SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
Hi all,
I received a notice from the City that the last tenant in one of my SFR's located in IN has not paid their last sewer bill and they have been unable to reach the tenant about this. I have 30 days to pay it else a lien will be put on the house.
I have a property manager managing this property. The tenant moved out in early August. Shouldn't the property manager check that all the final utility bills are paid before giving back a deposit? I believe in Indiana the deposits need to be returned within 45 days, which seems long enough to ensure the final utility bills are paid, unless there is some legal (or other) reason that would prevent property managers from knowing this information.
Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
12y
I'm a IN REI also, and I pay all of my own sewer bills because of this exact scenario. Include them as a hard cost to the property when calculating rental rates.
I agree 100% that the PM should know what utilities are the tenants responsibility and check that they have been paid prior to releasing the Sec Dep.
Its my opinion that your PM dropped the ball on this and they should be responsible to pay the sewer bill, and chase down the tenant for the amount owed.
Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
12y
@Michaela G. in Indiana, at least every part I have lived in, the sewer are owned by the city, and the city has the ability to lien the property for unpaid sewer bills, and any other utility owned and supplied by the city. Water is the only other utility I have heard of that the city will own.
Any time I buy a new property in a new area I check with the local municipality to find out what utilities are lienable. All utilities that can cause a lien against a property should be paid for buy the LL, and be considered a hard cost used to calculate the rental rate for the property.
Sewers are typically a fixed price, or they are calculated by the water usage. If its the later then a allowance should be calculated into the rent and any amount over this allowance should be billed to the tenant on the next months rent. This of course needs to be in the lease.
SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
12y
I believe it is legal because the notice came directly from the City.
I would rather not pay these bills because that isn't standard in the area I am renting and it would probably add another 10% to my costs. It seems easy enough for a property manager to check the bill is paid before sending back the deposit, Indiana law clearly says the deposit can be used for "unpaid utilities", however I didn't know if it was standard practice for property managers to do this or not. It would seem like it is?
I'm going to check with my other property manager to see what they do about this, however they are located in a different state so it may not help much.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
12y
@Amie D. It's probably just going to be easier just to pay the bill than sit and fight about it. You can go after the tenant for the bill yourself but to do anything officially you'd have to take them to court. If you don't pay it you will end up with the lien, not them. I've had to mow yards for tenants before because they weren't keeping it up to code and the city charges $184 plus 18% interest per cut, most expensive lawn service in town which is immediately recorded as a lien. The problem with the property manager is by the time that bill becomes delinquent enough for the city to send the property owner rather than the account holder notice it would be past the deadline to return the tenant's security deposit. I guess you could ask the PM in the future to contact the city to make sure the sewer bill is current prior to returning any deposits.
On a side note, I miss Bloomington.......I had a great time there in college and it's been about 8 years since I've been back. Are you happy with the rental market there? I saw plenty of my friends trash some rentals (my neighbors tore out all of the drywall in the living room one late night because it was getting in the way while they were playing ping pong beer pong) there so I would be pretty scared to rent to college students there.
SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
12y
@Patrick L. If I end up having to pay it, fine, I'm not so much concerned about that as I am if the property manager was irresponsible in doing this, so that it doesn't happen again.
Bloomington is a great place for rentals, I own in an area more populated by community members and graduate students so I've had pretty good tenants, including a married PhD student/professor who stayed for 3+ years.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
12y
@Chris Adams you're probably right that in your area it is different than in Georgia.
With that said, in Atlanta the water company is also owned by the city and the law here states:
(c) A public or private water supplier shall not impose a lien against real property to secure unpaid charges for water furnished unless the owner of such real property is the person who incurred the charges.
(d) A public or private supplier of gas, sewerage service, or electricity shall not impose a lien against real property to secure unpaid charges for gas, sewerage service, or electricity unless the owner of such real property is the person who incurred the charges.
But the water company doesn't like the law, so they pretend that it doesn't exist and I've had them tell me in my face, with me bringing the law in, that this doesn't apply. Most people here don't even know that this law exists and they accept it at face value when they say that they're responsible for the bill of their tenant.
These days I just send them a letter with a copy of the law and threaten to sue them for willful non-compliance, if they don't adjust the bill. And they always do.
@Patrick L. If I end up having to pay it, fine, I'm not so much concerned about that as I am if the property manager was irresponsible in doing this, so that it doesn't happen again.
Bloomington is a great place for rentals, I own in an area more populated by community members and graduate students so I've had pretty good tenants, including a married PhD student/professor who stayed for 3+ years.
I'm sure by the time the property manager got wind of it the deposit had already gone back out. See if they'd be willing to verify with the city in the future prior to returning deposits and put a clause in your lease informing the tenants that they must pay their final sewer bill prior to their deposit being returned. They probably think they're just sticking it to the utility company and that it doesn't have any consequences.
I lived in an area full of undergrads who moved every year because it's easier to move than to clean the house.....plus once the carpets get too soaked with beer it gets kind of gross in there. I never stayed more than a year in any of my rentals. I wouldn't rent to college me. I know Bloomington is a great city with a lot of upstanding citizens for a college town so I'm sure you can find quality people, I was just curious if you were renting to undergrads because that would terrify me.
SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
12y
@Patrick L. it's just like anywhere else, screening tenants beforehand is the biggest factor. And researching where you buy. If you buy in an area flooded with undergrads who party.. that's what you are going to get.
That was my original question. Do property managers typically check if utilities are paid before sending deposits back, or no?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Interestingly, and news to me, is that California has a Public Utilities Code that prohibits public utilities from charging the owner for charges incurred by a tenant. If tenants have their own account, it's their bill and it cannot be charged to the owner or attach to the property.
I've paid a lot of water and sewer bills incurred by tenants and previous owners, but the water companies were always private water districts.
If it were me, I'd be looking high and low for an Indiana state law that addresses that issue. And if my PM weren't up to speed on such issues, I'd find a new one.
SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
12y
Ok, I just checked with my other property manager in KY, and they said also there the utility companies can hold the owners responsible for unpaid utilities in the same way.
They said they always check that the utilities are paid before the tenant moves out. It doesn't seem like an out of line expectation from my standpoint.
There is a bill to reverse the ability to put a lien on a house for a tenant's unpaid bills, but it was just introduced this year and I don't see action on it.
Ok, I just checked with my other property manager in KY, and they said also there the utility companies can hold the owners responsible for unpaid utilities in the same way.
They said they always check that the utilities are paid before the tenant moves out. It doesn't seem like an out of line expectation from my standpoint.
I agree 100% Amie, if the PM is responsible to release the Sec Dep then they should be certain any utilities that could be your responsibility have been paid. I feel these charges should be paid by the PM since they failed to check this prior to releasing the deposit.
SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
12y
The saga continues. The PM replied to my initial messages and said he would look into it and get back to me today, and asked if I could scan the letter and send it to him. So I did that.
Later, he replied that he could pay it out of the tenant's deposit, and then said he also had $192 as a balance left of that deposit that he could put into my bank account this week. I replied I was confused, as I thought the deposit needed to be refunded to the tenants within 45-days of move-out, and they moved out August 1. He said they never provided him with a forwarding address and so that rule is nullified.
Ok, that part is true about if they don't provide a forwarding address. Still, that's not really an answer to this issue, plus it seems shady. For one, had they provided a forwarding address, I'd be paying this bill, but only because they happened to not leave one, it "works out." Second, why am I just finding out about the balance of the security deposit now? If this issue hadn't come up, would he just have pocketed the remainder for himself?
Also is that what happens with "unclaimed" security deposit, it just goes to the owner? It seems odd for a $1K deposit that they would not have tried to retrieve it, even though there were other damages.
I have had the worst luck with PMs in that town. @Chris Adams or anyone else, if you can recommend anyone good there to me, please let me know! Thanks!
Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
12y
I wish I knew someone there Amie, but Im a bit to far away.
I agree with you, this company does not sound trustworthy at all. I can only imagine how often they are keeping security deposits. It sure sounds like he is making things up as he goes along. If anyone would retain the deposit, wouldn't it be the owner of the building?
I have been seriously considering starting my own PM company, unfortunately I would need to get a realtors license and find a broker and blah, its too much for me to worry about right now.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
12y
By law they would actually be required to turn the remaining security deposit over to the county, so that it can be held as unclaimed fund and potentially claimed by the former tenant.
That's only if there's money owed to the tenant. If there's an eviction or breaking of the lease that's a different story.
Real Estate Investor · Columbus, OH · Member since 2013 · 114 posts · 21 votes
12y
It sounds to me like a shady PM. Here in Ohio (my area anyway) water and sewer charges may be put as a lien against the property. There is actually a special form that the owner and the tenant must fill out in order for the tenant to be billed instead of the owner.
I do not pay my tenants water/sewer bill. They are required to put it in their name. I in turn get a copy of the bill telling me how much they owe each quarter that says "This is not a bill - your tenant has been billed" I also get a delinquent notice if they don't pay on time - if this happens I contact them right away and tell them they need to get it paid or face eviction. If they say they have paid I can call to verify. Same with when they move out. It is their responsibility to stop the service in their name - at which time it goes automatically into mine (again I am notified) and they get a final bill.
I do not return their security deposit until I call and get verification that their final bill has been paid. This is really not that difficult and something your PM should be doing before releasing any of the deposit IMO.
As far as including the water/sewer in the rent - I find this almost impossible as the bill can vary greatly and is not customary in my area.
This is why I am so reluctant to use a PM. I have heard about so many negative experiences with them.
SFR Investor · South Bend, IN · Member since 2013 · 342 posts · 56 votes
12y
I do not know if I can mention names directly on forum posts, but if it gets edited I will message you. Cres Properties, 513-561-7368, www.cresproperties.com, I believe they've been in property management since the early '70s, A+ with the Better Business Bureau, great references, statements on time every month as well as deposits, good communication. They only manage other people's properties so there is no preferential treatment of "theirs over yours". Really wish they managed in Bloomington, too. LOL