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

          ------------------------------------X   ADMINISTRATIVE REVIEW
          APPEAL OF
                    ROUNDHILL MGMT,
                    C/O REHAB ASSOCIATES
                                                  RENT ADMINISTRATOR'S
                                   PETITIONER     DOCKET NO:  LCS000591OM


          The above-named petitioner-owner timely filed an administrative 
          appeal against an order issued on February 10, 1987, by the Rent 
          Administrator, concerning the housing accommodations known as 322 
          East 81st  Street, New York, New York, various apartments, wherein 
          the Rent Administrator granted rent increases for the controlled 
          and stabilized apartments in the subject premises based on the 
          installation of various major capital improvements (MCIs).

          The Commissioner has reviewed all of the evidence in the record and 
          has carefully considered that portion relevant to the issues raised 
          by this administrative appeal.

          The owner commenced this proceeding on June 4, 1985 by initially 
          filing an application for a rent increase based on the total 
          claimed cost of $144,630.28 for the following items: adequate 
          plumbing; adequate wiring; intercom system; mail boxes (relocated 
          to inner vestibule); roof upgrading (January 1984); installation of 
          new roof (August 1984); new leaders (April 1985); steam cleaning 
          front of building; waterproofing exterior walls (completed June 
          1984); apartment entrance doors; new fireproof doors for hallways, 
          basement and cellar; repairs to roof bulkhead and new sky-light; 
          vestibule remodeling including new vinyl floor, light fixtures and 
          paint; level public hall floors; six (6) wood windows for 
          stairwell; new carpeting; repair sidewalk; painting exterior walls; 
          new concrete steps; iron railing and brass hand rails.

          Two tenants responded to the owner's application stating in 
          substance the following: (Apt. 3-FE) that the MCI installations 
          were prompted by the owner's desire to renovate some 8 to 10 vacant 
          apartments; that documents served by the owner on the tenants were 
          undated and were placed under tenants' doors on August 2, 1985, the 
          original application having been submitted to DHCR on May 31, 1985; 
          that it is difficult to address the specific items claimed as the 
          application is barely legible and the listing incomplete, the total

          ADMIN.  REVIEW DOCKET NO. BB430351RO

          cost of the MCI having been omitted; and that the owner's company 
          performed the installation which raises the issue of their cost as 
          compared to other contractors.  However with respect to the 
          plumbing and wiring installations the improvements were minimal; 
          the intercom system was not requested or approved by the tenants; 
          the question is raised as to how chemically cleaning the facade of 
          the building actually waterproofs it; and (Apt. 4-FW) that the 
          installations increased the value of the owner's property and 
          should not be charged to the tenant as it is the owner's obligation 
          to maintain the building.

          On February 10, 1987 the Rent Administrator granted in part the 
          owner's MCI application allowing $75,479.02 for the following 
          improvements: adequate plumbing; adequate wiring; a new intercom; 
          a new roof; waterproofing; new apartment entrance doors; 
          (relocated) new mail boxes; and hall, basement and cellar doors.  
          The Administrator disallowed claimed expenditures in the amount of 
          $66,169.99 for the following items based on a determination that 
          they did not qualify as major capital improvements: electrical 
          fixtures included in the adequate wiring, roof upgrading including 
          new leader and repairs to roof bulkhead; steam cleaning front of 
          the building; vestibule remodeling including vinyl floors light 
          fixtures and paint; level public hall floors; 6 public hall wooden 
          windows; new carpeting; repair sidewalk; painting exterior halls; 
          new concrete steps, iron railing and brass hand rails. The 
          Administrator further disallowed labor costs in the amount of 
          $8,600.00 for work performed by the owner.

          In this petition the owner contends, in substance, that labor costs 
          were arbitrarily eliminated; that the "roof upgrading" (new bulk- 
          head, new skylight and new leader) was an integral part of the roof 
          installation; that the vestibule and hall remodeling was necessary 
          as a result of various qualifying major capital improvements; and 
          that the concurrent improvements (light fixtures, vestibule and 
          building entrance upgrading, railings, carpeting, concrete steps, 
          sidewalk repair, public hall floors, steam cleaning, exterior 
          painting, cosmetic work and repairs) were disqualified contrary to 
          Section 33.1e of the Rent Regulations.

          In response to the owner's petition the tenants state in substance 
          the following: (Apt. 4-FW) that an MCI rent increase collected in 
          May 1987 is a sufficient increase; that the proposed increase of 
          $16.80 for the instant MCI is more than the 6.99 % allowable based 
          on the current rent of $120.19; and (Apt. 5-RW ) that a Senior 
          Citizen Rent Increase Exemption application was filed with the 
          proper agency. 

          ADMIN.  REVIEW DOCKET NO.:  BB430351RO

          After careful consideration of the entire evidence of record, the 
          Commissioner is of the opinion that this proceeding should be 
          remanded for further processing.           

          Rent increases for major capital improvements are authorized by 
          Section 2202.4 of the Rent and Eviction Regulations for rent 
          controlled apartments and Section 2522.4 of the Rent Stabilization 
          Code for rent stabilized apartments.  Under rent control, an 
          increase is warranted where there has been since July 1, 1970, a 
          major capital improvement required for the operation, preservation, 
          or maintenance of the structure.  Under rent stabilization, the 
          improvement must generally be building-wide; depreciable under the 
          Internal Revenue Code, other than for ordinary repairs; required 
          for the operation, preservation, and maintenance of the structure; 
          and replace an item whose useful life has expired.

