Legal Q & A. Unpaid Water & Sewer Bills: What Can and Cannot Be Done? By Roger Huebner, General Counsel, IML and Jerry Zarley, Paralegal, IML

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1 Legal Q & A Unpaid Water & Sewer Bills: What Can and Cannot Be Done? By Roger Huebner, General Counsel, IML and Jerry Zarley, Paralegal, IML (July 2004) This monthly column examines issues of general concern to municipal officers. It is not meant to provide legal advice and is not a substitute for consulting with your municipal attorney. As always, when confronted with a legal question, contact your municipal attorney as certain unique circumstances may alter any conclusions reached herein. Many municipalities in Illinois operate their own combined water and sewer systems and supply these services to their residents as opposed to contracting them out to private businesses. Unfortunately, some people fail to pay their water and sewer bills. The simple answer would be to terminate or discontinue water and sewer service when the bills for the services to a particular location go unpaid. However, the real answer is more complicated than simply cutting off services to a particular location. After all, unpaid water and sewer bills aren t like unpaid parking tickets or fines for building code violations which have a variety of enforcement tools. For example, one renter moves out leaving behind an unpaid water bill. Why should the new renter of the rental property go without service because the previous renter didn t pay the bill? In addition, maybe the renter that left behind the unpaid bill moved outside of the service area. This leads to the question as to whether the renter or the owner of the rental property should be responsible for the unpaid water and sewer bills. But then, why should the owner be responsible when the owner didn t benefit from the services? There are also other situations where it may be complicated or confusing as to whether a municipally-owned water and sewer service may have the authority to go after monies from unpaid water and sewer bills. Q: What authority do municipalities have in collecting monies from unpaid water and sewer bills? A: Municipalities that provide water and sewer services to their residents pursuant to Division 139 of Article 11 of the Illinois Municipal Code may enact and enforce any non-discriminatory regulation and take any action pursuant to that regulation to collect monies from unpaid water and sewer bills. The relevant provisions of Section of the Illinois Municipal Code 1 provide as follows: The corporate authorities of any municipality availing itself of this Division 139 may (1) make, enact, and enforce all needful rules and regulations for the acquisition, construction, extension, improvement, management, and maintenance of the combined waterworks and sewerage system of the municipality and for the

2 use thereof, (2) make, enact, and enforce all needful rules, regulations, and ordinances for the care and protection of such a system, which may be conducive to the preservation of the public health, comfort, and convenience and to rendering the water supply of the municipality pure and the sewerage harmless insofar as it is reasonably possible to do so, and (3) charge the inhabitants thereof a reasonable compensation for the use and service of the combined waterworks and sewerage system and to establish rates for that purpose.... Such charges or rates are liens upon the real estate upon or for which service is supplied whenever the charges or rates become delinquent as provided by the ordinance of the municipality fixing a delinquency date; except the charges or rates established by contract for the supply of water to another municipality. A lien is created under the preceding sentence only if the municipality sends to the owner or owners of record of the real estate, as referenced by the taxpayer's identification number, (i) a copy of each delinquency notice sent to the person who is delinquent in paying the charges or rates or other notice sufficient to inform the owner or owners of record, as referenced by the taxpayer's identification number, that the charges or rates have become delinquent and (ii) a notice that unpaid charges or rates may create a lien on the real estate under this Section. However, 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, or in the office of the registrar of titles of such county if the property affected is registered under "An Act concerning land titles", approved May 1, 1897, as amended. This notice shall consist of a sworn statement setting out (1) a description of such real estate sufficient for the identification thereof, (2) the amount of money due for such service, and (3) the date when such amount became delinquent. The municipality shall send a copy of the notice of the lien to the owner or owners of record of the real estate, as referenced by the taxpayer's identification number. The municipality has the power to foreclose this lien in the same manner and with the same effect as in the foreclosure of mortgages on real estate. The municipality also has the power, from time to time, to sue the occupant or user of the real estate in a civil action to recover the money due for services rendered, plus a reasonable attorney's fee, to be fixed by the court. Whenever a judgment is entered in such a civil action the foregoing provisions in this section with respect to filing sworn statements of such delinquencies in the office of the recorder and creating a lien against the real estate shall not be effective thereafter as to charges sued upon and no lien shall exist thereafter against the real estate for the delinquency. Judgment in such a civil action operates as a release and waiver of the lien for the amount of the judgment. 2 Most unpaid water and sewer bills are for those that still reside within the home that is being provided the services. The simple course of action is to provide notice, and if the bill still doesn t get paid, disconnect the service. However, there may be circumstances where it may be

