BB 410005 RT

                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                              JAMAICA, NEW YORK   11433

          APPEAL OF                               DOCKET NO.: BB 410005-RT

                     IRA HURVITZ,
                                                  DRO DOCKET NO.: ZAA 400055-OM
                                                  OWNER, S. Z. 70 ASSOCIATES
                                  PETITIONER      LOWER EAST REDEVELOPMENT, INC.

                                       IN PART

          On January 29, 1987, the above named  petitioner-tenant  filed  a
          Petition for Administrative Review against  an  order  issued  on
          December 29, 1986, by the Rent Administrator,  92-31  Union  Hall
          Street, Jamaica,  New  York,  concerning  housing  accommodations
          known as Various Apartments, 70 East 3rd Street,  New  York,  New
          York wherein the Rent Administrator determined that the owner was 
          entitled  to  a  rent  increase   for   certain   Major   Capital
          Improvements (MCI's),  i.e.,  rewiring,  new  roof,  mail  boxes,
          intercom; but denied an MCI increase for hallway renovation.

          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 by filing an application  for
          an MCI increase.

          In answer to the  application,  various  tenants,  including  the
          petitioner herein, objected to the rent increase.  The petitioner 
          objected on the ground  that  his  rent  was  the  initial  legal
          regulated rent and was established after each of the improvements 
          was  made.   That  is,  his  negotiated  first  stabilized   rent
          included the costs of the various MCI's, as well  as  renovations
          made solely to the tenant's apartment.

          The tenant alleged that the owner had made a unilateral offer  to
          waive collection of the MCI increase until the end  f  the  then-
          current lease, but stated that this offer was  unacceptable.   In
          addition,  the  tenant  alleged  certain  decreases  in  services
          unrelated to the MCI's.  However, the tenant made  no  allegation
          denying the existence of the MCI's  or  questioning  the  quality

          Attached to the tenant's answer was a Notice to  Rent  Stabilized

          BB 410005 RT
          Tenant of Right to File a Fair Market Rent Appeal
          [Form No.  DC-2A(9/85)]  in  which  the  owner  stated  that  the
          petitioner  was  the  first  stabilized  tenant   after   vacancy
          decontrol on July 18, 1985.

          Also attached to the petitioner's answer was a copy of  a  letter
          from the owner stating that the MCI application had  been  served
          on April 17, 1986.  The record shows the tenant's  initial  lease
          commenced December 1, 1985.  (All MCI's  had  been  completed  by
          August 30, 1985.)

          In the order herein under review the parties were  notified  that
          "[u]nless there is an authorized provision in the  current  lease
          of the tenant in occupancy, the increase granted  in  this  Order
          cannot become effective until the expiration of such lease."

          In this petition, the tenant contends the  Administrator's  order
          is incorrect and should be modified for the reasons stated in his 
          answer to the owner's application,  emphasizing  that  all  MCI's
          were completed before he took occupancy and  that  he  would  not
          have agreed to the negotiated rent had he been informed  that  it
          was subject to be raised for the existing improvements.

          In addition, he contends that because the April 17, 1986  service
          of the MCI application on the tenant was after the 90 day  period
          in which he could have filed a Fair Market Rent Appeal (FMRA)  he
          no longer had  that  method  of  challenging  his  initial  rent.
          Accordingly, he asks that the Division now  "investigate  if  the
          landlord did, indeed, set a fair market price on my apartment."

          Attached to the tenant's petition is a copy of a January 26, 1987 
          letter from the owner stating its

               "intention not to pass these MCI  rent  increases  along
               to tenants, such as yourself, who moved  in  after  most
               of these improvements had been completed.

               "Therefore, please rest assured that, while  you  reside
               in you present apartment, you will not be asked  to  pay
               MCI increases based on improvements made prior  to  your
               occupancy in 70 East Third Street."

          The tenant contends that he requires a  Division  order  on  this
          subject in order to protect him from a new owner  who  might  not
          honor the owner's unilateral promise not to enforce the MCI order 
          and also to protect  future  tenants  from  this  increase.   (An
          earlier letter attached to the above-quoted letter, in which  the
          owner agreed only to waive t e  MCI  increase  during  the  then-
          current lease  term,  states,  in  part,  that  the  owner  "will
          increase your rent as a matter of record to the extent  permitted
          by the DHCR.")

          In an answer dated April 8, 1987 the owner states that it had not 
          received a copy of the tenant's petition.  On December 5, 1990  a
          copy of the petition was again served on the owner.  To  date  no
          response has been received.

          The Commissioner is of the opinion that this petition  should  be
          granted in part.

          BB 410005 RT

          Division policy is that  the  apartment  of  a  first  stabilized
          tenant is permanently exempt from any additional MCI increase for 
          an improvement completed before  the  commencement  date  of  the
          first stabilized lease.  Such a lease's rent is a negotiated fair 
          market rent which presumably reflects the value of the  apartment
          with all existing improvements.  [If the initial stabilized lease 
          stated explicitly  that  the  initial  negotiated  rent  did  not
          include the specified costs of specified MCI's a different result 
          would follow.  But the lease of the tenant herein shows  no  such

          Had this issue been raised for the first  time  in  the  tenant's
          petition, it could have been denied on the basis that it did  not
          allege an error of fact or  law  in  the  Administrator's  order.
          (Such a denial order would have nevertheless notified  the  owner
          of the Division's policy.)  In the present case, since the  issue
          was  raised  before  the  Administrator,  it  should  have   been
          addressed in the Administrator's order.  (The  above-cited  lease
          authorization paragraph of the  Administrator's  order  does  not
          address this special case.)

          In so far as the tenant has petitioned for a determination of the 
          fair market rent, that portion of the petition is hereby  denied.
          The tenant stated to the Administrator  that  he  had  considered
          filing an FMRA but failed to do so, at least in part, because the 
          apartment was not registered.  In his petition he implies that he 
          would  have  filed  a  FMRA  had  he  received  the  owner's  MCI
          application within the ninety day period allowed for  the  filing
          of a  FMRA.   The  Commissioner  finds  that  neither  reason  is
          sufficient to extend the ninety day period.  If the  tenant  felt
          his $850.00 initial rent exceeded the fair  market  rent  a  FMRA
          could have been filed on that allegation alone.   The  fact  that
          the apartment was not registered would not prevent  such  filing.
          (The Division's records indicate that the  owner  has  still  not
          registered the subject premises.  The  owner  is  hereby  advised
          that the Code imposes penalties for such failure.)

          When the tenant received the owner's MCI application the proper
          remedy was that taken by the tenant--not the late filing of a FMRA.

          Finally, the petitioner's  allegations  regarding  diminution  of
          service are beyond the scope of this review.  However, this order 
          is without prejudice to the tenant's  right  to  file  a  service
          complaint, if the facts so warrant.

          THEREFORE, in accordance with  the  Rent  Stabilization  Law  and
          Code, it is

          ORDERED, that this petition be, and the same hereby  is,  granted
          in part and the Rent  Administrator's  order  be,  and  the  same
          hereby is, modified in accordance with this Order and Opinion  to
          state that this tenant's apartment is permanently exempt from the 
          MCI increase granted in ZAA 400055-OM.

          BB 410005 RT
                                                  JOSEPH A. D'AGOSTA
                                                  Deputy Commissioner

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