When you are buying a home, one question that comes up for many buyers is what happens to utility bills at closing. Buyers don’t want to be stuck with unpaid utility bills from the seller, and sellers want to make sure that they don’t pay more on utilities than they have to if the buyer is tardy in opening their own accounts. In Washington State, the way utility bills are handled at closing differs depending on who the utility is. Some utilities are able to apply a lien to a property and some are not.
Utility companies that are run by a local government can attach a lien to a property when utility bills go unpaid. Those unpaid amounts get attached to the property’s title and become the responsibility of whoever currently owns the home, even future home owners. Since future home owners can get stuck with large unpaid bills from previous owners, it is critical to make sure these get paid off.
Utility companies that are not government-operated may not attach a lien for unpaid utilities to a property. They must pursue collection action against whoever was on the utility account. Companies like Puget Sound Energy and Waste Management are some obvious examples of such companies in our area. As a buyer, it is not critical to make sure that these bills are paid off at closing, rather it is critical that they open their own account on the closing day. The new owner will only be responsible for amounts charged after they have opened their account.
There is a very specific process that can be requested to the closing company to make sure that lienable utilities are paid off at closing. On most transactions, this is done via Form 22K: Identification of Utilities Addendum to Purchase and Sale Agreement. This form specifically requests that the closing company administer disbursement of funds necessary to satisfy unpaid utility charges affecting the property. The seller provides a list of utility companies. The closing company then requests payoff statements from the ones that can attach liens. From those payoff statements, the closing company will hold back funds from the seller to make sure they get paid off. Remember that this is NOT done for utilities like PSE. This also does not guarantee that new accounts are opened for the home buyer.
As a home buyer in Washington, you want to make sure of two things. First, request that the closing agent administer the payoff of utilities via Form 22K. There are a few sellers who won’t accept this, namely banks and some builders, but most sellers will. The second thing is to make sure that you call all of the utility providers after closing and open utility accounts in your name. Just because the closing company has facilitated a payoff of the seller’s last utility bill does not mean that the utility company has opened an account with your contact information.
As a home seller in Washington, it also makes sense to request that the closing company pay your lienable utilities. You also need to make sure that you call all of your utility providers on the closing date to close out your accounts. If you forget to close out your water bill and the new buyer forgets to open theirs in a timely manner, you could get stuck with some of their utility charges.