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 ADMINISTRATIVE REVIEW
IN THE MATTER OF THE ADMINISTRATIVE DOCKET NO.: BB430351RO
APPEAL OF
ROUNDHILL MGMT,
C/O REHAB ASSOCIATES
RENT ADMINISTRATOR'S
PETITIONER DOCKET NO: LCS000591OM
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ORDER AND OPINION REMANDING PROCEEDING ON APPEAL
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
were
installed.
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
installations.
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
remand.
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
remand.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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