On today’s show we’re talking about J-walking. J-walking is when you take a small risk and cross the street where you don’t have a traffic light for pedestrians.

We’ve all done it. It’s breaking some rules, but as individuals we take some calculated risks.

The idea of J walking brings me to discussing building extra apartments into a property.

In the city of Chicago there are many 50 foot wide 3-story buildings with six apartments. These lovely old buildings were built in the 1920’s. There are thousands of them. Remember the roaring 20’s? That was the period after WW1 and after the Spanish Flu pandemic when the economy took off and expansion was happening everywhere. It was the precursor to the Great Depression that started later that decade.

These 1920’s buildings were made out of stone and brick with wood framing on the interior structure. The foundations were made out of stone and cement. Most foundations were 5 feet deep. But the basement typically had windows at the front and back which mirrored the look of the stately windows of the units above, even though the basements were largely unfinished. In some cases, owners would finish the basements in order to create storage space for residents in the basement. That space also created the opportunity for two more apartments. Many enterprising building owners did in fact create two more apartments in the basement. Some were done properly. But many were not.

For some reason, these basement apartments are called garden units. I don’t know why they call them that, because there’s nothing garden about them. They’re a basement apartment. If you visit Chicago and hear people talking about garden units, you need to translate that into meaning basement apartments.

If you look through the real estate listings for these types of buildings, you will also see mention of “legal garden units”. That means that a building permit was issued for those basement units.

The problem with these illegal units is that, unbeknown to the building owner, they are at risk of not having any insurance coverage. You see most insurance companies will not insure properties that were not legally built. I can see their point of view. They don’t have the opportunity to inspect properties before providing insurance coverage. If there were no bounds on the insurance, then property owners would be free to continue expanding their property illegally and the insurance companies would be on the hook with virtually unbounded liability. Let’s be clear, the insurance company will happily collect the insurance premium from you. They will take your money. But when there is a claim, the property owner and the insurance company become legal adversaries. There will be a review of the policy by the insurance company’s legal team and a determination on the limits of coverage will be made after an examination of the facts surrounding the claim. That includes an investigation. The insurance company may look to see if there are any building permits that were opened on the property and never closed out. They might do the same for any electrical permits. They may examine whether any additions were made to the property without a permit. Insurance companies will likely do anything they can to get out of paying out on a claim.

Now I’m not an insurance professional, and I’m not here to provide insurance advice. If you want to get a proper opinion, then I recommend that you connect with a lawyer who specializes in litigating insurance claims. They can usually set you straight on where your points of vulnerability might be.

When you J walk, you are taking a risk. Yes, everybody does it from time to time. But J walking is done selectively. Owning an illegal unit is a bit like J walking every minute of every day, 7 days a week, 365 days of the year.