Shady Plumbing Contractor

Shady Plumbing Contractor

Brian AsaroPro Member
San Diego, CA · Member since 2022 · 19 posts · 12 votes

My wife and I own a 3-unit in San Diego.  A front house with a duplex behind it.  The problem was in the duplex. In 2017, I got a call from one of the tenants about sewer backing up into the tub.  My dad, a retired plumbing contractor, was living in Boulder City.  I didn't call him because he was retired and I didn't want to bother him.  Big mistake.  I called a drain cleaning company to come out and take a look.  He put a camera down the main and discovered that the cast iron pipes had collapsed in places and would need to be replaced.  He gave me two options and steered me towards one.  Option 1, dig a trench  on the outside and behind the unit, parallel to the existing line and out to the city main.  There would be some concrete busting and digging through clay. Plus, tying in the interior plumbing to the new outside line. Finally, tying into the city main.  Option 2, break through floors and concrete inside the living room each unit, dig to the broken pipes, remove them, plumb in new sewer lines, backfill the sewer laden dirt, patch the concrete, and replace the flooring that was removed.  Both options would require finding accommodation for two displaced couples.  Guess which one I was steered towards?  I'm sure one sounds much more expensive than the other.  I can't remember how he justified option 2 as being the best way to go.  But I agreed, waited for the scope of work to be drafted and gave an initial payment of around 6k.  They were going to start the next day.  After the paperwork, I gave my dad a call to tell him the story.  He flipped out. He demanded the number of the technician that gave the estimate and called him.  After a while, my dad called me and gave me the riot act on why I didn't call him and he explained to me what they were trying to do.  He knows that these type of companies work on commission.  That's why I was steered towards the more expensive option.  My dad got on the road to San Diego immediately.  Because I had already signed a scope of work and gave a payment, I was already behind the eight ball.  The shadiness continued when I noticed the technician writing the new scope on the document that had the original estimate and I had already signed.  Then I flipped out.  I was screwed because I already paid money, which was probably enough for the new scope.  Yada yada, I had to let them continue the work because I was in a bind paying for tenants to be housed. A tenant in the front house overheard the technician telling a coworker that they didn't need to rush because the tenants were staying in a hotel.  I was furious. Fast forward to completing the repair, there was a dispute with how much to pay. I didn't pay what they wanted. They immediately submitted a mechanics lien.  I hired an attorney.  Months down the road, sitting in a courtroom, minutes away from jury selection, he wanted to negotiate and I didn't really want to put my fate in a jury, he ended up getting 5k more from me.  My  attorney said he probably spent way more than that in attorney fees which made me feel slightly better.  The whole thing sucked and they dragged on getting the paperwork submitted to clear the lien.  On the bright side, there isn't anymore cast iron.

I still love real estate investing.

0Reply
168 views

1 Reply

Jump to latestLatest
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    3w

    @Brian Asaro, That's a rough story to have gone through, glad it's finally behind you at least.

    From a tax standpoint, all in it's worth confirming how that sewer replacement, the interior floor and concrete work, the legal fees, and even the extra $5k settlement got handled on your return back in 2017. A full sewer line replacement like this, breaking through floors and concrete to replace collapsed cast iron pipe, generally gets capitalized as a betterment or restoration rather than deducted as a current repair, since it's replacing a major system rather than patching a minor issue, so that cost should have gone onto your depreciation schedule, not written off in year one. The attorney fees related to the mechanics lien dispute are also part of that capitalized cost if they were defending your interest in the property itself, not a standalone deduction, worth double checking that was captured correctly at the time.

    Since this happened back in 2017, if any part of it wasn't handled properly on that year's return, or the depreciation schedule was never updated to reflect the new sewer line, Form 3115 can fix the depreciation method going forward without needing to amend that old return, worth having someone take a look now if you're not confident it was captured correctly back then, real dollars sitting there either way.

    Happy to connect!

    INVESTOR FRIENDLY CPA®5241 Reviews
    TaxMD™ | AI-Powered Tax Planning
Join the conversationCreate a free account to reply, vote on answers and follow this thread.