Water Bills become Liens on Property


Legal background for what the City does with your water and sewer bills.

Things you may want to know about the ordinances and laws that govern City actions.

Q:  Why do delinquent water and sewer and bills stay with the property? Shouldn’t you go after the owner or renter who used the water, or turn them over to debt collection like other businesses do?  Why would a new property owner be responsible for the last person’s bill? 

A:  It may sound weird to say the customer is the ‘property’ ¬not the person, but, that is the case. The fact that the ‘premise’ – the property ¬is the customer applies to municipal utilities such as water, and sanitary sewer utilities. Municipal utility services are governed by Michigan State Laws (statutes) and not the Michigan Public Services Commission as are private companies that provide services. Michigan Compiled Laws (MCL) tells us what we can and cannot do with delinquent bills. State law, through the Municipal Water Lien Act (MCL 123.161-167), allows for placement of any delinquent water/sewer fees on the property’s tax bill as a lien for collection purposes.

Michigan laws were set up this way to assure municipalities like Iron Mountain are able to finance water, sewer and electric services for their residents. Most municipal services are financed by selling bonds or by borrowing money. A municipality’s ability to repay its debt is by the revenue they receive from selling water, sewer and electric services. To make sure the community would have enough revenue to pay its debt, the laws were written to indicate the ‘premise’ (property) was the customer, not the person. This way, no one could ‘skip out’ on paying their bill and deprive the municipality of revenue to pay its debt. The property owner is ultimately held accountable for payment of any delinquent outstanding bills. State Law MCL 123 et. seq. allows delinquent bills to be placed as a lien on the property and collected with usual property tax bills and payments. 

The State Laws governing this were accepted by the City of Iron Mountain and put into our Code of Ordinances in Chapter 66. These sections were based on MCL 123.161-167 

•    Article IV Sec. 66-113 (a) says utility bills become a lien against the premises. 

•    Article IV Sec. 66-113 (b) says unpaid utility liens can be added to the property taxes and collected in the usual manor as the taxes. 

•    The above also indicate the authority to set rates and shut¬off services. 

Our Ordinances are on-line.  Link is in the page footer below.

Below is the full text of the Michigan Law 



Act 178 of 1939

AN ACT to provide for the collection of water or sewage system rates, assessments, charges, or rentals; and to provide a lien for water or sewage system services furnished by municipalities as defined by this act.

The People of the State of Michigan enact:

123.161 Definitions.

Sec. 1.

As used in this act:

(a) “Municipality” means a county, city, township, village, or metropolitan district.

(b) “Person” means an individual, firm, partnership, association, or corporation which is the owner or occupant of any house or other building or any premises, lot, or parcel of land.

(c) “Sewage system” means a sewage disposal system, including sanitary sewers, combined sanitary and storm sewers, plants, works, instrumentalities, and properties used or useful in connection with the collection, treatment, or disposal of sewage or industrial wastes.

123.162 Municipality operating water distribution system or sewage system; lien as security for collection of assessments, charges, or rentals; effective date and enforceability of lien.

Sec. 2.

A municipality which has operated or operates a water distribution system or a sewage system for the purpose of supplying water or sewage system services to the inhabitants of the municipality, shall have as security for the collection of water or sewage system rates, or any assessments, charges, or rentals due or to become due, respectively, for the use of sewage system services or for the use or consumption of water supplied to any house or other building or any premises, lot or lots, or parcel or parcels of land, a lien upon the house or other building and upon the premises, lot or lots, or parcel or parcels of land upon which the house or other building is situated or to which the sewage system service or water was supplied. This lien shall become effective immediately upon the distribution of the water or provision of the sewage system service to the premises or property supplied, but shall not be enforceable for more than 3 years after it becomes effective.

123.163 Manner of enforcing lien.

Sec. 3.

The lien created by this act may be enforced by a municipality in the manner prescribed in the charter of the municipality, by the general laws of the state providing for the enforcement of tax liens, or by an ordinance duly passed by the governing body of the municipality.

123.164 Official records of municipality as notice of pendency of lien.

Sec. 4.

The official records of the proper officer, board, commission, or department of any municipality having charge of the water distribution system or sewage system shall constitute notice of the pendency of this lien.

123.165 Priority of lien; applicability of act where lease provides lessor not liable for payment of bills; affidavit.

Sec. 5.

The lien created by this act shall, after June 7, 1939, have priority over all other liens except taxes or special assessments whether or not the other liens accrued or were recorded before the accrual of the water or sewage system lien created by this act. However, this act shall not apply if a lease has been legally executed, containing a provision that the lessor shall not be liable for payment of water or sewage system bills accruing subsequent to the filing of the affidavit provided by this section. An affidavit with respect to the execution of a lease containing this provision shall be filed with the board, commission, or other official in charge of the water works system or sewage system, or both, and 20 days' notice shall be given by the lessor of any cancellation, change in, or termination of the lease. The affidavit shall contain a notation of the expiration date of the lease.

123.166 Discontinuing service or instituting action for collection; invalidation or waiver of lien.

Sec. 6.

A municipality may discontinue water service or sewage system service from the premises against which the lien created by this act has accrued if a person fails to pay the rates, assessments, charges, or rentals for the respective service, or may institute an action for the collection of the same in any court of competent jurisdiction. However, a municipality's attempt to collect these sewage system or water rates, assessments, charges, or rentals by any process shall not invalidate or waive the lien upon the premises.

123.167 Construction of act.

Sec. 7.

This act shall not repeal any existing statutory charter or ordinance provisions providing for the assessment or collection of water or sewage system rates, assessments, charges, or rentals by a municipality, but shall be construed as an additional grant of power to any power now prescribed by other statutory charter or ordinance provisions, or as a validating act to validate existing statutory or charter provisions creating liens which are also provided for by this act.

History: 1939, Act 178, Imd. Eff. June 8, 1939 ;-- CL 1948, 123.167 ;-- Am. 1981, Act 132, Imd. Eff. Oct. 7, 1981

© 2009 Legislative Council, State of Michigan