Co-op in West End Avenue Finances Riser Replacement with Innovative Payment Plan

Faced with a major riser replacement project but without adequate reserves, the board at a luxury West End Avenue co-op is using an interest-free contractor payment plan to fund the nine-month, multimillion dollar project. This financial strategy means the monthly assessments for the project are stretched nine months beyond the expected completion date, easing the financial stress on shareholders. The move enables the much-needed work at the 45-unit building to start immediately. “The risers are way past their life expectancy,” says master plumber Joe Santullo, owner of the plumbing firm Systems 2000, who is facilitating the project.  

The total cost of the domestic hot water pipe replacement is estimated at $2.3 million, with the plumbing work north of $1.5 million. Not only will the leaking risers be replaced, but the entire water-circulation system is getting an overhaul. Currently, electric pumps fill a tower on the roof to supply hot and cold water to apartments. This gravity system is being replaced with a booster system, which will have computerized pumps with variable frequency drives supplying domestic hot water. This is going to standardize water pressure and generate electricity savings of 60%. “The system pays for itself in around five years,” Santullo says.

The building is managed by AKAM, and it was senior director of project management Matt Resnick who negotiated the payment plan with Santullo.” The 18-month payment plan decreases the immediacy of the financial burden on all shareholders and it creates some certainty for the contractor,” he says. The plan exclusively covers the plumbing, leaving engineering costs, special inspections, probes and Department of Buildings permits outside its scope. Even so, the arrangement suits both parties. “They just couldn’t afford it otherwise,” says Santullo. “And I have the funds to front it for them.”

Contractors typically seek a 10% to 20% deposit for their work, then send out monthly payment requisitions until the project is finished, with 5% held back by the client until the project is signed off. In this case, Resnick negotiated a 10% deposit, followed by six months of payments amounting to 1/18th of the base contract. Adjustments for change orders will be made in the new year with payments completed by the end of 2025, without incurring interest. “Previously, all payments were to be due by March 31, but we’ve kicked them to December 31, 2025,” Resnick says. 

The building’s reserve funds are tied up in certificates of deposits and money market accounts so the co-op can continue to collect interest while the assessment pays for the work. The plan also preserves essential funds, giving the board flexibility if it is faced with another major cost in the coming year. 

It’s rare to get a payment plan like this, but Resnick says it never hurts to ask. “I make the request during the final bidding stage, where we haven’t given an indication of who we are awarding it to,” he says. “If they want the business, you’re going to get a deal.” The project is now underway, with two risers being replaced at a time. To ensure minimal disruption to residents, part of the negotiations included a guarantee that the contractor would restore domestic hot water at the end of each workday.