ATG frequently receives claims for unpaid utility bills. The majority of these claims are for unpaid water bills. These claims are especially prevalent in short sale transactions and transactions where the seller is a lender that foreclosed (REOs). It is common for the previous owners to not be current with their utility bills.

Water services can be provided by a municipality or county.  Regardless of who is providing the water services, in order for the water provider to have the ability to collect from a purchaser, a lien must have been recorded.  The relevant statute for water services provided by a municipality is 65 ILCS 5/11-139-8. That statute provides that "the municipality has no preference over the rights of any purchaser, mortgagee, judgment creditor, or other lien holder arising prior to the filing of the notice of such a lien in the office of the recorder of the county in which such real estate is located . . .”

For water services provided by a county, the relevant statute is 55 ILCS 5/5-15021. That statute has similar language to the language quoted above.

Similarly, for a purchaser to have title insurance coverage for the water bill a lien must have been recorded. Without a recorded lien, an unpaid utility bill does not fall within the Covered Risks of the Owner’s Policy of Title Insurance. 

Even though the statutes specifically provide that there is no priority over a subsequent purchaser, it is common for a municipality to attempt to collect the delinquent charges from a purchaser. Accordingly, a prudent purchaser should contact the municipality and inquire as to whether there are any outstanding water charges before the closing. 

If you have any questions regarding unpaid water bills, please contact the ATG Underwriting Department, legal@atgf.com, 217.403.0020, or 312.752.1990.