Unbelievable Water Bill- Detroit

[Saul L.]

Since I began investing in Detroit a few years ago I cannot get my head around so many things regarding the way things are done over there - but this one definitely is a contender for taking the cake. 

End of April I sold one of my section 8 tenanted homes. This home has had the same tenant continuously since bought about 2.5 years ago. The sale closed and I have received  payment - Title company held the usual $300 in escrow for final water and sewage bill. This has taken about a month to extract from the city and I couldn't believe it when I saw it. The bill is for $5,353 pertaining to usage for 11 days in beginning May ?!?. A search of the billing history shows zero billing on the house every single month since I bought it. 

The only thing I can make of it at the moment is that the city didn't bill, the tenant didn't pay, the PM never checked and someone is going to take a fall (hopefully not me). (Even if this bill is for 2.5 years usage it seems too high?) I cant see the tenant being capable of paying. 

How do you see this panning out ? Can the buyer come back to me considering closing and transfer have taken place and the bill period is post closing ? Have any of you ever run across this kind of situation ? Any insight welcome.

[Joel Owens]

Saul you need to go to their website right away and print screen and copy everything showing they haven't billed in 2.5 years time with a zero balance.

Since it was a single family property the tenants had the water bill in their name correct? It wasn't included in the monthly rent payment to the landlord? It's usually not unless a multi family complex etc. 

The local government it seems had an oversight. That's tough for them but they caused it by a mistake it sounds like. They can't just waive a magic wand and go OOPS just forget our mistake and pay up.

Some areas even if the tenant is billed directly the utility company on a default tries to lien the property. I have even seen laws on the books in certain states where the water lien survives the foreclosure process in some cities.

If the city is smart they will write down the bill to a normal level, get the money, and everyone moves on.

Buyer should have never closed without a statement in writing signed by that company showing the balance. Was there a statement saying XXX amount is escrowed the 300 at closing to pay the final utility bill but if balance comes back higher the seller will pay the difference?

Might want to pay for a real estate attorney litigation consultation about 100 to see what might happen. They charge too much to litigate but a consult only to get insight might make sense. Some on the phone if you catch them on a good day might just give you some pointers for free.

No legal advice given.