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
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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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