Category Archives: Money Matters

Do You Know Anyone Who Finished Renos In 2012?

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Yesterday was the day that the Department of Finance released the tentative property tax valuations for the coming year. Our valuation went from $333K to $1.91M. That means our property taxes are going from about $3,500/year to something around $21,000/year! [Why does the City seem to want to punish people for improving their communities? I mean dealing with DOB is a nightmare, and now this…]

The way it’s supposed to work is that the amount of improvements to the property is added to market valuation of the property. Normally DOF is limited in how much they can jump your property taxes, but when you do substantial improvements that is the one time they’re allowed to bump the taxes up substantially – but only by the amount of improvements to the property.

If I understand things correctly they threw out the PW3 Cost Affidavit that we submitted to the Department of Buildings and instead used the number $1.46M which their appraiser appears to pulled out of thin air since it’s nothing close to the actual cost. Mind you, “cost” is one of those things that’s a bit flexible and open to interpretation since what you report to DOB is “hard costs” which don’t include everything you spend money on. But it’s not like we’re arguing over small amounts that might be due to the interpretation of “hard costs”. There is just no reality in which we could have spent $1.46M – we simply didn’t have access to that kind of money.

The reason why I’m asking in the title of this post whether people know of other people who completed their jobs in 2012 (and possibly even late 2011) is because I suspect there’s a problem assessor covering Central Harlem. 104 West 120th had an assessment last year of $262K. Their PW3 cost affidavit was for $315K and the assessor gave them a market valuation of $1.5M – so she’s in the same boat we are – it’s just the change isn’t quite as drastic as ours.

If a bunch of us can all band together and go to DOF together, then I think our individual cases will be strengthened and it will seem like the problem is with the assessor. If you know of anyone who might be in the same situation, please have them contact me – jay@beatingupwind.com. I’ll be happy to look up their particulars if they don’t know how to find them. And if you just know the address for buildings that had completed projects last year, please put them in the comments below and I’ll look them up and contact the owners if appropriate.

Update (Jan 21st):

In researching the situation – looking for other places that completed their work in 2012 – I discovered that it’s also affecting some of the folks who haven’t gotten their jobs signed off yet..

There’s a place on 136 that filed a preliminary cost estimate of $50,000, but they’ve had about $650K added to their market value by DOF before the renovations are actually completed. Their taxes will just about triple because of that – not as bad as our case, but they’re probably going to have more added next year when they complete their renovations.

But that’s nothing compared to what’s happening to 241 Lenox (which has also not completed their renovations yet)… They filed cost estimates totaling about $850K. The assessor has raised the market value on that place by $650K which doesn’t seem like a horrible thing on the face of it, but the problem is the tax class was not changed. So their tax bill is going from about $13K/year to a whopping $56K/year. I think they’re doing 2 family plus commercial. I don’t know if that qualifies for tax class 1. If it does, then keeping them at tax class 2 is just spiteful. It’s adding $40K to the cost of their renovations.

Electric Bills For Townhouse vs. Apartment

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This is a blog post I’ll update as time goes on… But I’ve been wondering how much our utility costs would go up once we moved into a house. Here are the baseline numbers for electrical usage in our old coop. It was 2 bedroom, 2 bathroom, and about 1,350 sq. ft. in a 1939 pre-war (poorly-insulated) building with leaky window A/C units and a Sub Zero fridge:

Summer Average (’07-’09): 29.0 kWh/day
Winter Average (’07-’09): 18.3 kWh/day

Summer I defined as the June 20ish reading through the August 20ish reading. Winter I defined as the September 20ish reading through the May 20ish reading. Actually, winter is a bad term – “non-summer” would be better. So what you see above is the  average of three summers (6 total months), and 2 winters (16 total months)

I should also mention that we work from home – so everything you see includes air conditioning during the day – but typically just for the rooms we were occupying, though Dan has a bad habit in the house of opening doors into unairconditioned spaces and cooling more of the house than is necessary. We also have at least one computer on 24 hours a day – since it acts as a server.

