Utility debt after buying a home: why the new owner doesn’t always have to pay for the previous one

After purchasing an apartment or house, the new owner often faces not only re-registration of documents, repairs or connection of services, but also unexpected debts left by the previous owner. Utility companies sometimes continue to show old debts in the personal account, make additional charges or demand payment of amounts that arose before the transfer of ownership. Because of this, a person who has just purchased a home may find himself in a situation where he is forced to be responsible for services that he did not actually use.

Lawyers from the law firm “Repeshko and Partners” told how a new property owner should act in the event that utility services or condominium associations try to collect debts from the previous owner, what legal positions of the Supreme Court should be taken into account, and why it is important to distinguish between the obligations of a co-owner of an apartment building and old debts for housing and communal services.

When acquiring real estate, citizens usually try to resolve the issue of utility debts with the previous owner of the property. Certificates from utility services about the absence of debt, data on utility payments from such relationships as “Privat 24”, etc. come to the rescue. However, it is not always possible to resolve such issues finally, because sometimes utility services make additional charges, sometimes make mistakes in calculations, and sometimes real estate is acquired with debts. In such cases, the question arises: who exactly should pay the existing debt – the previous owner or the current one?

The practice of the Supreme Court proceeds from the fact that the obligation to pay for housing and communal services is associated with the actual use of such services and the existence of relevant legal relations between the consumer and the executor. In accordance with Articles 66, 67, 162 of the Housing Code of Ukraine, for the use of residential premises owned by a citizen on the right of private ownership, a fee is paid for the maintenance of the house, the adjacent territory and for the consumed communal services.

The Law of Ukraine “On Housing and Communal Services” also establishes a mutual relationship between the rights and obligations of the consumer. Clause 1 of Part One of Article 20 of this Law provides for the right of the consumer to receive housing and communal services on time and of proper quality in accordance with the legislation and the terms of the contract. At the same time, Clause 5 of Part Three of the same article imposes on the consumer the obligation to pay for such services within the terms specified by the contract or law.

It follows from these norms that the person who actually used them must pay for housing and communal services. If the debt arose before the new owner acquired the right to property, and the new owner himself did not consume these services and did not assume the obligation to repay such debt, there are no legal grounds to demand payment of the debt of the previous owner from him.

At the same time, Article 322 of the Civil Code of Ukraine establishes that the owner bears the burden of maintaining the property. This means that after acquiring the right to property, it is the new owner who is responsible for maintaining his property and paying for services that are provided during the period of his ownership. However, this norm does not mean the automatic transfer to him of old debts that arose before the purchase of an apartment or house.

Of particular importance is part two of Article 382 of the Civil Code of Ukraine, according to which all owners of apartments and non-residential premises in an apartment building are co-owners of the common property of such a building. Common property includes premises for common use, in particular auxiliary premises, supporting, enclosing and supporting-enclosing structures, mechanical, electrical, plumbing and other equipment inside or outside the house, if it serves more than one residential or non-residential premises. It may also include buildings and structures intended for the needs of all co-owners and located on the adjoining territory, as well as rights to a land plot under the house and the adjoining territory, if such rights are registered.

Taking into account this legal construction, the Supreme Court has developed an approach according to which the new owner of the property is not obliged to repay the debts of the previous owner if the court establishes that he did not assume such an obligation. Contracts for the provision of housing and communal services do not encumber the property itself, therefore, in the absence of a corresponding condition in the contract for the alienation of real estate, claims against the new owner should be rejected. In this case, the proper defendant is the previous owner who used the services and allowed the debt to arise.

Regarding the condominium association and the application of the Law of Ukraine “On the Peculiarities of the Exercise of the Right of Ownership in an Apartment Building”, it is important to take into account the content of part three of Article 7 of this Law. The preamble states that the Law determines the features of the exercise of the right of ownership in an apartment building and regulates the legal, organizational and economic relations related to the exercise of rights and fulfillment of obligations of co-owners regarding the maintenance and management of the building.

Article 7 of this Law is devoted to the obligations of co-owners of an apartment building. Part two of this article establishes the rule according to which each co-owner is obliged to participate in the proper maintenance, operation, reconstruction, restoration, current and capital repairs, as well as technical re-equipment of the common property of an apartment building in proportion to his share as a co-owner.

Part three of Article 7 of the Law of Ukraine “On the Peculiarities of Exercising Ownership in an Apartment Building” provides that in the event of alienation of an apartment or non-residential premises, the new owner acquires all the obligations of the previous owner as a co-owner of an apartment building. In practice, this provision is sometimes mistakenly interpreted as a basis for automatically transferring old utility debts to the buyer of the apartment.

The content of this provision should be considered together with other provisions of the legislation. In this regard, it means the transfer to the new owner of the obligations of the co-owner of the house, stipulated by law, and not the debts of the previous owner for housing and communal services that he used before selling the apartment. That is, after the transfer of ownership, the new owner participates in the maintenance of the common property of the house, but is not responsible for overdue payments of another person, unless he has separately agreed to pay them.

From the moment of transfer of ownership, the previous owner loses the rights and obligations of the co-owner of the apartment building, and the buyer acquires them for the future. This approach corresponds to part one of Article 2 of the Law of Ukraine “On the Peculiarities of the Exercise of Ownership Rights in an Apartment Building”, according to which the subject of regulation of this Law is the relations that arise in the process of exercising the rights and fulfilling the obligations of the owners of apartments and non-residential premises as co-owners of an apartment building.

