Hello Schi. It appears that there are different experiences among the agents here as far as past due utilities are concerned. While I have had a client call after the close of escrow asking me to send a copy of the purchase agreement & the final closing statement to SMUD & the water company, I have never had a utilities company refuse service to the buyer because of unpaid outstanding bills for which the prior owner was responsible. Let's face it, not having water, electricity and/or gas renders that property essentially not habitable & the utilities companies don't want that. You really have to distinguish between secured & unsecured delinquent accounts. If the past due balances have been rolled over to the tax roll, the unpaid amounts become part of the tax bill & attach to the property & it does not matter that it was the prior owner who accrued the past due amounts. The utility companies do not collect payments that have already been rolled over to the tax roll. You as the new owner would be responsible for any unpaid utilities liens & that's why it's important to investigate this to make sure they get paid at close of escrow.
Unsecured utilities are a different story. The utilities companies should not refuse service to the new owner when the new owner can show the change of ownership. They may not establish new service in the new owner's name without proof of the change of ownership. If you do run into a problem, ask for a supervisor & ask them for a written rule that allows them to refuse service. Utility companies have rules and regulations and they can't just refuse service because they feel like it.
If you had an account with the utilities company before at a different address & you had past due payments there, the utilities company may require a deposit as a condition of establishing service at the new address. If that's the case, the deposit requirement is not because of the prior owner's past due payments, but because of your own payment history with that utilities company.
This may all sound a bit confusing, but it's really not that difficult. It takes a few extra phone calls & make sure the listing agent knows about any outstanding utilities issues so that the listing agent can forward that to the escrow officer to make sure it appears in the HUD-1 that goes to the lender with the offer. Don't assume that the listing agent knows everything about the property and that the escrow officer who will prepare the HUD-1 will put all the necessary items on the HUD-1. It's also possible that new things will surface while you are waiting for the lender approval. Study the prelim carefully and make sure it shows all liens that you think should be in the prelim (you will probably not receive a prelim until the approval has been issued, but some title companies will prepare it and it will be included with the short sale package, depending on the lender requirements for short ). You don't want to receive an approval and then find out that the lender never knew about a lien because it was not listed in the HUD-1. Frankly, I don't think it would be unreasonable for a buyer to request a copy of the HUD-1 that was sent to the lender together with the offer. I have had cases where I received a short sale approval letter from the listing agent and I had to figure out myself what was actually approved and found out that we were over $2,000 short. The listing agents never bothered to compare the approval letter and the HUD-1 and had no idea that there was not enough money to pay for everything the contract called for. In those kind of situations, the escrow officer is your friend as they will strive to reconcile the HUD-1 and approval letter. Had I not requested a copy of the HUD-1, I would not have been able to discover we were short as I would not have had anything to which I could have compared the approval letter. When I receive the short sale approval letter, I ask the sellers to sign it indicating that they read and approved it and I go over it and compare it to the HUD-1 to make sure there are no inconsistencies. I don't want my buyer to go into escrow and spend money on inspections thinking that everything is alright, when it is not. If there are inconsistencies, the buyer should know before spending money on inspections & an appraisal and not find out at the last minute that we are short and more money is needed to close escrow. While receiving a short sale approval is exciting, the work is not done until all the numbers add up. Many approval letters will require further negotiations and if an agreement cannot be reached, the seller essentially fails to provide a short sale approval as specified in the short sale addendum. The devil is in the detail.