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California Foreclosures and Utility Bills- What Steps Homeowners Can Take To Avoid or Reduce Liability After The Sale

California homeowners facing foreclosure are right to be concerned about whether their mortgage is a non-recourse loan, or if they will end up personally liable for the loan. However, some foreclosed Californians are surprised to find that they may be liable for utilities after the trustee’s sale, when they no longer own the property. Experienced Sacramento and El Dorado real estate lawyers are seeing former owners being pursued by utilities for bills charged after they lost the house.

How It Works

In this problem there are two kinds of utility companies; the local government agency, and the private or quasi-public utilities. Local governments, such as City and County, may provide and bill for services such as sewer, water, garbage, and street cleaning. The non-government utilities provide electricity, gas, and other services such as phone or cable. In the case of government agencies, there are local ordinances that govern how they bill the consumer. Usually the agency is notified by the County Assessor when a deed is recorded which changes ownership of the property, and this is the legal trigger by which they change who they bill for the utilities. The agency is bound be the Assessors determination; an example is Sacramento City Code section 13.12.010

Why A Problem Now?

1150487_property_for_sale_3.jpgBut now foreclosing lenders are not recording the deeds immediately. While in the past the trustee’s sale deed would be recorded within a few days (and still is if an investor buys the property), if the lender takes it back, they have no incentive to record. Big banks now own plenty of properties due to foreclosure, and the resale market is flooded. Why should they care about recording? It can be months before they record the deed and the assessor reports the change in ownership to the agency. But, as I explained on Sacramento Ch. 13 “Call Kurtis” show, there is nothing the former homeowner can do to record a change of title. Meanwhile, the local agency keeps billing the original owner who may have already moved out because they don’t own the property anymore.

What’s the Troubled Homeowner To Do?

1. Make sure you shut off utilities that you can- such as closing the main water valve to your house, unplugging electrical devices, and turning off heaters, air conditioners, and thermostats, and sprinklers.

2. As to the non-governmental utilities, you can contact them and let them know you are moving and arrange to change your utilities, or at least shut them off at the house. There is usually a fee charge to shut off the service.

3. As to governmental agency utilities, some provide a shut off service for a fee. But there are some services that have a mandatory continuous billing, such a garbage, street cleaning, or sewer. You can try approaching them after the foreclosure sale, but they may be constrained by ordinance.

If you get billed and don’t pay, you may face a sympathetic judge in resulting collection action, but you are still involved in a lawsuit.