From 5/21 to 6/12 we used an average of 36.3 kWh/day (98% over winter average)
From 6/12 to 7/31 we used an average of 37.2 kWh/day (28% over summer average)
From 7/31 to 8/20 we used an average of 54.1 kWh/day (87% over summer average)
From 8/20 to 9/20 we used an average of 41.0 kWh/day
From 9/20 to 10/23 we used an average of 31.4 kWh/day (72% over winter average)

Now, mind you, the house is a lot bigger has more things going on. Instead of 1,350 sq. ft., it’s about 3,200 sq. ft. There’s 180 watts of light bulbs that are on from dusk to dawn (roughly 2 kWh/day). There’s a dehumidifier running the cellar 24/7 – it’s Energy Star certified, but it still uses a fair amount of power. The server we have running is more power hungry. There’s also a booster pump for water pressure, etc. All in all there’s just more electrical demand than there was in the apartment.

The average from 6/12 to 8/20 was 42.1 kWh/day. Since the period started a little earlier than it should have and there were some days we wished we had A/C before July 3 (when it actually got up and running), let’s call the summer average 45 kWh/day – that would be “just” 55% more than at the coop. I’m pretty happy with that, all things considered.

The average up to 6/12 and after 9/20 is 33.4 kWh/day. So once again we see power going up roughly 11 kWh/day for A/C during the summer. That’s great since we’re cooling more space than we did at the apartment with about the same amount of energy. In fact for about 6 weeks during that time Dan had the A/C on 24/7 up in the studio because he was making stuff out of fiberglass and needed to control the temperature. But our building is more efficient and the A/Cs are more efficient.

But the “winter” (non-summer) power is considerably higher. So far, the townhouse seems to consistently use 15 kWh/day more than our old apartment – that’s 80% more power. Electricity seems to be costing about 25 cents per kWh, so that’s less then $4/day, or about $115/month additional. But when you look at the list of stuff (above) that we didn’t have in the old apartment, it sorta makes sense that it costs more to run a townhouse that’s over twice the size of the apartment.

We also have data for our tenant. That’s a roughly 1,050 sq. ft. duplex apartment (basement & half of the cellar):

From 7/31 to 8/20 he used an average of 24.5 kWh/day (15% under summer average)
From 8/20 to 9/20 he used an average of 35.2 kWh/day
From 9/20 to 10/23 he used an average of 20.9 kWh/day (14% over winter average)

Our tenant also works from home. Theoretically his energy usage should be less than our old apartment – the square footage is less, the insulation is better and the A/C is more efficient. Plus, a third of the space is the cellar which almost never needs cooling. But he does have a dehumidifier running 24/7… His usage was 15% below our usage from late July to late August, but then the following month his electricity usage went up considerably for some reason. And then he was 14% over our winter usage in the past month.

What To Do When You Get A Mechanic’s Lien

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[This blog post is not “legal advice” – readers should consult a lawyer for all legal matters. Instead, this blog posts reflects what Dan and I, as homeowners, have learned by going through the process of having liens put on our homes and being sued by contractors.]

Our townhouse got its first (and hopefully only) mechanics lien last month. Our contractor decided to not have his stair subcontractor (and “friend” – Adam Wedrychoski of ABC Stairs Builders Corp – aka “Traditional Stairs Corp”) complete the stairs because he was too expensive and the budgets had gotten tight. Adam got disgruntled and is now going after us for $9,600.

We’ve gone through this before when the contractor for our apartment remodel (Bill Angelov of ABS Construction) went after us a few years ago (a blog post is pending on that one). We were amused that Adam Wedrychoski / ABC Stairs Builders even used the same lien service Bill Angelov / ABS Construction had used – Speedy Lien. Unfortunately the New York court system, and companies like Speedy Lien, make it so disgruntled workmen/contractors/subcontractors can put liens on your property without any proof that they have a legitimate claim.

