Adm. Rev. Docket No.: DB830076RO
                                   STATE OF NEW YORK
                             OFFICE OF RENT ADMINISTRATION
                                      GERTZ PLAZA
                                92-31 UNION HALL STREET
                               JAMAICA, NEW YORK   11433

           ----------------------------------X  SJR No.:  5941          
           APPEAL OF                            DOCKET NO.: DB830076RO  

                                                DRO DOCKET NO.:    
           STREG, INC. (as Agent for the          GBL-8-3-0001-OM            
                 BEECH HAVEN CO.)                                
                                PETITIONER      TENANTS: VARIOUS       


           This Order and Opinion is issued after a Decision, Order and 
           Judgment of the Supreme Court, Westchester County, Justice Lange, 
           dated July 28, 1992, wherein the Article 78 Proceeding brought on 
           by the principal of the Petitioner herein was granted in part and 
           the Court remanded this matter to the Division for the limited 
           purpose of further considering whether the subject claimed Major 
           Capital Improvements (MCI's) were paid for by "a special assessment 
           of all the shareholders".

           The Commissioner has reviewed all of the evidence in the record and 
           has carefully considered that portion of the evidence relevant to 
           the issues raised in the administrative appeal relevant to the 
           issue to be considered upon the Court's remand. 

           The sole issue left to be determined in this appeal is whether the 
           Administrator was correct in determining that the Petitioner had 
           not established that the subject work had been paid for (in whole 
           or in part ) by a special assessment of all of the shareholders of 
           the subject co-operative corporation. As to the other issues 
           involved in the Administrator's denial of these MCI increases, the 
           Administrator's determination was  affirmed in the Commissioner's 
           Order and Opinion issued under this same Administrative Review 
           Docket Number on July 12, 1991; which, in turn, as to those points, 

          Adm. Rev. Docket No.: DB830076RO

           was affirmed by Justice Lange's Decision, Order and Judgment of 
           July 28, 1992.

           The proceedings hereinbelow were commenced when the petitioner, as 
           the managing agent for the Beech Haven Co., filed an application 
           for rent increases as to the various apartments owned by the 
           Petitioner's principal at the complex known as 60-104 Pinewood 
           Road, Hartsdale, New York, based on the alleged installation of 
           several improvements made between July 1983 and 1986 at a total 
           cost of $202,978.98.

           Numerous tenants responded to that application; opposing it on 
           various grounds, including the allegation that the improvements 
           were all made after the conversion to co-operative ownership and 
           were all paid for by the co-operative corporation (60-104 Owners 
           Corp.): not the Beech Haven Co.

           The petitioner responded to said objections and asserted, among 
           other things, that the subject complex had been converted to co- 
           operative ownership on October 13, 1982; that title was held by the 
           60-104 Owners Corp; that the alleged MCI's were completed between 
           1983 and 1986. The petitioner also alleged that the improvements 
           had been paid for from various cash accounts including the original 
           cash reserve fund contributed by the sponsor totaling $212,000.00 
           plus an additional $54,000.00 contributed by the sponsor between 
           1983 and 1987; and that additional cash was added to the 
           corporation's cash accounts as a result of maintenance increases in 
           1985 and 1986 and a five year assessment of $.034 per share per 
           month begun in 1985, yielding $22,800. a year.

           The Administrator's order of December 2, 1988 denied the 
           application on the ground that the owner had failed to provide 
           verifiable proof that the funds taken from the co-op's reserve fund 
           to finance the claimed major capital improvements were fully 
           returned to the reserve fund either by the sponsor or holder of the 
           unsold shares or through a special assessment of all of the 

           In the Petition for Administrative Review, the petitioner argued , 
           in substance, that the Administrator's Order and Determination 
           should be revoked for one or more of the following reasons: it was 
           beyond the Division's authority to have promulgated the portion of 
           the Operational Bulletin (Supplement 1 to Operational Bulletin 84- 
           4) relied upon by the Administrator as the basis for the denial of 

          Adm. Rev. Docket No.: DB830076RO

           the application* ; that even if said Supplement had been properly 
           promulgated, it was error to have applied it retroactively to the 
           instant application; and the reserve fund was replenished by 
           assessments and maintenance increases.

           On July 12, 1991, the Commissioner issued an Order and Opinion 
           denying the Petition for Administrative Review and affirming the 
           Administrator" Order and Determination.

           Thereafter, the Beech Haven Co. filed an Article 78 Petition in the 
           Supreme Court for Westchester County seeking judicial review of the 
           Commissioner 's Order and Opinion of July 12, 1991. Said Article 78 
           Proceeding (Beech Haven Co. v DHCR, Westchester County Clerk's 
           Index No. 91-14554) was resolved by the above-described Decision, 
           Order and Judgment (hereinafter, the Judgment). 

