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  S.J.R. NO. 5864
     IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
     APPEALS OF                             DOCKET NOS.DF 220250-RT
                                         :             DI 230180-RO
         LEONARD MACE &                     
         LEV REALTY                         DISTRICT RENT ORDER
                           PETITIONER    :  DOCKET NO. DB 230018-RP
     ------------------------------------X                             

                      ORDER AND OPINION REMANDING PROCEEDING

     On June 20, and September 15, 1989 the above named  petitioner-tenant  and
     petitioner-owner respectively filed Petitions  for  Administrative  Review
     against an order issued on June 2, 1989 by the Rent  Administrator,  92-31
     Union Hall Street, Jamaica, New York concerning housing accommodations
     known as 140 Ocean Parkway, Brooklyn, New York, various accommodations.

     On June 11, 1991 the Commissioner issued an Order and  Opinion  dismissing
     the petitioner-owner's administrative appeal.

     Subsequent thereto, the petitioner-owner filed a petition in  the  Supreme
     Court pursuant  to  Article  78  of  the  Civil  Practice  Law  and  Rules
     requesting that the order of the Commissioner be annulled.  The proceeding 
     was remitted by Court order to consider the  owner's  petition  as  timely
     filed.  

     These petitions are being consolidated herein since  they  involve  common
     issues of law and fact.

     The Commissioner has reviewed all of the evidence in the  record  and  has
     carefully considered that portion of the  record  relevant  to  the  issue
     raised by the administrative appeals.

     On June 2, 1989 the Rent Administrator issued the  order  appealed  herein
     authorizing a major  capital  improvement  (MCI)  rent  increase  for  the
     installation of, among other things, an  oil  burner  and  boiler  in  the
     subject building.  Said order was issued after a review of the  supporting
     documentation submitted by the owner and  the  tenant  responses  thereto.
     The Rent Administrator further determined that the rent controlled tenants 
     were exempt from the increase for the burner  and  boiler  because  a  new
     heating system was installed and a rent increase therefor was passed along 
     to those tenants on June 6, 1975.

     In this petition the tenant of Apartment 5A contends, in  substance,  that
     the rent increase for the heating  system  was  added  to  the  base  rent
     stabilized rents as well as the rent controlled  rents;  that  the  useful
     life of the "boiler" system, for which a rent increase had previously been 
     granted, had not expired; and that no tenant should be required to pay  an
     increase for the heating system.  








          DOCKET NUMBERS: DF 220250-RT & DI 230180-RO
     In response to the tenant's petition the owner asserts that the old boiler 
     was over forty (40) years old and beyond its useful life;  that  only  the
     burner was upgraded at the time the new heating system was installed; that 
     the burner had to be replaced  with  the  boiler  in  order  to  retain  a
     compatible system; and that even if the burner  was  not  required  to  be
     replaced with the boiler, it is entitled to a rent  increase  because  the
     burner was replaced with a more efficient model.

     In its petition the owner contends, in substance, that the  1975  increase
     was not for a new heating system  but  rather  for  the  modernization  or
     upgrading of the then existing heating system; that  the  forty-four  (44)
     year old "boiler/burner" was upgraded in 1975 and replaced in  1987;  that
     the fact that it was upgraded should not negate the fact that  the  entire
     system had to be replaced twelve  years  later;  and  that  the  owner  is
     entitled to a rent  increase  for  a  new  heating  system  for  the  rent
     controlled apartments as indicated in Administrator's order Interpretation 
     No. 8 (Rev.).

     The Commissioner is of the opinion that this proceeding should be remanded 
     to the Rent Administrator for further processing in accordance  with  this
     order and opinion.

     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.

     The record indicates that the owner is not entitled  to  a  major  capital
     improvement increase for the installation of a new burner at  the  subject
     premises.  It is the established position of the DHCR,  as  set  forth  in
     Operation Bulletin 90-2  and  prior  administrative  decisions,  that  the
     useful life of an oil burner is 20 years.  The record reveals that on June 
     6, 1975, in an order issued under Docket No. 2AC  518378,  the  City  Rent
     Administrator  authorized  a  rent  increase  for  the   rent   controlled
     apartments at the subject premises based on the owner's  modernization  of
     the  existing  heating  system,  which  modernization  consisted  of   the
     installation/replacement of  a  new  No.6  oil  burner  and  fuel  storage
     tank(s) as distinguished from the "upgrading" of the existing system under 
     Local Law No. 14 which would not entail a new installation.  (There is  no
     indication in the record that any work was performed on the boiler  during
     the earlier modernization of the  heating  system.)   The  record  clearly
     indicates that the useful life of the previously installed burner had  not
     expired when the new burner was installed in  1986/87.   Accordingly,  the
     owner is not entitled to an MCI increase for the burner installation.

