn’t be held responsible.

• Contact your title insurance company. They may be able to cover legal fees or pay the lien amount if it qualifies under your policy protections.

How to Avoid This Headache in the Future

To keep other buyers from going through this headache, it’s important that real estate agents and closing professionals take steps to prevent unpaid water bills from slipping through the cracks. Here are a few best practices they should follow:

• Confirm that all final meter readings are completed before settlement and have documentation of the final read.

• Review the last 12 months of water bills for abnormalities or non-payment periods.

• Add specific language to purchase contracts mandating a final meter read and utility account payment by the seller.

• Flag any existing water liens that appear during the title search process.

• Advise buyers on their right to review utility records and payment history.

• Hold off on recording the deed until the final water bill is verified as paid.

With proper precautions by real estate and title professionals, new homeowners can rest assured they won’t get stuck paying for the previous owner’s water usage. While utility companies may try to stick buyers with these bills, savvy agents can help ensure their clients don’t unjustly end up on the hook.