Philadelphia - Sheriff Sale Property - Water Bill Transfer?

Question

Hi BP,

Question: Does anyone have experience with back billing of water bills from properties purchased at Sheriff Sale?

Current Situation:

My partner and I current have a property under contract, cleared to close, but there’s a water meter issue. The bills for the past 12 years have been only estimates and NOT actual readings from the water bill. However, the seller from bought the property at the Sheriff Sale in 2016.

The title company we’re using on this deal is fearful of 12 years of back billing once we install a new meter and is therefore requesting the seller to escrow $30,000 to for any potential back billing of water, which makes sense because the title company doesn’t want to eat that cost after closing if that were the case.

We’ve checked with 2 other local title companies, who have said that since the current owner bought the property at sheriff sale in 2016, the water department will only back bill until 2016 because titles are promised free and clear at sheriff sale.

The seller doesn’t want to escrow $30,000 and is therefore holding up the settlement. He’s willing to escrow $5,000 ... but no more than that. Lastly, we do not want to extend 3 months to get a new meter installed, go through the billing cycles, to get the ACTUAL METER READING, because we are purchasing this property with a loan and would have to start over completely.

We have the option to take on the liability (any additional back billing of water bills) after the $5,000 that the seller is escrowing.

> Can anyone confirm in Philadelphia, PA that the back billing of water bills would only be up to 2016 for this property?

Steve Babiak · Answer

@Yuriy Skripnichenko - the seller should have done that already. And the seller really isn’t helping much here. The title company has limited choices: make an exception for coverage due to the water lien sticking the lien on the new owner, keep a deposit from the seller proceeds in escrow to cover the lien with return of amounts that exceed the lien, or delay settlement until the exact lien amount is known.

If this was a mortgage foreclosure, just like property taxes the water bill should have been paid before the lender received any proceeds. But that can be quite broken in actuality.

If this was a mortgage foreclosure, just like property taxes the water bill should have been paid before the lender received any proceeds. But that can be quite broken in actuality.

Jon Sanborn · Answer

@Steve Babiak There is a meter installed currently, but its not accurately reading usage, so yes, he has been paying on an estimated bill since he bought it in 2016. Like you said, its a mess. The seller refuses to escrow anything over $5k (which isn't enough for the potential risk for us or the title company to feel covered) So we are going to end up extending 3-4 months and just get a new meter installed

Steve Babiak · Answer

When that happens in the suburbs, the water company immediately wants to put a new meter in; a zero reading is a red flag to them that the meter might be broken. Of course, any empty houses during this pandemic will have only zero readings  unless there is some leak ...

Steve Babiak · Answer

I just RE-read this.

So this seller is getting water now without a PWD meter installed? I’m guessing that because the seller is paying on an estimated bill. What a mess.

I wouldn’t trust this seller one bit.

Jon Sanborn · Answer

Thanks for your responses guys, I'm Alex's partner on this deal.

@Yuriy Skripnichenko I've had to do the same thing you mentioned for different properties I purchased at sheriff sale in the past. Take the paperwork to the sheriff's office, to then get more paperwork, to then go to PWD, L&I, etc to get the file totally clean. As @Steve Babiak mentioned, why the seller hasn't done this in the last 4 years in concerning. Does he know something we don't? Maybe. What makes it tough is I can't go to the sheriff's office or the PWD right now to try to get more info with the shut down. If we could guarantee that when a new meter is installed that the back billing will only occur from 2016-present, we would be more comfortable closing the deal since we can get the seller to escrow $5k. (he has been paying on the estimated bill, and its a 3 bedroom with no laundry) BUT, the big unknown is if the PWD will try to back bill from the last ACTUAL meter reading, which was 12 years ago, since the foreclosure file is lost with the city. That is what gives so much unknown and uncertainty.

Steve Babiak · Answer

"Free and clear" from a sheriff sale?!?!

Not necessarily so, especially if there was a failure to serve notice to a lien holder.

But here's the thing. In Philadelphia, water and gas (PGW) are both municipal utilities, so IMO debts owed to them survive the sheriff sale, just like property taxes. I could be wrong, but that is my opinion. You might get better advice from people on the HAPCO forums, where they regularly transact inside the city - I don't.

And why didn't this seller fix this sort of thing over the past three years? I am suspicious ...

Yuriy Skripnichenko · Answer

@Alex Capozzolo

Usually when you buy from sheriff sale all municipal bills are paid off including water.

However, the process is broken. I bought 3 properties from the sherif sale and for all 3 I had to physically go to the sheriffs office and take a letter that the property was sold and the water liens paid. Then I had to physically take that to PWD and they would take care of that on the spot. However, the new owner will still be responsible for all water bills starting from the auction (sale) date, not the date the sheriffs deed was recorded.

Cheers,

Yuriy

Jon Sanborn · Answer

@John Mano Yep, you're in the same situation. Definitely prepare for when you do replace the meter for there to be a back bill.

John Mano · Answer

I have a SFR rental in Philly that's in similar situation where the meter looks really old and has no dial so I don't even know what the reading is.  Each month my bill shows zero usage so I'm only charged for service.  I'm dreading the day when I have to address this, smh.  The house was a bank foreclosure back in 2013.

Jon Sanborn · Answer

@John Mano That is a million dollar question. Ask anyone who works at the PWD and you won't hear the same answer twice. That's why there's a high risk involved. The water department is one of the most difficult/corrupt department to work with in the city. I'd love to know the answer to your question.

Philadelphia - Sheriff Sale Property - Water Bill Transfer?

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