More than 1,000 may lose water — or even their homes — because a landlord didn't pay

Tenants of 1,400 rental units in Indianapolis are on the brink of a water shut-off due to nonpayment by their corporate landlord — a tenant-landlord dispute of such a scale that city and state officials have stepped in with legal action to head off the possibility of a mass eviction.

With an unpaid water bill of $1.7 million and counting, an Indianapolis utility company this week posted notices to residents of four apartment complexes owned by the nonprofit JPC Affordable Housing Foundation, warning that their water could be shut off in September.

With the water shut off, the city health department could declare the units to be in violation of local health codes, prompting a wide-scale emergency eviction, as first reported by the Indianapolis Star.

A shut-off would cause a "mass-homelessness problem in our community," the city wrote in a court document filed last month.

In a statement, Indianapolis Mayor Joe Hogsett called the decision by utility company Citizens Energy Group "incredibly disappointing."

"The City is considering all options in response and will continue working with all parties involved to prioritize the well-being of tenants and their families," Hogsett said.

The landlord blames the pandemic for financial troubles

At the four Indianapolis properties in question, tenants do not directly pay for their own water use. Instead, their landlord pays the collective bill for each complex. Tenants' utility payments are combined with their monthly rent payments.

But in the spring of 2021, JPC stopped regularly paying water bills, court records indicate.

The company says it could not pay due to financial hardship caused by the pandemic because "an overwhelming majority of tenants" failed to pay rent, according to affidavits signed in May and July by its president, Oron Zarum.

The company has not otherwise provided evidence of wide-scale nonpayment. Zarum did not respond to NPR's request for comment.

By February of this year, the unpaid bill had grown to $1 million, court records show.

On Feb. 17, Citizens Energy shut off the water at two JPC-owned apartment complexes, affecting hundreds of tenants. The next day, the city of Indianapolis agreed to pay the utility company $850,000 to restore water service.

City officials say they are not willing to consider another payment to avert the September shut-off.

"We do not currently have confidence that Citizens shares our priorities in ensuring that the residents of these buildings do not lose their utility service," said Mark Bode, a spokesperson for the city of Indianapolis, in an email to NPR. "Without that confidence, we cannot be sure that additional money addressing past-due bills would be well spent."

Shut-offs are common, and protections vary widely

It is relatively common for utility companies to threaten service shut-off to tenants when landlords fail to pay, said Sam Whillans, a fellow at the Natural Resources Defense Council who studies housing and utility affordability — though it is "unusual to have this many tenants affected simultaneously," he added.

Protections for tenants in similar circumstances vary widely by state. Some states ban utility shut-offs during certain months, or when tenants are low-income or have certain medical conditions. Some places, like New York City, do not allow water shut-offs for nonpayment.

In Syracuse, the city banned water shut-offs in similar situations after a court ruled the city had erred in shutting off service to a woman whose landlord did not pay.

"There's very little evidence that shutting off utility service to a tenant is an effective way to collect from a delinquent landlord," Whillans told NPR. "In many cases, landlords that refuse to pay repeatedly are bad actors that also have lots of other outstanding violations, so a lack of water service is just one more violation on the books."

When a landlord's nonpayment causes a utility company to shut off water, the consequences can be massive for the tenant, Whillans said.

A lack of water can force tenants to undertake a costly and disruptive move. Child Protective Services or a family court could decide that a home without water is unsafe for children, causing tenants' children to be removed from their homes.

Ongoing legal action and an uncertain resolution

In Indianapolis, the shut-off is scheduled for Sept. 30. "If an inhabited building loses water, the Health Department may call for emergency evictions," said Bode, the Indianapolis spokesperson.

In April, the city of Indianapolis and Citizens Energy filed suit simultaneously against JPC, along with its various associated companies and board members, seeking repayment. The Indiana state attorney general also filed suit challenging the organizations' nonprofit status.

For its part, in court documents JPC disputes the amounts owed to the water utility. The company also says it was engaged in good-faith negotiations over a payment settlement before the legal action began. It also claims that because Indianapolis used federal COVID-19 relief grant money to end the shut-off in February, the company is not obligated to pay the city back.

Litigation is ongoing in all three lawsuits. Tenants of the 1,400 units await a resolution.

For now, the city of Indianapolis has criticized the utility's threat to shut off the water. Allowing the litigation to play out — without a shut-off — is the best course of action to recoup payment, Mayor Hogsett said. [Copyright 2022 NPR]