STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEALS OF DOCKET NOS.CC 420234-RT
GEORGE L. GEORGE, : CC 4202355RT
ARTHUR BEKENSTEIN, CC 420236-RT
DAVID HENDEL, EVELYN TOCCI, AND CC 420237-RT
ROSLYN HOROWITZ PETITIONERS : CC 420238-RT
DOCKET NO. BA 430070-OM
ORDER AND OPINION REMANDING PROCEEDING ON APPEAL
On March 29 and 30, 1988, the above named petitioner-tenants filed
Petitions for Administrative Review against an order issued on February 24,
1988 by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning housing accommodations known as 685 West End Avenue, New York,
New York, various apartments, wherein the Rent Administrator authorized a
major capital improvement rent increase of $35.54 per room, per month, for
both the rent controlled and rent stabilized apartments in the subject
building for the following: elevator upgrading (including a new controller
and selector), aluminum replacement windows, adequate rewiring, a new roof,
waterproofing and facade work.
These petitions are consolidated for disposition herein as they involve
common issues of law and fact.
This proceeding was commenced by the sponsor/owner (i.e., the holder of the
unsold shares) of the subject cooperative building filing an application for
a major capital improvement (MCI) rent increase for the following: elevator
modernization (including new controller and selector), new thermal
replacement windows, adequate rewiring, roof (penthouse, main, lobby), and
waterproofing/facade repair. The sponsor/owner submitted documentation in
support of the application including copies of various proposals, contracts,
cancelled checks and necessary governmental approvals and sign-offs for
those items requiring same.
Various tenants submitted responses to the application asserting, among
other things, that the owner paid for the MCI installations out of the
reserve fund. The sponsor/owner subsequently submitted a letter stating:
"This is merely to attest to the fact that the funds for
the major capital improvements in the matter before the
DHCR bearing Docket no. BA 430070-OM did not come out of
the reserve fund.
"The funds were derived by a refinancing of the mortgage
which resulted in an increase in the monthly maintenance
charges against all apartments."
DOCKET NUMBER: CC 420234-RT, etal
In the order appealed herein, the Rent Administrator authorized an MCI rent
increase for the above mentioned installations.
In these petitions the tenants contend, in substance, that the subject
building is not a non-eviction cooperative as indicated in the Rent
Administrator's order but rather is an eviction cooperative; that the money
to pay for the improvements came from the reserve fund; that improvements
which do not qualify for rent increases for rent controlled tenants should
be deleted; and that the decision should be postponed until an overcharge
matter before the courts is settled.
In response the owner asserts, among other things, that the subject building
was declared effective as an eviction plan for conversion to cooperative
status on April 19, 1983; and that the funds for the MCI were derived from
a refinancing of the mortgage which resulted in an increase in the monthly
maintenance charges against all apartments and did not come from the reserve
The Commissioner is of the opinion that these petitions should be remanded.
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.
Further, it is the well established position of the Division, as restated in
Supplement No. 1 to Operational Bulletin 84-4 and Section 2522.4 of the Rent
Stabilization Code that to the extent an MCI has been paid for after
conversion of a building to cooperative ownership out of such corporation's
cash reserve fund, such MCI will not be the basis for a rent increase.
However, to the extent the MCI is paid for by special assessment of all
shareholders or to the extent the work is paid for out of general operating
funds (that is funds from normal monthly maintenance) or increased
maintenance charges obviating a need for a special assessment neither the
policy nor the prohibition against the use of reserve funds would be
violated. (Accord ART 3866-Q;DH 610251-RT).
The record in the instant case indicates that the owner correctly complied
with the application procedures for major capital improvements for the
elevator upgrading, aluminum replacement windows, adequate wiring, and new
roof and substantiated its application for those improvements by submitting
documentation in support thereof. However, regarding the tenants'
assertion, first raised during the proceeding below, that the MCI
installations were paid for out of the reserve fund, the Commissioner notes
that the owner's statement, cited above, was submitted without any
supporting documentation. Accordingly, in view of these conflicting
allegations, the Commissioner finds that this proceeding should be remanded
to the Rent Administrator for further consideration.
DOCKET NUMBER: CC 420234-RT, etal
Regarding the tenants' contention that improvements which do not qualify for
MCI rent increases for rent controlled apartments should be denied, it is
noted that owners were not entitled to MCI rent increases for rent
controlled apartments for windows and roofs installed prior to April 1,
1984. In this case however, the windows and the roof were installed
subsequent to that date. Therefore, such restrictive policy was properly
not applied under the facts herein.
Regarding the tenants' contention that the subject building is an eviction
as opposed to a non eviction cooperative, the Commissioner notes that the
owner has stated that the subject building was declared effective as an
eviction plan for cooperative conversion. Accordingly, the Commissioner
finds that the Rent Administrator's order should be modified to indicate
that the subject building is an eviction plan cooperative.
Regarding certain tenants' contention that the decision should be postponed
pending a court matter, the Commissioner is of the opinion that this
contention is not sufficient to warrant a delay in the issuance of the Rent
THEREFORE, in accordance with the Rent and Eviction Regulations for New York
City and the Rent Stabilization Code, it is
ORDERED, that these petitions be, and the same hereby are granted to the
extent of remanding the proceeding to the Rent Administrator for further
processing in accordance with this Order and Opinion. The Order of the Rent
Administrator remains in full force and effect until a new Order is issued
upon the remand.
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner