DOC. NO.: BF 430192-RT
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          APPEAL OF                            :  DOCKET NO. BF 430192-RT
                                                  DRO DOC NO. LCS00578-OM
                    VARIOUS TENANTS OF         :
                    157 E 72ND STREET,         
                              PETITIONER       :


          On June 26, 1987 the above-named petitioner-tenants filed a 
          Petition for Administrative Review against an order of the Rent 
          Administrator issued May 22, 1987.  The order concerned housing 
          accommodations known as 157 East 72nd Street, New York, New York.  
          The Administrator granted a rent increase based on the installation 
          of major capital improvements.

          The Commissioner has reviewed the record and carefully considered 
          that portion relevant to the issues raised by this appeal.

          The owner commenced this proceeding on February 5, 1985, by filing 
          an application for a rent increase based on installations of major 
          capital improvements, to wit:

                    Remove old chimney and furnish and install
                    new chimney, March to April 1982

                              Elevator repairs, April to June 1983

                    Furnish and install new boiler system,
                    August 1982 to February 1983

                    Convert standpipe system, March 1983

                    Furnish and install sump pump and pit
                    with drain and overhaul and reassemble
                    sump pump, February 1982 to May 1983

                    Parapets, pointing and masonry, May to
                    December 1982

                    Rebuilt terracotta column on second floor,
                    February 1983

          DOC. NO. BF 430192-RT

                    Lobby security system April 1982 to May 1983

                    New windows, September 1982 to May 1983.

          The total cost of the improvements was $338,715.23.  On September 
          4, 1985 the owner certified that each tenant had been served with 
          a copy of the application and given an opportunity to respond.

          Various tenants responded objecting to the increase on the ground 
          that the improvements were made in anticipation of the conversion 
          of the building to condominiums and to promote sales.  The tenants 
          argued that the cost of the improvements would be recouped when the 
          apartments are sold.

          The Administrator found no relevant complaint pertaining to the 

          The Administrator allowed $286,962.87 of the cost of the 

          The following costs were disallowed:

               Temporary hot water $1,082.50/removal of old tank 
               $2,165.00/sales tax $321.75/rebuilt terra-cotta column 
               $541.25/security lock $438.41/console for security system 
               $1,450.00/lobby modernization $31,590.00/elevator repairs 
               $7,988.44/labor $525.01/standpipe $2,650.00/painting 
               boiler room $3,000.00.

          On appeal the tenants, through counsel, raise three issues in 
          urging reversal.

               1.   157 East 72nd Street Associates does not own the 
                    premises.  Premises are owned by cooperative apartment 
                    corporation.  Failure to disclose same makes the 
                    application defective.

               2.   Landlord failed to disclose existence and 
                    status of reserve fund.

               3.   Upon information and belief the reserve fund 
                    has not been exhausted.

          DOC. NO. BF 430192-RT

          The owner initially responded to the petition by stating that the 
          tenants' grounds for reversal do not dispute that the improvements 
          were made and that they qualify for MCI's.  In response to certain 
          queries from the Commissioner the owner further pointed out the MCI 
          installations predated the creation of the working capital fund and 
          that no special assessments were made to pay for the MCI.

          After a careful review of the evidence in the record the 
          Commissioner is of the opinion that the petition should be denied.

          The owner is correct in pointing out that the reserve fund issue is 
          irrelevant.  Since the parties agree that the installations herein 
          predated by several years the conversion of the subject building to 
          condominium ownership, a reserve fund created in conjunction with 
          the subsequent conversion could not have been the source of funds 
          for the work that was done.  While major capital improvements paid 
          for after conversion out of a cash reserve fund may not be the 
          basis for a rent increase, (See Supplement No. 1 to Operational 
          Bulletin 84-4) here the tenants do not even assert facts that would 
          preclude eligibility for the subject rent increase.  The tenants 
          simply allege that the owner failed to disclose the existence of a 
          reserve fund and that the reserve fund has not been exhausted.  The 
          owner had no obligation to disclose the existence of a reserve fund 
          if it was not the source of funds used for the improvements and the 
          owner is not required to use up a reserve fund before qualifying 
          for a rent increase when the improvements were paid for by funds 
          contributed by the owner before the conversion.

          The tenants' allegation regarding the identity of the owner is also 
          without merit.  The application was filed by 157 East 72nd Street 
          Associates which is also listed in DHCR's registration records as 
          the owner of all the rent regulated apartments in the building.

          A review of the record reveals that the owner satisfied the 
          requirements for a rent increase based on the installation of the 
          various improvements and the tenants have not established any basis 
          for modifying or revoking the order.

          THEREFORE, pursuant to the Rent Stabilization Law and Code and the 
          Rent and Eviction Regulations, it is

          DOC. NO. BF 430192-RT

          ORDERED, that this petition be, and the same hereby is, denied and 
          that the Rent Administrator's order be, and the same hereby is, 

                                             JOSEPH A. D'AGOSTA
                                             Deputy Commissioner

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