3 landlords sue PGW over collection tactic

Three landlords have sued Philadelphia Gas Works over the municipal utility's practice of dunning property owners for unpaid energy bills accrued by deadbeat tenants.

The landlords allege PGW slapped liens on their properties with little or no notification, in some cases years after tenants left, forcing the property owners to pay for debts over which they had no control.

"It's not just that they're taking your money," said David Wolf, an industrial real estate owner who is one of the plaintiffs. "They're belligerently stealing your money. It's outrageous."

The federal suit filed last month in Philadelphia alleges PGW's method of filing liens violates due process. The plaintiffs are seeking class-action status, saying the city has filed more than 50,000 liens against property owners who were not the customers responsible for the underlying gas bills.

The lawsuit, filed by attorneys Irv Ackelsberg and John J. Grogan of Langer, Grogan & Diver, is the latest salvo in a long-running battle between property owners and PGW over the utility's collection methods.

Unlike investor-owned utilities, PGW as a municipal government agency has the power to place liens against properties to collect debts. Liens are legal encumbrances that must be settled when real estate is transferred or sold.

Critics say PGW is too quick to resort to liens rather than more laborious collection tactics. They say the utility makes an insufficient effort to curtail gas use for nonpaying customers, allowing deadbeats to run up bills PGW knows it can ultimately collect from the property owners.

The Philadelphia Gas Commission estimates PGW has placed 90,000 liens worth about $126 million - some properties have more than one lien. The utility says it has not estimated the number of liens filed against landlords.

PGW declined to comment on the lawsuit. Last year, Doug Oliver, the utility's senior vice president of marketing and corporate communications, told 6ABC News that if property owners did not pay, the arrearages would have to be paid by PGW's other customers.

"They are part of the equation, whether they signed up for it or not," Oliver said. "It is one of the things that comes along with doing business."

PGW was long considered a soft touch, and in the 1980s and '90s, it amassed huge amounts of bad debts on its books. In the last decade, it has applied "more rigor and more discipline" to its collection methods, said spokesman Barry O'Sullivan, including more aggressive use of liens.

The suit does not challenge the validity of liens as a collection tool - the city's power has survived previous court challenges. But it alleges that PGW fails to notify landlords in a timely fashion that they are at risk from a delinquent tenant.

"A fundamental requirement of due process is the opportunity to be heard at a meaningful time and in a meaningful manner," the suit says.

PGW typically refers complaining landlords to the Pennsylvania Public Utility Commission, though the PUC invariably dismisses the complaints because it lacks jurisdiction to address the validity and enforcement of liens.

The suit contrasts PGW's practices with the city's treatment of unpaid water bills. The Water Department is required to notify property owners when a delinquency arises on a tenant-customer's water bill, and the landlords can take action.

Wolf, who owns an industrial property in Bridesburg, went on the warpath against PGW after the utility slapped him with liens for one former tenant who owed $27,000, and a second tenant who skipped out on a $3,500 bill. PGW eventually withdrew the larger lien because too much time had elapsed since the debt was incurred. But the $3,500 lien remains.

PGW says residential landlords can enroll in its Landlord Cooperation Program, which gets them off the hook for future arrearages if PGW has access to the meters on rental dwellings.

And in 2012, PGW created a Commercial Lien Notification Program that gives registered landlords 30 days' notice of a lien on a commercial property.

Complaints about liens are not limited to rental properties.

In a recent case before the PUC, the owners of a house in the 2500 block of East Norris Street complained that PGW placed an $11,000 lien against their property in 2009 for arrearages accrued seven years before by the previous owner, a family member. The owners did not learn of the lien until the end of 2013.

The PUC declined to take up the complaint.

But Commissioners Pamela A. Witmer and Gladys M. Brown issued a joint statement at the June 19 meeting, saying they were "troubled" by the case.

"We are very concerned that PGW seemingly did not work diligently to keep individual customers informed of arrearages, did not keep individual arrearages at a more manageable level, and did not aggressively pursue other collection options before resorting to filing a lien," they said.