This is likely to be a more specific post to the WA area, but it all depends on your local MLS and the forms used in your transactions. But, since this is both for agents and the public to check out, hopefully it will get people thinking no matter where they live and to do what is appropriate for their own locale.
In WA State we have statewide forms that are available to MLS members that are attorney drafted and approved fill-in-the-blank forms. These are copyrighted forms and not for public consumption or sale. The way agents are allowed to do what is a limited practice of law is by virtue of using only these forms.
One of these forms is called the 22K Identification of Utilities Addendum. This form often gets used to put general information about the utility companies that affect the property being sold, but if you really read the first paragraph of the document it says, “The names and addresses of all utilities providing service to the Property and having lien rights are as follows:”
So, what are lien rights? And who has them? Lien rights are much like the mortgage against your house. Basically, if someone files a lien against your property (such as taxes, deed of trust, mortgage, mechanics lien, etc), when you sell the property, then the lien must be paid off at the time of sale.
When it comes to utilities, the only companies that can file a lien against your property are those that are municipality based. For example: City of Seattle is the water company for most homes with Seattle addresses, they are a municipality based utility and can lien the property on unpaid bills – so if a seller forgets to pay their water bill and moves away without paying it, then the next homeowner will likely get stuck with that bill. I’ve met clients who in prior transactions, not with me and my team, had agents who didn’t use the 22K form in a sale. They ended up stuck with seller’s water bills, some as high as $500. It was definitely a surprise. Most other utility companies, such as Puget Sound Energy, go after the specific person(s) for unpaid bills and cannot lien properties because they are a for-profit business and not a government entity. The form 22K and the standard Purchase & Sale Agreement do have language stating that the Seller is still obligated to pay, but if someone skips town and doesn’t pay, as the buyer you’ll want to have some protection from municipality owned utilities to be paid off at closing out of the seller’s proceeds.
These issues mostly apply to residential, multi-family, and townhome properties that are not part of Home Owner Associations where some portion of the HOA dues/assessments are used to pay some utility costs. For condominium sales you’ll want to look to see what the HOA dues pay for because the Closing Agent (escrow) cannot close out a bill if it’s paid for by the HOA and not the seller directly. That’s why when I received an offer for one of my client’s condo based townhomes yesterday, we removed the 22K from the offer because it wasn’t necessary. We gave the utility company info for the ones the seller does pay, but there was no need for 22k in this situation as the HOA pays for water, sewer and garbage collection.
Even if someone has put the 22K form in your offer, don’t assume that because the information was filled out, that the Closing Agent is paying those off. If it’s non-municipality based, they can’t. Always check. Even more important to do so if you are dealing with a foreclosure or short sale property as these may have unpaid utilities along with the unpaid mortgage.
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