Chelsea City Utility Issues

The City of Chelsea offers its own municipal electric services. Residential and commercial uses of electricity find that locating within the City, as opposed to other areas in Washtenaw or Jackson counties, has the advantage of lower electrical rates. Chelsea's utility grid being smaller and more compact has fewer "brown outs" and interruptions due to weather events.
The City, being a municipality, has the right to impose a lien upon real property for the non-payment of its electrical utility charges, unlike private companies. This presents two unique legal issues for the purchaser of property in the City. First, a buyer of property may find after closing that the seller did not pay the light bill. The City will impose a lien on the real property title regardless of who appears on the deed. Title insurance companies are attuned to the necessity of withholding an amount to pay water charges, but frequently, they fail to inquire as to a municipal electric charge.

Secondly, and more importantly, is this unique issue in landlord/tenant relations. All leases commonly provide that utilities are to be paid by the tenant. However, the landlord can not assume that by merely placing the account in the name of the tenant, that the landlord is relieved of the potential for a future lien for non-payment of electric charges. By statute, a landlord may inform a municipality that the tenant is responsible for payment of utility charges. Once the required notice is given the utility then requires the tenant to pay a deposit. The deposit frequently is six months advance billings. This is a significant issue for some tenants depending upon whether they are residential or commercial.

In the drafting of leases care needs to be taken to provide verification by the tenant of opening the appropriate account and funding the deposit with the City. Should the tenant become insolvent or simply vacate the property, without the required statutory notice and required deposit, the City's right to lien the property remains.

Our firm is familiar with the policies and procedures of this unique intersection of real estate and municipal law and can assist clients in the buying and leasing of property where utility charges are a significant concern.