This isn’t a horrible thing… Liens are good in that they alert purchasers of a property that there may be claims on a property. They also insure that people who add value to a property are compensated when the owner sells the property. But ultimately, they’re just a first step and the workman / contractor / sub-contractor needs to prove their claim in court.

In this case Adam Wedrychoski / Traditional Stairs Corp has no basis for putting a lien on our property. He has no contract with us, nor was there an implied contract with us (e.g. we never paid him directly). He was a subcontractor working for our contractor. If he had talked to a lawyer, he would know that all he is legally entitled to do is sue our contractor. We do have a contract with our contractor, but every time he gets a payment from us he signs a lien waiver stating that all of his subcontractors have been fully paid.

The amount of the lien doesn’t even make sense – which seems typical of liens by Speedy Lien… He took the total amount he would have been paid if he had completed the job, subtracted what he had been paid, and then put a lien on us for the difference. So he’s essentially asking for money for work he didn’t do. Thankfully our court system doesn’t think the same way Adam does.

When we contacted Wells Fargo (the lending bank for our mortgage), what they said worried us – they stop all payments of any kind if there is a lien in place. They wanted us to “settle” with Adam Wedrychoski / ABC Stairs Builders Corp and they erroneously told us that they don’t accept bonds.

Thing is, bonding the lien is the correct way to deal with the situation. It’s actually sort of cool how bonds work… You contact a surety agent (ours is Elmer Hyde Agency), and give them 110% of the lien amount plus a few hundred in fees. They bond the lien, and you file that paperwork along with some other affidavits with a clerk at the court building (harder than it sounds) and the lien is discharged. Once the lien is discharged, it no longer exists. That means your title is clean and your bank will be happy.

If the workman/contractor/subcontractor sues you and the court finds in his/her favor, the bond is used to pay the judgement and you get whatever is left over. Liens are for one year and they can be renewed once – so they can only exist for two years total. If the workman/contractor/subcontractor doesn’t sue you during that time, then you get the bond amount back with interest. However, the workman/contractor/subcontractor can sue you for up to 6 years (in NY), but after the bond expires, s/he just has to hope that you can still pay.

While it may seem odd to welcome a lawsuit, we’ve been through the process before and our attitude is “bring it on”. Adam Wedrychoski / Traditional Stairs Corp is in an impossibly difficult position. Because he is a corporation he is not allowed to show up in court without a lawyer. Because lawyers typically take a percentage of the settlement, they won’t take the case on unless they think they’ll get paid. They would typically get 1/3rd – and 1/3rd of $9,600 ($3,200) isn’t enough for them to bother with the case. And that assumes they’ll get the full amount – which they know they won’t. That means the only  way Adam Wedrychoski / ABC Stairs Builders Corp can get a lawyer, and hence the only way he can sue us, is if he pays his lawyer hourly. Bottom line – he will lose a substantial amount of money if he tries to sue us.

While Adam Wedrychoski / Traditional Stairs Corp has to have a lawyer, we’re individuals, so we can represent ourselves (this is one of the advantages of not putting our building in an LLC). The courts are very lenient with pro se defendants – there are actually judges that only hear cases with pro se defendants. Plus pro se defendants can go in and get free help with filing paperwork, etc. So while it can be time consuming to show up at all the hearings, it doesn’t actually cost us much of anything. Meanwhile he’s paying his lawyer hourly, so if you do the math its in our best interest to drag things out and have as many hearings and motions as possible. 😉

If Adam Wedrychoski / ABC Stairs Builders Corp sues us, the first thing we’ll do is a show cause motion – making him prove that he has standing to sue us. He will fail because he can’t produce a contract with us. No contract = no enforceable terms.

Incidentally, people often think that the loser pays the winners attorney fees, but that’s not the case at all (at least not in New York). That only happens if you have a written contract saying that’s what you agreed to – and of course Adam Wedrychoski / Traditional Stairs / ABC Stairs Builders has no contract with us. That is why we’re confident Adam will lose money if he pursues this, but it gets better…

If he does survive the show cause motion, our next step will be a counter suit. The stairs in the rental are not according to plan – they’re too narrow (the stringers are not flush with the sheetrock), and they’re made of red oak, not white oak. On top of that, the stairs in our unit are not square and the contractor had to correct a number of things that Adam / Traditional Stairs didn’t quite get right. In fact things are so bad our architect suggested either we or our contractor sue him for everything he’s received – about $20,000. At one point we detailed a whole list of things that we wanted him to fix and he never came back to fix them – instead the contractor had to take care of it.

