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If developer hid fee, nail him

DEAR BENNY: My husband and I purchased a home in a new development. At the time we viewed the home, at the time we offered to buy it, and at the mortgage closing, no mention was made of any extra fees associated with having city water at the site.

About 20 months after we (and several other families) moved into this development, we received a water bill with a “compact fee” of $174.25 added to our regular water bill. After some investigation and a fair amount of righteous indignation, we learned that the builder had entered into an agreement with the city.

The gist of the arrangement is this: Since we are outside the city limits, we (the residents) will be billed for 3/4 of the rate of city property taxes on top of our regular water/sewer bill until such time as the city annexes us into their limits.

The long and the short of it is we pay 75 percent of city property taxes and get only sewer and water services … no city police, no city fire protection, no city trash pickup.

My question is this: How can a purchase be conducted with no mention of this burdensome expense? Isn’t there some rule that requires disclosure of extraneous fees, especially those that will be imposed monthly? The builder’s response is, “Well, this is only until you get annexed.” That is easy for him to say. Annexation is not likely to happen because we are not near the current city boundary; besides, why give up this incredible collection of money just to increase the

services to which we would be entitled? I think we got snookered. Is there any recourse for us and our neighbors? – Mary


DEAR MARY: A similar problem occurred in the State of Maryland several years ago, where the local water company was charging new-home buyers for the water and sewer connection costs incurred by their developer. Finally, the Maryland Legislature enacted legislation prohibiting those charges to be passed on to new-home buyers.

I think that even without disclosure laws on the books in your state, you have a good legal case against the developer. He has, in my opinion, a legal obligation to disclose all charges that he knows of – and clearly he knew of these fees. I suspect that when you were negotiating for the property, you were provided with a list of charges and expenses you would have to pay if you went to closing (escrow).

If the extra water bill charge was not included in that list, then you have a case for misrepresentation. In many states, that is a cause of action under your consumer protection act, and if you are successful, you can get a judge to award you attorneys fees over and above any monetary judgment you may get against the developer.

But litigation is time-consuming, expensive and always uncertain. If you wish to go down the litigation path, try to get other homeowners in your subdivision to join in; in numbers there is not only strength, but money for a legal defense fund.

This answers the first part of your question: namely should the developer have disclosed the charges to you. As to your second question – Why should you be charged any extra from the city? – I suggest that your group contact your local political leaders, both at the local level as well as at the state level. You all vote, and politicians like voters.

Perhaps you can persuade some politician to go to bat for your cause, and get the water bill dropped.


KASS is a practicing attorney in Washington, D.C., and Maryland. He is not providing specific legal or financial advice to any reader. Questions for this column may be submitted to: mailbag@kmklawyers.com

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