Peculiarities of buying real estate with debts for communal services
When buying real estate (apartment, house, commercial premises), buyers often encounter the fact that the seller has not paid utility bills for a long time and a large debt has accumulated. That is, an apartment, house or commercial premises is sold with debts.
Are utility debts the personal debts of the seller (previous owner) of the property or do they pass to the buyer (new owner) along with the transfer of ownership of the property?
To do this, we first need to figure out who the seller (previous owner) is and what are his responsibilities in the field of housing and communal services.
The main legislative acts regulating legal relations in the field of providing housing and communal services are the Civil Code of Ukraine and the Law of Ukraine “On Housing and Communal Services” (hereinafter referred to as the Law).
According to this Law, a consumer is an individual or legal entity who receives or intends to receive a housing and communal service (Article 1 of the Law). And so, the seller is the consumer of utilities.
The provision of housing and utilities services is carried out on the basis of an agreement (Part 1 of Article 12 of the Law). Therefore, the consumer is obliged to conclude contracts for the provision of these services with housing and communal services providers (parts 2, 3 of Article 7 of the Law).
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Housing and communal services providers are organizations that supply certain housing and communal services (i.e., heat supply organization, energy supplier, management of an apartment building, etc.).
Such organizations provide services, and the consumer consumes/uses them in accordance with the concluded agreements. That is, obligations arise between the providers of housing and communal services and the consumer, on the basis of the contract: the provider is obliged to provide services, and the consumer is obliged to pay for their use.
The consumer is obliged to pay for the provided housing and communal services at prices/tariffs established in accordance with the legislation, within the timeframes established by the relevant contracts (Part 2 of Article 7 of the Law).
Contracts for the provision of communal services are developed on the basis of typical contracts for the provision of certain housing and communal services (electricity supply, water supply, etc.), approved by the Cabinet of Ministers of Ukraine. Therefore, the contracts for the provision of communal services specify the same conditions for the termination of these contracts. Thus, the contract may be terminated early in the event of:
- disappearance of the need to receive the service or the consumer’s refusal to use the services of the contractor;
- transfer of ownership (use) of the apartment (estate house) to another person;
- failure to comply with the terms of the contract by the parties to the contract.
In the first two cases, the consumer must, within 20 days, notify the housing and communal services provider of the situation that has arisen, provide him with an application for termination of the contract and pay all necessary payments. Since in the event of failure or untimely notification by the consumer to notify the supplier of the vacating of the premises and/or the final termination of the use of services, as well as the transfer of ownership (use) to another person, the consumer is obliged to pay for the services consumed and other payments based on the terms of the relevant contracts.
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Therefore, if the seller (previous owner) sold his property to the buyer (new owner) and did not fulfill his obligations for payment of utility services, did not contact the utility service providers to terminate the contract, then the contract with this previous owner will continue to be valid. That is, the previous owner must continue to fulfill his obligations under the contract.
And, according to the Civil Code of Ukraine, even in the event of termination of the contract, unilateral refusal to accept the contract, and even upon payment of a penalty, the debtor is not released from fulfilling the obligation. That is, even if the contract for the provision of housing and communal services is terminated due to the transfer of ownership of the property to the new owner, the previous owner is obliged to pay the cost of the services used by him! And this debt does not transfer along with the transfer of ownership of the property to the new owner!
Even if the consumer refuses to enter into an agreement with the utility service provider, he is not released from the obligation to pay for the actually consumed utility service (Part 5 of Article 13 of the Law). That is, if the consumer has not entered into an agreement with the energy supply organization, but has used electricity, then the consumer must pay for the cost of the electricity used, regardless of whether he has entered into an agreement or not.
Also, the consumer is not exempt from paying for housing and communal services that he receives before entering into the relevant agreements with the providers of housing and communal services (Part 1 of Article 9 of the Law). For example, if the consumer entered into an agreement with the energy supply organization 1 year after purchasing the apartment, and during 1 year he used electricity. In this case, the consumer is also obliged to pay the cost of the electricity used.
That is, if the consumer used housing and communal services, then he is obliged to pay their cost!
In case of late payment for housing and communal services, the consumer is obliged to pay a penalty in the amount specified in the agreement, but not more than 0.01 percent of the debt amount for each day of delay. The total amount of the penalty paid cannot exceed 100 percent of the total debt amount.
The penalty is accrued from the first working day following the last day of the deadline for payment for housing and communal services (Part 1 of Article 26 of the Law). That is, if the utility bills had to be paid before April 20, which falls on Saturday, then in case of non-payment, the penalty begins to accrue from the next business day, that is, from April 22, which falls on Monday.
Related services:
The utility service provider has the right to terminate/suspend the provision of utility services in the event of non-payment or payment in full in the manner and within the timeframes established by law and the agreement.
The utility service provider also has the right to go to court in the event of a violation of the terms by the consumer contract, including in the event of non-payment of utility bills (Part 1 of Article 8 of the Law). The defendant in a case of violation of the terms of the contract for the provision of housing and communal services will be the consumer who used the services but did not pay for them, i.e. the debtor.
