How Cities in Texas Can Collect on Delinquent Utility Bills
Many municipalities in Texas provide utilities to their citizens in one form or another, but what does a city do when a customer refuses to pay a long overdue bill? The answer is simple, place a lien on the property for the amount owed. However, the process is not as simple as the answer, and a municipality that provides utilities to their residents must be aware of the laws and prescribed procedures for collecting such debts and imposing the proper utility liens on a delinquent property.
First, per Section 552.0025(d) of the Texas Local Government Code (TLGC) the City would need to adopt an ordinance that allows for utility liens on delinquent properties.
Furthermore, the municipality must be aware of certain limitations that have been placed on the authority to impose utility liens on delinquent property, all of which can be found under Section 552.0025 of the TLGC. One such limitation is that a lien cannot be imposed on a property where service is connected in a tenant’s name after the property owner has given notice to the City that the property is being used as a rental property. Another limitation established by section 552.0025 says that a utility lien may not be placed on a property where service is connected in a tenant’s name prior to the effective date of the ordinance imposing the lien. Lastly, section 552.0025 says that if the property is a homestead, a lien cannot be imposed. This means a city that wants to start imposing liens on delinquent property must perform some due diligence before filing the lien to ensure that it is being done properly.
Once the city has adopted the proper ordinance which establishes their authority to impose utility liens and has determined that none of the limitations discussed above exist on the delinquent property, the city must perfect the lien by “recording in the real property records of the county where the property is located a notice of lien containing a legal description of the property and the utility’s account number for the delinquent charges.” TLGC 552.0025(g).
Additionally, a municipal utility lien is “superior to all other liens, including previously recorded judgment liens and any liens recorded after the municipality’s lien.” 552.0025(h). However, a municipal utility lien is inferior to a bona fide mortgage that was recorded before the utility lien.
Another tool in a city’s toolbox to combat delinquent utility bills is requiring a deposit, but a policy must be established if this is the proactive route a city wants to take.
Once such a policy is in place, the municipality may require varying deposits to reduce the impact such delinquencies have on the city’s utilities. A good example of a varying deposit would be a city requiring a larger deposit on tenants of rental properties where the landlord has provided notice that the property is being used as a rental property. By collecting a deposit that covers multiple months of utility bills, the city can avoid the frustrating impact a long-standing delinquent rental property has since the city cannot impose a lien on such a property.
As one can see from the above, there are specific tools available to a municipality in Texas that provide utilities to their residents. However, the proper procedures established by the State and local law must be followed to effectively impose a lien and collect the delinquent amounts owed. A municipality seeking to impose a lien on a delinquent property should always consult their attorney ahead of time to ensure all proper procedures are followed.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our commercial and business litigation practice can be found here.
Carl attended the University of North Texas from 2008 to 2011, where he earned his Bachelor’s degree in History (both majoring and minoring in History). Upon graduating, he worked for TRCA, Inc. in Denton, Texas as a Sr. Account Executive, where he was personally mentored by the company’s CEO. It was in this capacity that...