     With respect to the owner's contention that Administrator's Interpretation 
     No. 8 supports its entitlement to an MCI rent increase for the rent






          DOCKET NUMBERS: DF 220250-RT & DI 230180-RO
     controlled apartments for the new heating system, the 
     Commissioner  notes  that  Administrator's  Interpretation  No.  8  (Rev.)
     (Effective November 6, 1972) provides, in pertinent part, as follows:

          ...it has  been  determined  that  boilers  which  have  been  in
          operation 25 years or more, and burners (other than those  firing
          residual fuel oil) and fuel storage tanks which have been in  use
          20 years or more shall be  considered  eligible  for  replacement
          under the  terms  of  this  Interpretation.   Where,  because  of
          unique  and  peculiar  circumstances,  as   determined   by   the
          Administrator, such equipment needs replacement even  though  the
          20 or 25 year period, whichever is applicable,  has  not  expired
          their replacement under such circumstances may also warrant  rent
          increases under this Interpretation.

          An exception has  been  made  with  regard  to  existing  burners
          firing No. 6 grade fuel oil, in  that  the  replacement  interval
          has been liberalized in furtherance of the City's  air  pollution
          control program.  The Administrator finds  that  the  replacement
          of an existing No.  6  burner  with  a  new  and  improved  model
          designed to fire residual oil, or the installation of a  new  gas
          conversion or gas/oil firing burner  will  be  eligible  for  the
          rent increase indicated  provided  that  landlord  has  not  been
          granted a prior rent adjustment for a  burner  installation  made
          subsequent to January 1964 in connection with  a  heating  system
          improvement.  However, where the landlord has  received  a  prior
          rent adjustment for  upgrading  residual  oil  burning  equipment
          pursuant to Local Law No. 14, he  will  not  be  eligible  for  a
          subsequent adjustment based on  burner  replacement  within  five
          years of the date of upgrading.

     This Interpretation describes a one time exception to the 20  year  useful
     life  requirement  with  respect  to  No.  6  (residual)  oil  burners  in
     connection with New York City's air pollution control program in effect at 
     that time.  It was not intended to continue in  perpetuity.   Accordingly,
     in view of the fact that a new burner was previously installed (for  which
     a rent increase was granted in 1975 for the  rent  controlled  apartments)
     and since the useful life of said burner had clearly not  expired  at  the
     time of its replacement, the Commissioner finds that  not  only  were  the
     rent controlled tenants properly exempted from paying a rent increase  for
     the new burner  but,  it  was  improper  for  the  Administrator  to  have
     increased  the  rents  of  the  rent  stabilized   apartments   for   said
     installation.

     However, the record further indicates that the  owner  correctly  complied
     with the application procedures for a major capital  improvement  increase
     for the installation of a new boiler at the subject premises,  the  useful
     life of the prior boiler having clearly expired at the  time  of  the  new
     installation.  As previously noted,  since  the  prior  installation  only
     entailed the replacement of the existing oil burner and did not involve






          DOCKET NUMBERS: DF 220250-RT & DI 230180-RO
     the installation of a new boiler, the Commissioner  finds  that  the  rent
     controlled tenants are not exempt from paying an  rent  increase  for  the
     boiler installation.

     Accordingly, the Commissioner finds that the rents of the rent  controlled
     apartments should be increased to reflect allowable costs related  to  the
     boiler installation; and that the rents of the rent stabilized  apartments
     should be adjusted so as to delete the portion of the  costs  attributable
     to the burner installation.  

     However since the record, as presently constituted,  fails  to  contain  a
     breakdown of costs with respect to  the  boiler/burner  installation,  the
     Commissioner deems it appropriate to remand this proceeding  to  the  Rent
     Administrator for such further processing as may be  deemed  necessary  in
     order to effectuate the determination herein.

     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 this proceeding to the Rent Administrator for  further
     processing in accordance with this order and opinion.  The  order  of  the
     Administrator remains in full force and effect until a new order is issued 
     upon remand.

     ISSUED:






                                                                   
                                          JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner




                                                   
    

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