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Who Pays Utilities in a Foreclosure?

by Jann Seal, studioD

Owning a home or renting one involves contracting for certain services to be provided, such as water, gas, electricity, garbage pickup and sewage. Payment for these utilities is the responsibility of the owner, or his tenant. If the owner abandons the property, he is still responsible for utility services. When the property sells and a new owner assumes title, the new owner becomes responsible for these services.

The Foreclosure Process

It takes anywhere from several months to several years for a foreclosure to be completed. If you’re living in your home during the foreclosure process, you must still cover your utility bills. Tenants usually pay utilities during their tenancy, depending on their agreement with the owner. Before abandoning the property, cancel all the utilities. Some services, contracted through your city, cannot be cancelled. Send the service provider a letter saying you’ve abandoned the property. However, it may still bill you until a new owner is recorded.

Tenant in Residence

If you have a tenant living in your home while it goes through foreclosure, he pays the agreed-upon utilities, even when title transfers to a new owner. At that point, the new owner must uphold the lease, depending on your locality. The new owner cannot turn the utilities off prior to the conclusion of the lease. Federal, state and local governments have assistance programs that help owners and tenants with delinquent utility bills.

Foreclosed Properties

After a property has been sold at a foreclosure auction, the new owner, usually an investor or lender, is responsible for paying utility costs, especially city services such as garbage, sewage and street cleaning. Water and electricity often become the responsibility of the real estate agent assigned by the new owner to sell the home, and many utility companies offer a “landlord” program allowing the electric to be turned on for a specific time without a large deposit being made. The agent pays all costs and is reimbursed from the owner of record.

Buying a Foreclosure

Some cities allow utilities to be turned on for a home inspection without incurring large deposits, while other utility companies put excessive roadblocks in the way of inspections. If the owner of record refuses to turn utilities on for an inspection, the potential buyer may have the option of having them turned on in his name. A liability comes with doing this and the buyer may have to sign an addendum by which he assumes liability if anything goes wrong while the utilities are operational. Check with your agent before any inspections are scheduled to be sure utilities are turned on.

About the Author

Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.

Photo Credits

  • Ablestock.com/AbleStock.com/Getty Images