Therefore, the current legislation does not impose on the buyer of an apartment the obligation to pay the debts of previous owners or tenants for housing and communal services received by them earlier. An exception is possible only when such an obligation is expressly provided for in the purchase and sale agreement or other transaction on the basis of which the person acquired real estate.

In such disputes, it is worth considering the practice of the Supreme Court. One of the indicative decisions is the resolution of September 1, 2020 in case No. 686/6276/19. In this case, a citizen filed a lawsuit against the municipal enterprise “Managing Municipal Company “Central” of the Khmelnytskyi City Council and requested that the enterprise be obliged to exclude from her personal account the debts of the previous owners of the apartment for the period until August 3, 2018.

According to the circumstances of the case, on August 3, 2018, the plaintiff acquired ownership of the apartment on the basis of a purchase and sale agreement certified by the private notary of the Khmelnytskyi City Notary District Luchkovskaya T. M. Since August 6, 2018, she has been registered in the purchased apartment.

The extract from the personal account at this address showed a debt for housing and communal services in the amount of UAH 5,368.74 for the period until August 3, 2018. The plaintiff noted that the utility company unjustifiably transferred to her personal account the debt of the previous owners, which arose even before she purchased the apartment.

In the case of an apartment in Khmelnytskyi, the new owner, after purchasing the apartment, discovered that her personal account had a debt of the previous owners for housing and communal services. This was a debt that arose even before the sale and purchase agreement was executed. The woman insisted that she should not be responsible for other people’s debts, since she did not use the services during that period and did not assume the obligation to pay them.

The utility company did not agree to voluntarily remove this debt from her personal account, so the owner of the apartment went to court. The court of first instance supported her position and ordered the utility company to exclude the debt of the previous owners from the apartment’s accounting. After that, the utility company tried to appeal the decision, but both the appellate court and the Supreme Court left the new owner’s position unchanged.

In fact, the Supreme Court confirmed an important principle: a utility debt does not automatically pass along with the apartment to the new owner, unless the owner has separately agreed to pay it. The court proceeded from the fact that the debtor should remain the person who used the services and allowed the debt to arise.

Another case, which concerned an apartment purchased at a public auction, was even more revealing. After registering the ownership title, the woman contacted the water utility to conclude a contract for water supply and sewage, but found out that there was already a significant debt accumulated by the previous owners on the personal account of the apartment.

The new owner was actually offered to pay the old debts, although she purchased the apartment after they arose and had nothing to do with using the services at that time. She appealed to the court with a demand to exclude this debt from her personal account and emphasized that as a bona fide consumer she wants to pay only for those services that she receives after acquiring ownership.

Initially, the courts of first and appellate instances refused to satisfy her claim. However, the Supreme Court overturned these decisions and sided with the new owner of the apartment. The court separately drew attention to the fact that the requirement to exclude someone else’s debt from the personal account is an appropriate and effective way to protect the rights of the new owner.

In its decision, the Supreme Court emphasized: if a person did not use utility services during the period of debt formation and did not assume the obligation to pay it, the utility company has no right to consider him a debtor only due to the fact of acquiring ownership of the apartment. Such a decision, according to the court, allows to restore legal certainty between the parties and confirms that the new owner does not have the obligation to pay someone else’s debt.

It is these decisions of the Supreme Court that are most often referred to today in such disputes, when utility companies or associations of co-owners of an apartment building try to shift old debts to the buyer of housing. Practice shows that the mere fact of purchasing an apartment does not mean the automatic transfer of all previous financial obligations related to utility services.

The Supreme Court expressed a similar legal position in other cases, in particular in the resolutions of September 1, 2020 in case No. 686/6276/19 and January 26, 2022 in case No. 201/11406/20. In these decisions, the court also proceeded from the fact that the new owner of the housing should not be liable for the utility debts of the previous owners, if he did not agree to take them on when concluding the contract.

In the case of the apartment in Zhovty Vody, the Supreme Court ultimately sided with the new owner of the home and overturned the decisions of the courts of first and appellate instances that had previously refused to grant her claim. The court concluded that the requirement to exclude old debts from the personal account is legal, since the debt arose before she acquired ownership of the apartment.

As a result, the Supreme Court ordered the municipal enterprise “Zhovtovodskyi Vodokanal” of the Dnipropetrovsk Regional Council to exclude from the personal account of the new owner of the apartment the debts of the previous owners for the period until October 12, 2021 in the amount of 12,960 hryvnias 96 kopecks.

Such decisions have practical significance for many property owners who, after purchasing an apartment, unexpectedly encounter other people’s debts in payments or personal accounts. The Supreme Court’s case law shows that utility companies cannot automatically transfer old debts to a new owner simply because of a change in ownership of housing.

At the same time, such disputes often arise because people do not know their rights or are afraid of legal costs, which can sometimes seem disproportionate compared to the amount of the debt. That is why the Supreme Court’s case law in such cases is important for ordinary citizens, as it provides a clear understanding of how to protect their rights, what decisions to refer to, and how to demand the exclusion of someone else’s debt from their personal account.

Therefore, we advise you to check information about utility debts before buying real estate, get certificates from service providers, and carefully read the terms of the purchase and sale agreement. If, after registering the ownership, the utility company demands payment of the debt of the previous owner that was not separately assigned to the buyer by the agreement, you should contact the service provider in writing with a request to exclude such debt from your personal account. In case of refusal, the new owner has the right to go to court, citing the practice of the Supreme Court, according to which debts for services must be paid by the person who actually used them before the property was alienated.