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

          ------------------------------------X   ADMINISTRATIVE REVIEW
          APPEALS OF                              DA410100RT, DA410203RT
                     Maxwell-Kates, Inc. and      DA410204RT, DA410205RT
                     Various Tenants of           DC430349RO
                     315-321 East 12th Street
                     New York, New York
                                                  DISTRICT RENT              
                                                  ADMINISTRATOR'S DOCKET 
                                                  NO.: BA430071OM


          On March 17, 1987, the above-named petitioner-owner completed the 
          filing of an application for a major capital improvement (MCI) rent 
          increase for the controlled and stabilized apartments in the 
          subject premises known as 315-321 East 12th Street, New York, New 
          York, various apartments, based on the installation of a new boiler 
          and burner and new roof doors at the premises.

          On December 30, 1988 the Rent Administrator issued an order which 
          purported to grant the owner an MCI rent increase for the subject 
          installations, but erroneously indicated that the increase was 
          granted for the installation of aluminum windows.

          Subsequent thereto, the Rent Administrator issued an amended order 
          which corrected the earlier order and indicated that a rent 
          increase was granted for the subject installations (boiler/burner 
          and roof doors) at a total approved cost of $59,210.00, and that 
          the December 30, 1988 issue date of the earlier order remained in 
          full force and effect. The Commissioner notes that although the 
          record indicates that the amended order was issued and mailed to 
          the parties on February 17, 1989, the issue date on said order is 
          incorrectly indicated as December 30, 1988.

          Various tenants filed petitions against the Administrator's 
          original order of December 30, 1988 complaining, in substance, that 
          no new windows had been installed at the subject premises. The 
          Commissioner finds that said complaints have been rendered moot by 
          the issuance of the Administrator's amended order.

          Adm. Rev. Docket No. DA410100RT et. al.

          The Commissioner notes that on December 4, 1990 said tenants filed 
          a supplement to their petitions in which they asserted, among other 
          things, that they were not advised of their right to file a 
          petition against the amended order and that the issue date of the 
          amended order was incorrect. A review of the record indicates that 
          the tenants were served with copies of the amended order and were 
          notified of their right to file a Petition for Administrative 
          Review. However, although the tenants did not file petitions 
          against the amended  order and did not raise objections thereto 
          until several months after it was issued and mailed, in light of 
          the possibility of any confusion which may have occurred as a 
          result of the issuance of the amended order, the Commissioner finds 
          it appropriate to consider said objections in this proceeding along 
          with those raised in the owner's petition filed against the amended 

          The tenants' objections to the amended order are, in substance, as 
          follows: that the boiler and burner were not new when installed;  
          that an engineering company the tenants retained to conduct a 
          physical inspection of the premises indicated in its report that  
          "(t)he boiler, burner and controls are deteriorating and should now 
          be refurbished to avoid a major breakdown"; that there have been 
          frequent heat and hot water problems since the installation; that 
          there are immediately hazardous class "C" violations regarding heat 
          and hot water which were on record against the subject premises 
          prior to the issuance of the Administrator's order; that as a 
          result of the tenants' numerous heat and hot water complaints filed 
          with the New York City Department of Housing Preservation and 
          Development(HPD) subsequent to the installation, the owner, during 
          a housing court proceeding, was directed to maintain adequate heat 
          and hot water services; that the roof door installation does not 
          qualify as an MCI; that the roof doors are of inferior quality and 
          were not installed in a workmanlike manner; that the owner's 
          documentation is not sufficient; that the owner is not maintaining 
          services; and that therefore a rent increase is not warranted.

          In response the owner asserts, in substance, that the tenants have 
          not established that the boiler and burner were not new when 
          installed;  that the inspection conducted by the tenants' 
          engineering company took place more than two years after the 
          boiler/burner installation, merely indicates conditions of wear 
          that would be expected after such a period of time, and fails to 
          refer to repairs made by the owner in response to the report; that 
          the allegations regarding immediately hazardous conditions should 
          not be considered because, among other things, they were not raised 
          below and they did not exist until after the Administrator's order  

          Adm. Rev. Docket No. DA410100RT et. al.

          was issued; that claims regarding the roof doors are being raised 
          for the first time on appeal; and that the MCI increase was 

          properly granted since there were no outstanding building-wide rent 
          reduction orders in effect.

          In its petition the owner contends, in substance, that the 
          Administrator erroneously failed to include certain expenditures in 
          the total approved cost.

          In response several tenants objected to the rent increase and 
          raised complaints regarding the quality and adequacy of the 

          The Commissioner is of the opinion that these petitions should be 
          remanded for further consideration.

          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.

          It is the established position of the DHCR that the installation of 
          a new boiler and burner and new roof doors constitute major capital 
          improvements for which a rent increase adjustment may be warranted, 
          provided the owner otherwise so qualifies. As part of the 
          application process, the owner must certify that essential services 
          are being maintained and will continue to be maintained.

          The record shows that the owner, in its response to the tenants' 
          petitions, admits that repairs were made to the boiler and burner 
          in response to the engineering company's report, and that the owner 
          has failed to refute the tenants' statements and submissions with 
          respect to the Housing Court directive to the owner to maintain 
          heat and hot water service at the premises. In view of the 
          conflicting statements made by the parties which cannot be resolved 
          herein, the submission of highly probative evidence regarding the 
          maintenance of certain services at the premises, and the 
          possibility that the owner may have falsely certified to the 
          maintenance and continued maintenance of essential services, the 
          Commissioner deems it appropriate to remand this proceeding for 

          Adm. Rev. Docket No. DA410100RT et. al.

          further processing to determine whether an MCI rent increase is 
          warranted and to suspend the rent increase subject to such 
          determination as may be made upon the remand of this proceeding.

          Regarding the tenants' contention that the roof doors were not 
          installed in a workmanlike manner and are of inferior quality, the 
          Commissioner notes that the tenants raised complaints about the 
          quality and adequacy of the roof doors installation during the 
          proceeding below which were not adequately addressed. Based 
          thereon, the Commissioner deems it appropriate for these 
          contentions to be considered by the Administrator upon remand.

          Regarding the owner's contention that certain expenditures were 
          erroneously excluded, the Commissioner notes that in computing the 
          rent increase the Administrator disallowed expenditures in the 
          amount of $2,840.00 as unsubstantiated. However, a review of the 
          record shows that the owner submitted a copy of a cancelled check 
          in said amount as proof of such expenditure during the proceeding 
          below. Accordingly, the Commissioner finds that upon remand, should 
          the Administrator determine that the MCI rent increase was 
          warranted, the Administrator's original calculations should be 
          modified to include such expenditure.

          THEREFORE, in accordance with the Rent Stabilization Law and Code 
          and the Rent and Eviction Regulations for New York City, it is

          ORDERED, that these petitions be, and the same hereby are, granted 
          to the extent of remanding this proceeding to the Rent 
          Administrator for further consideration in accordance with this 
          order and opinion. The Administrator's determination as to 
          retroactive and prospective rent increases is stayed effective on 
          this issuance date of this order and opinion, and such stay shall 
          remain in effect until a new order is issued on remand.


                                                    JOSEPH A. D'AGOSTA
                                                   Deputy Commissioner


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