3 confusing as to whether the municipality can terminate the service. For example, when it is claimed that the service is needed to maintain the health or life of a resident and the resident is unable to pay the bill. The Public Utilities Act 3 gives the Illinois Commerce Commission (ICC) broad powers to regulate public utilities. 4 Pursuant to those powers, the ICC enacted rules and regulations in the Illinois Administrative Code regulating public utilities including water and sewer services. 5 The Administrative Code provides that discontinuance of service... is prohibited for up to sixty days when discontinuance of service will aggravate an existing serious illness of any person who is a permanent resident of the premise where service is rendered if the customer complies with certain conditions. 6 However, municipally-owned and operated utility services are NOT subject to the Administrative Code because the Public Utilities Act explicitly exempts public utilities that are owned and operated by any political subdivision, public institution of higher education or municipal corporation of this State, or public utilities that are owned by such political subdivision, public institution of higher education, or municipal corporation and operated by any of its lessees or operating agents. 7 Homeowners who sell their property typically cannot leave behind an unpaid water and sewer bill. At the time of the sale, either the seller has to have all liens removed from the property by paying the unpaid bills, or the buyer buys any lien on the property and, as a result, becomes responsible for the unpaid bill. The latter typically applies in cases of abandoned property or property that has been foreclosed. However, it is not that easy when it comes to renters, especially when a renter moves out of the service area or even the state, which is usually the case when a renter leaves behind an unpaid bill. Let s apply the statutory language with the example given above regarding the renter that leaves behind an unpaid water and sewer bill. As stated, the bill for water and sewer services is a lien upon the property where the service is provided. Therefore, municipalities clearly have the authority to go after the rental property s owner for the unpaid bill, even if the service was provided in the renter s name. The Code also provides municipalities with the authority to go after the renter as the service recipient. However, municipalities cannot go after both the renter and the owner. Therefore, it may be sound advice for a municipality to make it clear that the rental property owner is always responsible for any unpaid water and sewer bills. This can be accomplished by ordinance and made terms of the agreement when signing up for service. In addition, municipalities cannot make the new renter responsible for the unpaid bill. In Cocanig v. City of Chicago, 8 new homeowners brought suit to enjoin the city from shutting off the water to their residents for unpaid water bills incurred by the former owners of their property. The Illinois Supreme Court held that the city could not shut off the plaintiffs water because they could not be held liable for the previous owners unpaid bills. While this case applies to homeowners instead of renters, this rule can be applied to renters because the Court noted that the new residents were under no more obligation to pay the previous residents unpaid water bills than they were to pay the other bills of any other person because the service was not contracted for them, by them, or known to them. 9 Therefore, municipalities cannot require the new renter to pay the previous renter s unpaid water bill before providing water and sewer services to the new renter.

4 Therefore, municipalities that own and operate their own water and sewer services have the authority to enact and enforce their own rules and regulations as it relates to unpaid water and sewer bills. They can make the owner or resident responsible for any bill, but they cannot go after both. In addition, they cannot make a new owner or resident responsible for a previous unpaid bill for services provided for the same property without proof of a contract making the new owner or resident responsible. However, it would be wise for municipalities to enact clear ordinances regarding unpaid water and sewer bills explaining to each customer what actions will be taken under the various circumstances. Your municipal attorney should be able to provide assistance with drafting an ordinance that will suit your needs ILCS 5/1-1-1 et seq. (West 2002 & Supp.) ILCS 5/ (West 2002) ILCS 5/1-101 et seq. (West 2002 & Supp) ILCS 5/4-101 (West 2002) Ill. Adm. Code et seq. (2004) Ill. Adm. Code (j) (2004) ILCS 5/3-105 (West 2002) Ill.2d 464, 173 N.E.2d 482 (1961). 9 Cocanig, 21 Ill.2d at 467, 173 N.E.2d at 484; quoting, City of Chicago v. Northwestern Mutual Life Ins. Co., 218 Ill. 40, 75 N.E. 803 (1905). CORRECTION In the July 2004 issue of the Illinois Municipal Review, in the Legal Q & A: Unpaid Water & Sewer Bills: What Can and Cannot Be Done? there were two statements made in one paragraph that have come to our attention that may deserve some clarification. The relevant paragraph provided as follows:... As stated, the bill for water and sewer services is a lien upon the property where the service is provided. Therefore, municipalities clearly have the authority to go after the rental property s owner for the unpaid bill, even if the service was provided in the renter s name. The Code also provides municipalities with the authority to go after the renter as the service recipient. However, municipalities cannot go after both the renter and the owner.... The first underlined statement in the paragraph, municipalities clearly have the authority to go after the rental property s owner, was not meant to imply that the statute (65 ILCS 5/ (West 2002)), imposes personal liability upon the rental property s owner for an unpaid water and sewer bill. We only wanted to express that municipalities have the authority to enact and enforce their ordinances to recover monies for unpaid water and sewer bills however they choose. They can go after the owner/landlord/mortgagor, or they can go after the resident/tenant/occupant; and they can define those terms however they choose provided it is reasonable and non-discriminatory as with all other ordinances. In addition, the term owner was used in the general sense because of how it is commonly understood. Typically, it is understood as the owner (or landlord) versus the tenant when it comes to unpaid water bills.

5 The second underlined statement, municipalities cannot go after both the renter and the owner, is not entirely accurate. This statement was intended to mean, in a general sense, that a municipality cannot recover the amount of the unpaid water and sewer bill from two different sources in effect, being paid twice for the same charge. Section of the Illinois Municipal Code provides that once the monies from the unpaid bill have been recovered from the renter (occupant or user of the real estate), the lien upon the real estate is lifted. Pursuant to the statutory language, a municipality may clearly impose a lien upon the property for the unpaid bill and file a civil action against the renter of the property as the benefactor of the services. This would give the impression that a municipality is going after the owner and the renter at the same time. The statement that a municipality cannot go after both the renter and the owner was misworded and an oversight. We sincerely apologize for any confusion regarding these statements Illinois Municipal League

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