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BLOG / 12.02.24 /Jason E. Rogovich

The Final Water Meter Reading: Closed but not really

For those buying or selling property in New York City (other than a cooperative or condominium unit), the final water meter adjustment is often the last closing figure agreed to by the parties. Frequently this adjustment comes after the closing.

The New York State Bar Association form contract generally provides that water charges and sewer rents will be apportioned as of midnight the day before the day of closing and that the seller must furnish a final water meter reading prior to closing. This is an easy concept to understand – the seller pays for the water they have used, and the purchaser is responsible for all of the water bills from the date of closing.

However, achieving a truly equitable adjustment of the water charges is not always so simple. In fact, it often requires some additional planning on behalf of the seller as well as taking extra precautions on behalf of the purchaser.

Obtaining a final water meter reading is not an instantaneous process.

When a seller orders a final water meter reading from the New York City Department of Environmental Protection (DEP), they are sometimes informed that it will take a DEP inspector weeks or even months to get out to the property. Meanwhile, the seller and buyer might want to close the transaction much sooner.

For a long time, parties would proceed to closing and either have the title company take a water escrow or establish a post-closing escrow between the buyer and seller based on the property’s previous water bills. The assumption was that the final water bill would be similar to the previous bills.

But in recent years, we have seen dramatically higher final meter readings.

Based on conversations with many of our title company colleagues, we have found that, on multiple occasions, the final readings differ drastically from the charges on previous water bills. These differences have ranged from thousands to tens of thousands of dollars. The variety of reasons for the discrepancies include inadequate estimated bills, old meters that have not been properly serviced and leaks at the property resulting in high charges.

As a result, purchasers have been saddled with the nightmare task of tracking down the seller to pay for the additional water charges, looking to their title company to pay the charges, or being forced to cover the additional cost themselves. Many title companies have vastly increased their escrows as a condition of omitting an exception to insurance coverage on the title policy (which can be a requirement under the purchase agreement), or force buyers and sellers into post-closing escrow agreements without a predicable outcome for the final charge.

What can buyers and sellers do to minimize their risk?

Generally, sellers should plan to order a final water meter reading anywhere from a month to two months prior to the anticipated closing date. Purchasers should have a discussion with their attorney and chosen title company about the protections they can insert into their respective purchase or post-closing escrow agreements, especially if the need to close the transaction is imminent.

Smith, Buss & Jacobs LLP’s transactional real estate department brings extensive experience and a personal, client-centric approach to assisting property buyers and sellers on a wide range of issues. If you have questions or concerns related to a real estate transaction, feel free to give us a call.