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
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.:BJ 430015-RO
:
TWELVE WEST 72ND STREET RENT ADMINISTRATOR'S
CORP., DOCKET NO.:ZLS000881-OM
PETITIONER :
------------------------------------X
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
denied.
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
increase.
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
improvement.
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
order;
(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.
ISSUED:
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
|
