You’ve spent the first month living in your new home and you couldn’t be happier.
However, when you go to check the mail, you notice a most unwelcome surprise. The city indicates there is an amount owing from the previous owner’s bill.
Your first thought might be malicious intent on the side of the seller, them trying to get away without properly taking care of their bills. However, chances are that this is probably not the case. The most likely scenario is that the previous owner's bill was never sent to them, or, on occasion, the municipality did not process the change of ownership in a timely manner.
Commonly, bills such as water and property taxes are connected with the property, while utilities such as hydro and natural gas are associated with the consumer. Therefore, while a title changes ownership, water and property taxes continue to accumulate charges to the account associated with the property even as the owner’s name is changed on the accounts. This common mistake sometimes leaves the new homeowner with the leftover bill of the seller.
If you find yourself in the situation of having to deal with a previous owner's bill, worry not, below we’ve outlined the exact steps you should take to resolve things.
- • Water bills and property taxes are associated with a property instead of a customer like utilities. This means you will sometimes see arrears on your water bills and property taxes from previous property owners.
- • To deal with an arrears on your water bill contact your lawyer and have them contact the seller to request payment.
- • Dealing with property tax arrears are more common on new homes and require your lawyer to contact the builder’s lawyer to adjust.
- • While arrears on your bill are a common post-closing issue and are often easy to solve, it is an excellent example of the benefits of title insurance.
What Should You Do with Arrears on Your Water Bill?
If you notice that there are arrears on your water bill from a previous property owner, the first thing you should do is contact your real estate lawyer and provide them a copy of the bill. Your lawyer will then contact the seller’s lawyer, who will then contact the seller directly to request payment of the bill.
If you do not receive a reply from the seller you are left with two options. If you have title insurance, you may submit a claim to your insurer. If you already paid the bill, the title insurer will reimburse you directly. If you did not pay the bill, the title insurer will pay the bill on your behalf. However, if you do not have title insurance, your choices would be to either take the seller to court which would be costly and time consuming, or pay off the bill yourself.
What Should You Do with Arrears on Your Property Taxes?
Property tax arrears on existing homes are rarely an issue after closing because they are known and adjusted at closing. However, if they are discovered, contacting your lawyer and following a similar format as you would for the above water bill situation is the best scenario.
However, if the property you are purchasing is a new home, then it is likely that the property taxes need to be adjusted with the builder after closing. It typically takes several months for a new property to be assessed. Once that happens, the new owner will receive a supplementary property tax bill.
When you receive your supplementary property tax bill, we recommend you contact your lawyer to ensure everything is in order before contacting the builder’s lawyer to properly adjust the bill between the parties.
More often than not, the builder will pay their portion of the bill to the new owners to reimburse them for paying the entire bill. Each builder has different policies in adjusting for property taxes therefore it is usually best to leave discussions up to your lawyer when getting reimbursed.
Adjusting after closing for arrears on your bills is often a common post-closing situation and most of the times can be resolved fairly quickly.
If all sides are cooperating, then the adjustment can be taken care of quickly and seamlessly. However, it’s recommended you always consult with an expert when dealing with these issues to avoid any mishaps. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.1