Commercial Property Buyers Beware: Don't Get Soaked!

Thursday, May 26, 2016 by Mark Schwartz




Guest Blog by: Mark J. Schwartz  Founder and President of New York Water Management

As investors and attorneys know, Riverside Abstract is at the forefront of the title industry, providing cutting edge support and assistance to make sure each deal closes smoothly. Riverside has formed  a longstanding relationship with New York Water Management to help clients reduce  water bills and help remove water related violations.

However, not everyone knows that water bills can play an outsized part in the world of commercial real estate, because in many areas water bills are similar to property taxes in that they are subject to government liens.

There are several type of water bills that are issued by the DEP. For properties billed on metered billing, (consumption based), DEP bills are generated by actual meter readings or estimated readings.  Estimated bills are often a red flag as the estimate and the actual consumption may be very different, especially when dealing with large commercial or industrial properties. Actual bills, on the other hand, reflect the actual consumption. Nevertheless it is very important to obtain a final water reading before purchasing any building.


Case in point. There was a real estate firm that bought a portfolio of buildings located in NYC. One of the buildings was a UES walk up that had residential units on the upper floors and storefronts on the ground floor.

One of the things investors look at is water usage and how it can affect the economics of the deal. The water bills were non-estimated normal bills that reflected that there was minimal water usage by the property and subsequently minimum bills were issued for three consecutive quarters. Ultimately no one involved thought to look more deeply into the matter as nothing seemed amiss as all readings were normal (and not estimated).  The closing took place and title was conveyed

Buyers were using a small-time title company that failed to procure a final reading from the DEP. and boy did it cost them!

As a matter of fact, the stores in the building used excessive amounts of water because they were occupied by large water users that had water cooled refrigeration on-site.  Water cooled systems are notorious water abusers, as they run less efficiently over time if not serviced regularly, often running water for lengthy periods of time to reach the desired cool temperature. The buyer later identified that the minimum consumption bills were false, as the city’s new “state of the art” AMR (automatic meter reading) system was defective and was sending faulty data to the billing system.  The real outstanding water bills were over $20,000!

Had the title company obtained a final water reading the new owners would only be required to assume the water bill post final reading, and they would not be liable for any backbill for water consumption prior to the purchase/final read date.

Because the title company did not obtain a final reading the buyer assumed liability for all outstanding water charges.

When commercial investors acquire property it is important to work with quality, skilled vendors, such as Riverside Abstract and New York Water Management that understand all the issues and have the experience and knowledge to ensure that the transaction goes through successfully, seamlessly and efficiently.

Have questions about "Waterbills" or other Title topics? Click here to ask a New York Water Management Expert and get the answers you need.

Have questions about other Title topics? Click here to ask a Riverside Abstract expert and get the answers you need.


Mark J. Schwartz is the founder and president of New York Water Management Inc. This corporation, established in 1998, is a 25 member consulting firm specializing in the reduction of water and sewer tax bills. Lifetime to date they have reduced NYC DEP water and tax billing by over $300,000,000 and $38,000,000 in calendar year 2015 alone.

Mark’s personal mission statement is “Hard work, honesty and ethics first. Everything else is second.”

The materials on this website are provided for informational purposes only and do not constitute legal advice. These materials are intended, but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as an indication of future results. Transmission of the information is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver. The newsletters and articles on this website are offered only for general informational and educational purposes. They are not offered as and do not constitute legal advice or legal opinions. You should not act or rely on any information contained in this website without first seeking the advice of an attorney.