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

      APPEAL OF                              DOCKET NO.:BJ 430015-RO
          CORP.,                             DOCKET NO.:ZLS000881-OM
                            PETITIONER    : 


      On October 17, 1987 the above-named petitioner-owner filed an 
      administrative appeal against an order issued on September 10, 1987 by the 
      District Rent Administrator (92-31 Union Hall Street, Jamaica, New York) 
      concerning the housing accommodations known as 12 West 72nd Street, New 
      York, New York, Various Apartments, wherein the Administrator denied major 
      capital improvement (MCI) rent increases for the stabilized apartments in 
      the subject premises.

      The owner commenced the proceeding below by filing its MCI application in 
      October of 1985 for cosmetic improvements of lobby and hallways, new 
      windows, elevator modernization, partial pointing and waterproofing.

      The District Rent Administrator's order, appealed herein, stated that the 
      installation of cosmetic improvements for the lobby, hallways, as well as 
      the modernization of the elevator, do not constitute major capital 
      improvements pursuant to the code and Regulations.  In addition, the spot 
      pointing and waterproofing, and the replacement of windows, all of which 
      was installed in a piecemeal manner from 1983 to 1985, do not comply with 
      the provisions  of the Regulations warranting a rent increase.  
      Accordingly, the application was denied.

      On appeal, the petitioner-owner states, in substance, that A) all of the 
      building's windows were replaced with energy efficient thermal windows in 
      as expeditious a manner as realty permits; B) the windows installation was 
      completed within the permissible time frame, since the law and code then 
      applicable did not establish any time limitation, C) the pointing and 
      waterproofing radically improved the building by ending all water 
      infiltration; D) the elevator modernization was a major capital improvement 
      for which an increase should have been granted and E) since the lobby and 
      hallways were improved (including but not limited to the walls, floor, 
      ceiling and electrical lighting fixtures) at the same time as the other 
      work, this should also have been considered a basis for a rent increase.

      In response to the owner's petition, the tenants filed an answer stating, 
      in substance, that a) the installation of windows were not installed on the


          DOCKET NUMBER: BJ 430015-RO
      27th, 28th and 29th floors on the west side of the building; b) the owner 
      obtained a credit from the reserve fund for the window installation; c) 
      apartments continue to have leaks and d) according to the fifth amendment 
      of the offering plan, to convert to cooperative ownership, the owner 
      promised to assume all the costs.

      After a careful consideration of the entire evidence of record the 
      Commissioner is of the opinion that the administrative appeal should be 

      Rent increases for major capital improvements are authorized by Section 
      2522.4 of the Rent Stabilization Code for rent stabilized apartments.  The 
      improvements 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 the building-wide 
      installation of new apartment windows and/or public area windows to replace 
      windows which are 25 or more years old constitutes a major capital 
      improvement for which a rent increase adjustment may be warranted, provided 
      the owner otherwise so qualifies.  In this respect, the Commissioner notes 
      that work of a piecemeal nature or ordinary repairs and maintenance does 
      not qualify as a major capital improvement.

      However, in recognition of the fact that there are limited circumstances 
      where the replacement of all windows would be an unnecessary and 
      unwarranted expense, the Commissioner has adopted the position that where 
      an owner has earlier installed new windows the conditions of which are such 
      that their replacement is not required or due to the special 
      characteristics of certain windows which are clearly of a distinct and 
      different nature, that the subsequent replacement of all other apartment 
      windows totalling at a minimum at least 80% of the total number of 
      apartment windows in the building as part of a unified plan and 
      consecutively timed project complete within a reasonable time frame would 
      substantially comply with the requirements of a major capital improvement.

      In this proceeding, a review of the record, including documentation and 
      information submitted the owner, indicates that of the 918 apartment 
      windows at the subject premises, 615 new windows, or 70% were installed.  
      Accordingly, the Commissioner finds that the Administrator properly 
      disallowed rent increase for the new window installation based upon the 
      fact that the window installation consisted of the replacement of less than 
      80% of the total number of apartment windows in the building.

      The Commissioner further notes, according to the evidence of the record, 
      the sponsor obtained a credit from the reserve fund ($200,210.10) for the 
      window installation.  It is the well established position of the Division, 
      and in accordance with the Rent Stabilization Code and Supplement No. 1 to 
      Operational Bulletin 84-4, that the the extent a major capital improvement 
      is paid for with reserve fund monies or where a sponsor applies a credit 
      against the reserve fund, thereby reducing its out of pocket costs, such 
      expense may not form the basis of a major capital improvement rent 


          DOCKET NUMBER: BJ 430015-RO
      In regard to the cosmetic improvements of the lobby and hallways and 
      elevator modernization the Commissioner is of the opinion and finds that 
      the Administrator properly disallowed the cost, in accordance with the 
      standard policy of the Division not to consider such items major capital 

      According to the fifth amendment to the offering plan, the "Sponsor-Seller 
      has agreed, at its own expense, and without reduction in the Apartment 
      Corporation's working capital fund or reserve fund, to complete:

           (a)  the decorations of the remaining hallways not yet finished,
                consistent in style to the hallways already finished;

           (b)  the installation of new furniture for the lobby presently on

           (c)  the installation of the refurbished elevators cars presently
                on order; and 

           (d)  the tower masonry work to make the tower water tight."

      According to Policy Statement 89-9, "DHCR has several MCI applications from 
      sponsors of converted buildings in which the offering plan states that an 
      improvement or improvements will be made at the sponsor's sole expense or 
      sole cost and expense.  The agency has reviewed correspondence from the 
      State of New York Department of Law stating, 'This presentation can only be 
      interpreted to mean that no non-purchasing tenant would bear any 
      responsibility' for the improvement.  The department of Law regards the 
      owner who makes a statement such as this is an offering plan as ineligible 
      to recover the cost of the subject improvement in an MCI increase.  
      "Therefore the Commissioner finds that the cost of the partial pointing and 
      waterproofing is ineligible for a MCI rent increase.

      On the basis of the entire evidence of record, it is found that the 
      Administrator's order is correct and should be affirmed.

      THEREFORE, in accordance with the applicable provisions of the Rent 
      Stabilization Law and Code and Operational Bulletin 84-1, it is

      ORDERED, that the Administrative appeal be, and the same hereby is denied; 
      and that the Administrator's order be, and the same hereby is affirmed.


                                           JOSEPH A. D'AGOSTA
                                       Acting Deputy Commissioner



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