Knowledgebase-Although Cities May Terminate Utility Service for Nonpayment, Such Authority Does Not Amount to a Lien Against the Property


Information Product

Title:Although Cities May Terminate Utility Service for Nonpayment, Such Authority Does Not Amount to a Lien Against the Property
Summary:MTAS was asked about authorizing the filing of a lien against property to collect delinquent sewer bills.
Original Author:Shechter, Leslie
Co-Author:
Product Create Date:03/06/91
Last Reviewed on::03/21/2010
Subject:Utilities--Termination policies; Utilities--Rates and charges; Liens on property
Type:Legal Opinion
Legal Opinion:

Reference Documents:

Text of Document: March 6, 1991

I apologize for failing to respond more quickly to your request for a sample ordinance provision authorizing the filing of a lien against property to collect delinquent sewer bills. However, having researched the matter more fully, it appears there is no such authority. I failed to find any specific authorization in the state statutes for the filing of a lien to collect delinquent utility bills except in a very limited circumstance. Further, the Sixth Circuit has ruled that refusing to provide service to an address where a previous user had become delinquent violates the equal protection clause of the Fourteenth Amendment. Craft v. Memphis, Light, Gas and Water Division,534 F.2d 684 (6th Cir. 1976), affirmed on other grounds, 436 U.S. 1 (1978). (Herein Craft)

The Tennessee statutes provide, in TCA, Section 65-35-104, that a utility may file a lien for the value of electrical power that has been fraudulently taken, which is defined in TCA, Section 65-35-102 as obtaining service with the intent of avoiding paying the lawful price for such service. Another specific reference to collecting delinquent bills is in TCA, Section 68-13-209 which concerns those sewer facilities that have obtained loans or grants from the state and allows them to recover delinquent charges, " ... with interest thereon at the maximum legal rate, in an action ex contractu." TCA 65-32-101 et seq. and 7-35-201 allow utilities to cut off sewer service for nonpayment after providing procedural due process.

Although cities may terminate service for nonpayment, such authority does not amount to a lien against the property. In Oliver v. Hale, 513 P.2d 806, tenants charged with service arrearage of previous owners challenged the city's practice of "...viewing water and sewer service bills as an obligation of the property, rather than as the personal obligation of the tenant or owner who incurred the charges."
The Oregon Court of Appeals followed the general rule that:

... liability for the debt of another cannot be imposed in the absence of special agreement or statutory authorization for a lien on the property, and ordinances or regulations seeking to impose such liability have usually been held unreasonable in the absence of an authorized lien ... ." 19 A.L.R.3d 1227,1232.

Thus, absent specific authorization, a municipality may not file a lien for unpaid sewer charges. See also, McQuillen, Municipal Corporations, Section 35.35d. 3rd Ed., page 589. Even if Tennessee were to statutorily authorize such a collection and enforcement mechanism it would probably not withstand constitutional challenge.

An ordinance that authorized a water company to withhold services to tenants of property when the owners account was delinquent was determined to be " ... unjust, unreasonable and unauthorized by ... charter" in Farmer v. Mayor and City Council of Nashville, 127 Tenn. 509. 156 S.W. 189 (1912). In Craft, the Fifth Circuit determined that a policy of refusing service to an applicant at an address where unpaid services were rendered to another fails to pass even the most minimal level of equal protection scrutiny: the test of rational relationship between the classification scheme and a legitimate governmental end.

... [a] collection scheme ... that divorces itself entirely from the reality of legal accountability for the debt involved, is devoid of logical relation to the collection of unpaid water bills from the defaulting debtor, ... [t]he City has no valid governmental interest in securing revenue from innocent applicants who are forced to honor the obligations of another or face constructive eviction from their homes for lack of an essential to existence--water. 497 F.2d at 144-145.

The Third Circuit Court of Appeals recently upheld the imposition of a lien for delinquencies of a previous owner/user against both equal protection and substantive due process challenge, Ransom v. Marazzo, 848 F.2d 398 (CA3 1988). This circuit, and specifically Pennsylvania, is in the minority, however.

It may be possible to make nonpayment of sewer bills an ordinance violation subject to the same penalties as any other ordinance violation. However, some courts have held that jailing people for nonpayment of debts may be unconstitutional. Also, if they are not paying their sewer bills, it is not likely they will be in a position to pay the penalty assessed in prosecuting the ordinance violation.

Unfortunately, without the threat of shutting off water service for nonpayment of sewer bills, the only remedy is to sue on the debt. Given the costs of filing such a suit relative to the amount of the particular delinquency, it is not much of a remedy. I am sorry for my original response and hope this, at least, answers your question.

Sincerely,

Leslie Shechter
Legal Consultant

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

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