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
     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
     ------------------------------------X                             
                                            RENT ADMINISTRATOR'S
                                            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 
     fund.

     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 
     Administrator's order.            

     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.

     ISSUED:










                                                                   
                                          JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner




                                                    
      





    

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