          It is the established position of the Division that vestibule and 
          hall remodeling; the installation of light fixtures, plywood 
          floors, wood windows in the stairwell, concrete steps, carpeting, 
          guard railing and hand rails; painting exterior walls; roof 
          repairs; the cleaning of the building facade; and sidewalk repairs 
          do not qualify as major capital improvements.  

          Section 2522.4(a)(ii) of the Code and Section 2202.4(e) of the Rent 
          and Eviction Regulations (formerly Section 33.le) permit a rent 
          increase for other work performed in conjunction with a qualifying 
          major capital improvement.  Such other work must improve, restore 
          or preserve the quality of the structure.

          The Commissioner notes that the work in question was performed 
          prior to the effective date of Operational Bulletin 84-4 (November 
          13, 1984) and the current Code (May, 1987) and is therefore not 
          eligible for rent increases as "concurrent improvements".  The 
          owner had no expectation of such an increase for the rent 
          stabilized apartments 
          at the time said items 

          However, Section 33.le of the New York City Rent Regulations, since 
          recodified as Section 2202.4(e), was intended to encourage 
          landlords to correct conditions arising from years of neglect of 
          residential housing accommodations by providing rent increases 
          where the landlord has incurred in connection with and in addition 
          to a concurrent major capital improvement "other expenditures to 
          improve, restore or preserve the quality of the structure."  Rent 
          Control Advisory Sheet 1-33.le specifies that the guideline to be 
          used is that the "net result must be one from which it clearly 
          appears from the nature of the work done or to be done that the 
          quality of the housing has been or would be materially upgraded." 
          Furthermore, for work to be "concurrent", it must be completed 
          within an interval not to exceed one year.

          ADMIN.  REVIEW DOCKET NO.  BB430351RO

          Whereas Section 2522.4(a)(ii) of the Code and Operational Bulletin 
          84-4, issued November 13, 1984, limit the application of 
          "concurrent improvements" to costs incurred within a reasonable 
          period of time of a major capital improvement and only if the work 
          performed bears a direct relationship to the underlying major 
          capital improvement, the Commissioner notes that it would be 
          inappropriate to apply this new rule with respect to rent 
          controlled apartments as to expenditures incurred by the landlord 
          prior to the promulgation thereof where it is determined that the 
          landlord incurred costs based on the officially promulgated and 
          then effective interpretation under Rent Control Advisory Sheet 1- 
          33.le, provided the landlord otherwise satisfies the financial 
          requirements thereof.

          Accordingly, the Commissioner deems it appropriate to remand this 
          proceeding to the Administrator to determine whether the owner is 
          entitled to a rent increase for the rent controlled apartments for 
          "concurrent improvements".
          Regarding the owner's contention that labor costs for work 
          performed by the owner were arbitrarily eliminated,the Commissioner 
          is of the opinion and the courts have so held that where an owner 
          acts as his own general contractor and work is performed by the 
          owner's own employees as part of their regular compensation, such 
          labor would not be recompensable in the form of a rent increase, 
          irrespective of the fact that the work done might otherwise qualify 
          as a major capital improvement.  In the same vein, the cost of 
          supervising (or general contracting) of such labor and/or 
          subcontractors by the owner's in house management personnel would 
          not be recompensable by a rent increase.

          The Commissioner notes that ample evidence was submitted in the 
          application supporting the owner's admission that two partners of 
          Roundhill Management, the owners are stockholders in Eberhart 
          Brothers Inc.  Accordingly, the Administrator correctly excluded 
          the cast of labor performed by Eberhart Brothers.  

          With respect to the owner's contention that costs for the new 
          bulkhead, new skylight and new leaders should have been allowed, a 
          review of the evidence of record indicates that the bulkhead 
          skylight work and new leader were an integral part of the roof 
          system installation.  Based thereon, the Commissioner finds that 
          the expenditures for those items were improperly disallowed.  On 
          remand, the Administrator should recalculate the rent increase to 
          include costs related to the bulkhead skylight and leader 

          ADMIN.  REVIEW DOCKET NO.  BB430351RO

          As to the rent controlled tenants' question concerning the 
          collection of the MCI rent increase, the allowable increase for 
          rent controlled apartments is limited to 15% of the rent charged on 
          March 1, 1987, the effective date, with any overage collectible in 
          succeeding years (and not the 6.99% stated by the tenant). 

          A tenant who has a valid Senior Citizen Rent Increase Exemption 
          Order (SCRIE) is exempted from that portion of the increase which 
          would cause the rent to exceed one-third of the tenant's household 
          monthly disposable income.  A tenant who may be entitled to this 
          benefit may contact the New York City Department of the Aging by 
          calling (212) 442-1000.   

          Upon the remand, the Administrator may take such action as may be 
          deemed necessary, on notice to the parties, in order to give 
          consideration to the documentation and allegations of record and 
          such additional evidence or allegations as may be raised upon the 

          THEREFORE, in accordance with the provisions of the Rent 
          Stabilization Law and Code, and the Rent and Eviction Regulations 
          for New York City, it is

          ORDERED, that this administrative appeal be, and the same hereby 
          is, granted to the extent of remanding this proceeding to the Rent 
          Administrator for further processing in accordance with this order 
          and opinion.  The order and determination of the Rent Administrator 
          remains in full force and effect until a new order is issued on 


                                                  JOSEPH A. D'AGOSTA
                                                  Deputy Commissioner



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