In case you’re wondering, Adam’s / ABC Stairs Builders Corp’s lien is an attempt to get paid for having to fabricate and install the flight of stairs from the parlor to the 2nd floor three times. When this was all going down we insisted that he do shop drawings, he refused and promised to fix any problems that resulted from not having shop drawings. I even mentioned that understanding up in a blog post. He even started before our architect gave him the green light. If he had just waited for approval to start we could have avoided at least one of those fabrication/installs. Plus, we’ll have our contractor, and our architects testifying that that we did in fact insist on shop drawings and that he agreed to fix anything that was a problem.

There is simply no way he can win his case, but I’m pretty sure we can win a fair amount of money on our counter suit. That means if he sues us, between lawyers fees and our counter suit, it will be a lose-lose proposition for him. Which is why our attitude is “bring it on”…

Thing is, all of this affects our contractor more than it affect us. The contractor is liable for the actions of his sub-contractors – including any liens they put on us. So the bond money is coming out of what he would have gotten at the end of the project. All Adam has accomplished with the lien is hurting someone who used to consider him a friend.

The bottom line is, be careful in dealing with contractors and subcontractors. Lien waivers and receipts of “final payment” are always a good idea. And summarize important conversations in writing/email after they occur so there’s documentation. Then when you get a mechanics lien, just bond it and put the ball back in the workman/contractor/subcontractor’s court.

Honestly, I think a lot of (sub)contractors don’t understand the process and have never heard of a bond. They just hear that liens scare some homeowners into settling. They don’t understand that they may actually have to sue the homeowner to get any money. They definitely don’t seem to understand that filing a lien starts a process which could result in them losing a considerable amount of money…

As a homeowner just realize you don’t have to settle with someone who is putting a lien on your property to harass and intimidate you – you can bond the lien and regain the upper hand in the situation.

Insuring A Townhouse Is Expensive

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[UPDATE: Our agent hadn’t put in the discount for being fully sprinklered, so I’ve updated the numbers to reflect that now that we know the true price…]

Since we’re coming to the end of construction as well as the one year mark on our Builders’ Risk policy we’re converting over to traditional homeowner’s insurance – and it’s a lot more expensive than I expected it to be. But admittedly I hadn’t researched insurance properly…

I had a little sticker shock when our insurance agent (David Bodansky – david@zamzok.net, 212-561-8990) told me the new homeowner’s policy was going to run $6,400 (with Chubb as the insurer). So I called GEICO (where we have auto insurance) and was told their policy was going to cost $5,800. It was a bit of an apples and oranges comparison but it seemed Chubb was just a little more expensive – but Chubb is Chubb – the best insurance company out there.

At the end of the day GEICO would insure the building for $1.087M (125% of $870K “base”) with $609K of coverage for personal property and $500K in liability coverage. Problem is, if it was a catastrophic loss, I don’t know that we could rebuild everything for $1.087M – it would be tight. That coverage cost $5,800/year with a $1,000 deductible and (I think) $5,400/year with a $2,500 deductible. They then would charge $400/year for another $1.5M of umbrella coverage for a total liability coverage of $2M. So GEICO’s total was roughly $5800/year with a $2,500 deductible.

I had our agent redo the Chubb quote with an umbrella policy and auto (so structured more like the GEICO quote). Chubb will insure the building for $1.4M – so plenty to cover a catastrophic loss. Liability coverage was quoted at $500K. The cost of that was $5,700 $5,050/year with a $2,500 deductible or $5,450 $4,800/year with a $5,000 deductible. So Chubb cost about $350/year more LESS than GEICO, but AND it had more coverage ($1.4M instead of $1.087M). But Chubb charges $700/year for a $2M umbrella (compared to $400/year for $1.5M with GEICO).

