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.:  BE430349RO
          APPEAL OF
                   ROUNDHILL MGMT,
                   C/O REHAB ASSOCIATES
                                                  RENT ADMINISTRATOR'S
                               PETITIONER         DOCKET NO:  LCS000592OM
          ------------------------------------X

                  ORDER AND OPINION REMANDING PROCEEDING ON APPEAL

          The above-named petitioner-owner timely refiled an administrative 
          appeal against an order issued on March 9, 1987, by the Rent 
          Administrator, 92-31 Union Hall Street, Jamaica, New York, 
          concerning the housing accommodations known as 324 East 81st  
          Street, New York, New York, various apartments, wherein the Rent 
          Administrator granted major capital improvement (MCI) rent 
          increases for the controlled and stabilized apartments in the 
          subject premises based on the installation of adequate plumbing; 
          adequate wiring; a new intercom; a new roof; waterproofing; new 
          apartment entrance doors; new mail boxes (relocated); and hall, 
          basement and cellar doors at a total approved cost of $69,361.26.  
          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: roof repairs; 
          cleaning the building facade; vestibule remodeling; exterior 
          painting; light fixtures; level plywood floors; windows in the 
          stairwell; sidewalk repair; concrete steps; carpeting; guard 
          railing and hand rails; and sheet rock.  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 and new skylight) 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 raised objections 
          to the rent increase.

                                          













          ADMIN.  REVIEW DOCKET NO.:  BE430349RO

          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, hand rails and sheet rock; 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 the Code 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 current 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
                                          
                                          2
                                          










          ADMIN.  REVIEW DOCKET NO.  BE430349RO

          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.

          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.

          In the instant proceeding, the evidence of record reveals that some 
          of the officers holding shares in Eberhardt Brothers, Inc.  
          ("Eberhardt"), the company that performed some of the work, are 
          partners in RoundHill Management Company ("RoundHill"), the 
          registered owner of the subject premises; that Eberhardt and Round 
          Hill share the same business address; that a notice to the tenants, 
          dated August 2, 1985, of the MCI rent increase application was sent 
          on Eberhardt letterhead; that most of the invoices and contracts 
          for the work performed by other contractors were made out to 
          Eberhardt; and that all of the cancelled check copies submitted to 

                                          
















          ADMIN.  REVIEW DOCKET NO.  BE430349RO

          payment from RoundHill and are signed by either  D.  Eberhardt or 
          W.  Eberhardt, including checks made out to Eberhardt.  In view 
          thereof, the Commissioner is of the opinion that Eberhardt, albeit 
          a separate entity, was, in effect, acting as the managing agent for 
          RoundHill and finds that the Administrator correctly excluded the 
          owner's labor cost claim.

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