– By Laurie S. Poole, Esq. (originally Summer 2000)
One of the common services homeowner associations provide is utilities for the common area. Items such as water and electricity are essential to the association’s ability to manage the common area. Have you ever considered whether your association is paying for utility services that it is not receiving, or being charged for use of a meter that neither the association or the utility company is aware exists? These things happen more often than you think.
For instance, one association realized that it had overpaid its local water company nearly twenty thousand dollars ($20,000.00) over several years because it was being charged sewer rates on a meter that was used exclusively for irrigation purposes. (Generally, sewer rates are higher than irrigation rates). Apparently, the original developer of the project purchased the meter as a sewer meter that was to provide water to residential units, but installed the meter for irrigating the common area. The association only discovered this error when it performed an independent audit of its utility services. The association pursued reimbursement of the monies it erroneously paid, claiming that the water company had been unjustly enriched by the association’s mistaken overpayment. The association and the city negotiated a settlement in which the city water department gave the association a large credit towards its other outstanding bills.
In another scenario, an association suddenly received a water bill in excess of sixty thousand dollars ($60,000.00) for charges on a water meter that the water company was unaware had existed for eight years prior to the bill being issued. The association’s legal counsel was able to get the bill substantially reduced as there was a local ordinance that mandated the water company read the water meters on at least a bi-monthly basis and that bills based on those meter readings should be prepared and sent to the consumers. The water department for the City of San Diego was consulted and the City Attorney agreed that the City was limited in the amount of years which it could back-charge the association. Additionally, the association was allowed to pay the back-charges over the course of a year.
What should you do if your association suddenly receives a bill for multiple years’ worth of utility services which allegedly have not been paid? First, you should gather as much documentation (or lack thereof) regarding the utility service and bills. Next, consult your association’s legal counsel to begin correspondence with the utility company to determine the basis of the bills and justification of the charges. There may be local ordinances that may be in the association’s favor if a utility company is attempting to be reimbursed for several years’ worth of meter charges.
Before your association finds itself in “hot water” over paying too much or too little for utility services, you may want to consider hiring someone to audit the association’s utility services in order to prevent this type of surprise. There are specific companies which perform audits of exactly this nature. Additionally, there are also companies that will review your association’s maps and documents and determine the exact location of the various utility installations throughout your community. If you believe that your association is paying too much for its utilities, you may want to consider having an audit performed.
And remember, if your association is faced with a bill for multiple years’ worth of utility costs, or a situation where the association has overpaid for the services it has received, there are avenues available to lower the bill or recover the overpaid costs. Associations find themselves in hot water over these items more often than you think!