Landlords Win Battle Over Utility Liens

by Chris on January 16, 2017

A federal judge had declared that Philadelphia’s municipal utility violated landlords’ rights by placing liens on rental properties when tenants failed to pay their gas bills.

The controversial practice begin several years ago, when city officials decided that liening a landlord’s property was a more cost-effective way to collect delinquent utility bills. At one point, the Philadelphia Gas Works was registering as many as 300 liens per day.

The judge’s decision to enter a permanent injunction against the PGW centered on the automation of the system itself, which caused significant processing delays. Rather than notifying a landlord of a default while there was still time to collect the funds from the tenant, the arrearage continued to accrue, and stayed on the books for years. In fact, PGW has liened properties for debts as old as ten years.

Meanwhile, tenants were allowed to open new billing accounts with the PGW in new rental properties despite having previously defaulted. Payments made by these tenants were not applied entirely to the past due amount. Citing confidentiality rules, PGW refused to disclose the tenants’ new addresses to landlords seeking to collect. PGW also refused to disclose which tenant defaulted, or over which time period the default occurred. Landlords were not automatically informed during tenancies when tenants were not paying the gas bill.

The city launched what was to be a workaround called the Landlord Cooperation Program. An estimated 43,000 landlords signed up. So long as they “cooperated”, lien filings would be delayed. However, faulty automation and mismanagement of that program resulted in numerous complaints from landlords who were found to be “uncooperative” because they didn’t show up for appointments they claim they didn’t about, or they showed up and were not counted present. The judge chastised the city for failing to alert landlords to the availability of the LCP. Many landlords only discovered the program after they received lien notices.

The PGW also routinely informed landlords whose properties were liened that they could file a complaint with the Pennsylvania Public Utility Commission. However, the PPUC repeated took the position that it lacked jurisdiction to hear the case because the liens were filed under the tax rules.

Prior to 2012, landlords were required to pay the tenants’ outstanding balance within 11 days of the city’s mailing a notice. Later, that was extended to 30 days. However, notifications were sent to the service address rather than to the landlord, even though that information was available on the landlord’s rental license.

In one case, landlords who owned two properties were repeatedly liened for unpaid tenant bills during the period of 2009-2012. Those liens totaled over $19,500 on one property and approximately $17,000 on another for tenant debts dating back to 2004. These landlords joined others in filing the federal lawsuit, requesting an injunction against PGW to halt enforcement of the liens.

Last year, the judge granted a temporary order halting collection, the first step in a two-step process that ended with a permanent injunction. In addition, the judge certified the lawsuit as a class-action, which means that all affected landlords are covered by the judge’s orders.

The city unsuccessfully argued that the loss of income from the lien program would pose a hardship to other utility customers. The judge indicated that it was landlords who stood to suffer “irreparable harm” through the program.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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