Needless to say, we’re going to go with Chubb even though it’s $600/year more expensive. It’s $50 less per year and we get $300+K more coverage on the building, $500K more liability coverage, and we get the Rolls Royce of insurance companies.

Our agent said he had done similar quotes for another client and Travelers also came out more expensive than Chubb. So it seems that townhouse insurance just runs a bit under $6K/year. I’m not happy it’s that high, but it is what it is… There might be cheaper insurers out there, but I can’t imagine fighting with cut rate insurance company over a million dollar claim.

The whole question of how much umbrella coverage to get was a big question… After researching it online I’m still not 100% certain $2.5M is sufficient – but it probably will be. One thing I do know is that we’ve been under insured for a while now. We should have gotten an umbrella policy a long time ago. Better late than never, I guess…

I should also mention that the Allstate insurance agent on 116th Street in East Harlem booked an appointment to sit down with me and only after I got there did she tell me that Allstate doesn’t write homeowner’s insurance in the 5 boroughs. If she had told me that upfront it would have saved me over an hour of traveling down and back to meet with her. (Grrrrrr…)

No Heat Needed

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I went to the house rather early yesterday morning – at about 7:45, just after the sun came up. I walked into the house and it was pretty warm inside despite the fact that it was 42 degrees and windy outside and we don’t have heat in our building yet. Given that the sun had just come up the warmth wasn’t due to solar heat gain either…

Besides a few light bulbs on, and a small heater down in the uninsulated part of the cellar (to keep the pipes from freezing) there wasn’t much the the way of heat sources, yet the house was still warm. It was a little on the chilly side, but we like that – that’s pretty much how we want to keep the house during the winter months. Cold enough to warrant wearing a light sweater or hoodie, but not so cold that our hands get cold.

It appears the heat was coming from the building next to ours – 166 West 123. Despite the fact that 166 is sandwiched between two cold, unheated shells it remarkably has no insulation in the party walls. I can’t imagine what their heating bills must look like – they’re radiating so much heat that it’s enough to keep multiple buildings warm. All the buildings next to them have to do is insulate well and trap 166’s heat.

I would feel guilty about having our neighbor heating our building for us but it’s costing them less than when our building was open to the elements and the party wall was freezing cold. The core principles of conservation are Reduce, Reuse, Recycle. To that end we’ve Reduced our neighbor’s energy usage, and Reused their radiated heat. It’s pretty much a win-win.

Even without a sweater I found the temperature yesterday to be pretty comfortable. What that means is that we probably won’t need to turn the heat on in our building until it gets down into the 30s and even then it doesn’t look like we’ll need much heat.

The moral of the story is closed cell foam is pretty incredible – and while it’s a bit more expensive upfront, it’ll save us far more money than it cost.

UPDATE:

It’s gotten colder since I wrote the post and I’ve figured out the house is comfortable down to roughly freezing. I was comfortable at 35 degrees outside with a 10 mph wind, but it was maybe 5 degrees too cold when it was 27 outside with a 14 mph wind. Even at 27 out the temperature wasn’t that bad. A hoodie or sweater would have made it comfortable enough except hands would have been a bit cold. And as a temperature for sleeping – it could even get colder inside with a proper down or wool blanket.

UPDATE #2

Today we finally got thermometers. The temperature outside was 32 degrees but inside it was 51 degrees on the parlor floor (the coldest part of our unit) and 52 degrees near the window in the cellar of the rental unit (the coldest part of the rental unit). That’s pretty sweet – we get 20 degrees of heat off light bulbs and from the warm wall with the neighbor. We also noticed at lower temperatures the heat gained is even more.

I think I’m going to be pretty comfortable with the house set to the high 50s during the day and the high 40s at night. That means we won’t need to turn on the heat until we’re in the high 30s (day) or below freezing (night). We’ll see what temperature we can get away with when we actually move in…