ART 10459-K
STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
GERTZ PLAZA
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
----------------------------------x
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.:
ART 10459-K
VARIOUS TENANTS, RENT ADMINISTRATOR'S
DOCKET NO.:
KCS 000267-OM
PETITIONER OWNER: EDITH FRIED
----------------------------------x
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On May 23, 1986, the petitioner-tenants filed a Petition for
Administrative review against an order issued on April 22, 1986,
by the Rent Administrator, 92-31 Union Hall Street, Jamaica,
New York, concerning housing accommodations, known as various
apartments, 1013 East 13th Street, Brooklyn, New York, wherein
the Rent Administrator determined that the owner should be
granted a rent increase for the installation of certain Major
Capital Improvements (MCI's), namely new windows, a new boiler/-
burner and a new roof.
The Administrator disallowed an MCI increase for a heat timer and
two doors. In addition, the Administrator found that the owner
had failed to properly document $14,800 of the alleged $38,000
cost of the boiler/burner and $1,825.00 of the alleged $11,625.00
cost of the new roof. Accordingly, the Administrator allowed
only $23,200.00 and $9,800.00 for those two items, respectively.
The Commissioner has reviewed all of the evidence in the record
and has carefully considered that portion of the record relevant
to the issues raised by the administrative appeal.
The owner commenced this proceeding on November 14, 1984, by
filing an application for an MCI rent increase. On March 28,
1985, the owner certified that all tenants had been served with
the application. The application stated that the contractor for
the boiler/burner and the roof had an ownership interest in the
subject building. Also submitted were a Certificate of Eligi-
bility promulgated by the New York City Department of Housing
Preservation and Development (HPD) stating that, pursuant to
Section J51-2.5(f) of the Administrative Code, the reasonable
costs for the boiler/burner, roof, and windows were $23,200.00,
$9,800.00 and $37,900, respectively, i.e., the costs allowed by
the Administrator herein.
ART 10459-K
In their petition, the tenants restate certain objections, all of
which had previously been raised before the Administrator in
response to the owner's application. In particular, the tenants
contend that the Administrator's order is incorrect and should be
modified because the MCI increase "will create undue economic
hardships" on many tenants in the building, including senior
citizens.
In addition, the tenants allege a "conflict of interest" between
the owner and the contractor for the roof and boiler/burner and
that this "obvious suspicion of collusion . . . warrants a more
thorough investigation by the DHCR."
The tenants also allege that the owner-contractor used non-union
labor, in violation of the Article 8-A Loan Program under which
the improvements were financed.
Furthermore, the tenants contend that certain alleged violations
of the Warranty of Habitability Law enabled the owner to collect
excess rent at least in the past.
Finally, the tenants question why they rather than the owner
should bear these costs and request a hearing to examine the
issues herein.
In response to this petition, t e owner contends the Adminis-
trator's order should be affirmed because the MCI increase
therein can only be applied in 6% annual increments, the total
increase is less than that requested by the owner, and the owner
has complied with all DHCR regulations in seeki g the rent in-
crease.
The Commissioner is of the opinion that this petition should be
denied.
The Rent Control and Rent Stabilization Laws provide for a rent
increase when qualifying major capital improvements have been
made by the owner. The record indicates that the owner has met
the requirements of both laws. There was no provision at the
time the MCI increase herein was granted to exempt tenants from
all or part of the MCI increase based on the income of the
tenants. (The 15% maximum yearly increase under Rent Control and
the 6% maximum increase under Rent Stabilization apply to all
tenants equally.) More recently, senior citizens under the SCRIE
(Senior Citizens Rent Increase Exemption) program a e not obli-
gated to pay that portion of an MCI increase which would raise
their total rent to over one-third of their disposable income.
However, this provision applies only to MCI orders issued on or
after September 1, 1986 and is therefore not applicable in the
present proceeding. Accordingly, there is no error of law or
fact in the Administrator's order on this issue and therefore no
ground on which the order can be modified to accommodate such
tenants. (The SCRIE program is not administered by the DHCR but
ART 10459-K
rather by HPD.)
The Commissioner notes that in a building where, as here, an MCI
increase is approved under the Section J-51 Tax Abatement
Program, the rent controlled tenants have a right to a two-thirds
reduction in their MCI increase during the period of the tax
abatement. The Owner's Individual Unit of the DHCR has an open
proceeding with Docket No. ED 230001-X to recalculate the rents
for the effected rent controlled tenants. That proceeding has
been held in abeyance pending the issuance of this Order. (Rent
stabilized tenants are now eligible for a one-half reduction,
but only for MCI's whose work commenced after June 28, 1988.)
Upon issuance of this Order, that proceeding will be reactivated.
As noted above, the owner had admitted to the Administrator that
the contractor for the boiler/burner and roof had an ownership
interest in the subject building. Such an interest does not
preclude the granting of an MCI increase. However, the owner in
such a case must present clear and unambiguous evidence of the
cost of the alleged improvements because there exists a greater
potential for inflated costs than in the case of an arm's length
transaction with an independent contractor. See Administrative
Review Docket No. ARL 00719-L. In the present case the Adminis-
trator was cognizant of the relationship and accordingly
disallowed $14,800.00 of the alleged $38,000.00 cost of the
boiler/burner and $1,825.00 of the alleged $11,625.00 cost of the
new roof.
Thus, this issue was addressed by the Administrator and the
Commissioner finds no evidence in the record to warrant a further
reduction of the MCI increase on this ground.
The allegation that the owner used non-union labor in violation
of the terms of the Article 8-A Loan Program is not relevant to
this proceeding. The DHCR does not administer that program.
The owner's alleged failure to comply with the terms thereof is
not a basis for denying an otherwise acceptable MCI increase.
The allegation that the owner had previously collected excess
rent due to alleged violations of the Warranty of Habitability
Law is also not a basis to deny an MCI increase. What the
tenants are apparently contending s that the conditions cor-
rected by these MCI's would have warranted rent abatements as
violations of the Warranty of Habitability. The tenants could
have sought such rent abatements either in a court of competent
jurisdiction or by means of complaints filed with DHCR. The
failure to do so does not affect the owner's eligibility for a
rent increase. Furthermore, the Commissioner notes that one
function of the MCI increase is to encourage owners to upgrade
the housing stock under their control. Indeed, an owner is not
eligible for an MCI increase for an item which has not outlived
its useful life.
As to the tenants' request for a hearing, such a hearing is dis-
cretional. There is nothing in the record to indicate that the
ART 10459-K
Administrator abused that discretion by not holding a hearing. A
letter submitted by the tenants from the former Conciliation and
Appeals Board merely stated that the tenants would "be afforded a
full opportunity to express their views as to the application"
but did not promise a hearing. The record shows that the tenants
were afforded the opportunity to respond and availed themselves
of that opportunity before the Administrator.
THEREFORE, in accordance with the Rent Stabilization Law and
Code, and the Rent Control Law and Regulations, it is
ORDERED, that this petition be, and the same hereby is, denied
and that the Rent Administrator's order be, and the same hereby
is, affirmed.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
|
