Adm. Rev. Docket No.: BH430350RO
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
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IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO. BH430350RO
:
LAURENCE GINSBERG, DISTRICT RENT
ADMINISTRATOR'S
PETITIONER : DOCKET NO. LC000116-OE &
LC000228-OE
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TENANTS: VARIOUS
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On August 26, 1987, the above-named petitioner-owner filed a
Petition for Administrative Review of an order issued on July 22,
1987 by the Rent Administrator, Gertz Plaza, Jamaica, New York,
concerning the housing accommodations known as Various apartments
at 1214-1216 First Avenue and 1220 First Avenue (which is also
known as 400 East 66 Street), New York, New York, wherein the
Administrator denied the owner's application under
9NYCRR2524.5(a)(2) [application for leave to refuse to offer rent
stabilized tenants renewal leases and to recover possession based
on the proposed demolition of the building] and 9NYCRR2204.8
[application for certificate of eviction as to rent controlled
tenants based on the proposed demolition of the building]; upon a
finding that a return of 8.5% could be realized from the subject
building which contained rent controlled tenants (1220 First
Avenue) and, therefore, certificates of eviction could not,
under the Sound Housing Law, be issued as to said rent controlled
tenants; and upon a finding that the owner's application as to the
rent stabilized tenants in 1214-1216 First Avenue and 1220 First
Avenue would have to be denied as that application was based on a
plan under which all of the subject buildings would be demolished
and replaced by a single structure.
The Commissioner has reviewed all the evidence in the record and
has carefully considered that portion of the record relevant to the
issues raised by the Petition.
In the Petition the owner's sole objection, in substance, is that
in the calculation of the return that could be realized on 1220
First Avenue, the owner was not given credit for depreciation and
interest as operating expenses.
Adm. Rev. Docket No.: BH430350RO
Various tenants have answered the Petition opposing it.
The Commissioner is of the opinion that the Petition should be
denied.
The Commissioner finds that it is the well established practice in
the performance of Sound Housing audits to disallow depreciation
and interest as operating expenses in the calculation of the
return that can be realized on a particular building. The
Commissioner further finds that that practice is reasonable and in
keeping with the Sound Housing Law.
The essence of the Sound Housing Law test is whether or not a
building has any chance of yielding a return of at least 8.5%, at
the real cost of operating it. Depreciation is not an actual out of
pocket expense and the interest attributed to a building may merely
reflect an owner's vigorous efforts to turn equity into cash by
mortgaging the building; there is no necessary correlation between
the amount of a mortgage on a building (or the interest paid
thereunder) and the costs that must be incurred in order to operate
that building.
THEREFORE, in accordance with all of the applicable laws and
regulations, it is
ORDERED, that this Petition be, and the same hereby is, denied, and
that the order of the Administrator be, and the same hereby is,
affirmed.
ISSUED:
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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