When Should Sellers Turn OFF The Utilities?

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Real Estate

It's a scenario that we encounter frequently.  Some sellers don't want to pay for an extra day or two of utilities.  They call the utility companies and schedule the utilities to be turned off on day of settlement at the end of the day (or after settlement has occurred); but the utility companies turn them off at the beginning of the day.  The buyer does the walk through inspection, and since the utilities are turned off, the buyer is frustrated.  So, when should the seller turn off the utilities?  

A recent discussion in our Facebook forum, EKKO Title NoVa Real Estate Talk, centered on this exact issue: when a seller should turn off utilities - day of settlement or the day after settlement?

Under Paragraph 10 of the Residential Sales Contract, "Seller will have all utilities in service through Settlement or as otherwise agreed."  The key word in this sentence is "settlement." Sellers need to keep the utilities on through Settlement (not settlement date).  Settlement is a defined term in the Code of Virginia.  "'Settlement' means the time when the settlement agent has received the duly executed deed, loan funds, loan documents, and other documents and funds required to carry out the terms of the contract between the parties and the settlement agent reasonably determines that prerecordation conditions of such contracts have been satisfied." See Va. Code Ann. Section 55.1-900.  While settlement can happen on the same day, the reality is that utility companies will turn off the utilities at the beginning of the day - not at the end of the day.  Sometimes settlement can happen the following day because the seller used their own representation and that attorney/title company does not get the documents over to the Settlement Agent until the following day.  Or, Settlement can happen the following day because funds from the buyer's sale arrive. 

So, to avoid extra stress, have this conversation early with your seller clients.  They should keep the utilities on until the next business day.  If sellers are really concerned about paying the extra money on utility bills, then they could execute an addendum with the buyers addressing when utilities will be turned off.   And of course, buyers should be encouraged to transfer the utilities to their name before Settlement.   

Posted by Ekko Title