           In the Judgment, the Court found that the Division had had the 
           authority to promulgate Supplement 1 and that Supplement No. 1 
           could, properly be applied retroactively, as it had been by the 
           Administrator. The Court went on, however, to point out that 
           according to Notes 4 and 5 to the 85/86 financial statement for 60- 
           104 Owners Corp., said corporation had secured a $80,000.00 line of 
           credit to be used for major repairs and improvements; and that to 
           offset the cost of principal and interest on that line of credit, 
           if the full amount of the line was utilized, a five year assessment 
           of $0.034 per share per month had been imposed on all shareholders.

           The Court also found that the July 12, 1991 Order and Opinion did 
           not consider the subject financial statement and, therefore, 
           determined that "the instant [Article 78] petition is granted to 
           the limited extent that this matter is remanded to respondent DHCR 

           * Supplement No. 1 to Operational Bulletin 84-4, issued on January 
           30, 1986, prescribed certain requirements regarding the use of 
           reserve funds. It provided that an MCI paid for after a building 
           has been converted to cooperative or condominium ownership, out of 
           a cash reserve fund deposited by the owner/sponsor/landlord, may 
           not be the basis for a rent increase. Also an MCI installed 
           subsequent to transfer of title to a cooperative corporation is not 
           eligible for a rent increase unless it is paid for by a special 
           assessment of all shareholders or the sponsor or holder of unsold 
           shares pays for the MCI without removing funds from the cash 
           reserve fund.
           to further consider whether the claimed major capital improvements 
           were paid for by a 'special assessment of all shareholders'." 

           Upon remand, by a written notice, the Commissioner afforded the 

          Adm. Rev. Docket No.: DB830076RO

           petitioner an opportunity to submit any further arguments or 
           evidence the petitioner might wish to submit and which the 
           petitioner might believe may be relevant to a determination of this 
           proceeding in accordance with the terms of the Judgment.

           In response to said Notice, the Commissioner received a copy of the 
           Amended Petition upon which the Article 78 Proceeding had been 
           brought and a covering letter from the petitioner's counsel wherein 
           counsel directed the Commissioner's attention to the 60-104 Owners 
           Corp. financial statements for the years 1985, 1986 and 1987 and 
           Petition for Administrative Review as most pertinent to the 
           Petitioner's position. 

           Upon remand, and, pursuant to the Judgment, having  re-examined the 
           entire record herein (including the Amended Article 78 Petition, 
           along with all of the exhibits annexed thereto), the Commissioner 
           finds that the Petition for Administrative Review herein, as to the 
           issue remaining to be determined therein upon remand, should be 
           denied and the Administrator's Order and Determination should be 

           An examination of the Notes to all of the 60-104 Owners Corp. 
           financial statements the petitioner has submitted (which statements 
           cover the period January 1, 1985 through December 31, 1987 [Exhibit 
           K annexed to the Article 78 Petition] ) shows that the assessment 
           imposed on all of the shareholders was not to be applied to major 
           repairs and improvements unless the full amount of the $80,00.00 
           line of credit had been utilized. 

           The financial statement for the period January 1, 1986 through 
           December 31, 1987 clearly indicates that as of December 31, 1987, 
           only $6,800.00 of the line of credit had been utilized. There is 
           nothing further in the record that shows how much more (if any) of 
           the line of credit was utilized. 

           On the other hand, the cancelled checks and bills submitted to the 
           Administrator to substantiate the claimed cost of the work herein 
           shows that the last payment made against said costs was made in 
           1986 : the A.M. DeSisto Management check [#383] for $9,016.50 
           payable to Matula Roofing and dated September 19,1986.

          Adm. Rev. Docket No.: DB830076RO

           Upon further consideration, the Commissioner finds that the 
           petitioner has failed to prove (either before the Administrator or 
           upon the initial processing of this Petition for Administrative 
           Review or by what was submitted to the Court or now, upon remand) 
           that the subject work was paid for out of funds generated by a 
           special assessment of all of the shareholders.

           THEREFORE, pursuant to all of the applicable statutes and 
           regulations, it is

           ORDERED, that the Petition, as to the issue remaining to be 
           determined therein upon remand, be, and the same hereby is denied; 
           and that the Administrator's order, as to the issue remaining to be 
           determined with respect thereto upon remand, be, and the same 
           hereby is, affirmed.


                                      JOSEPH A. D'AGOSTA
                                      DEPUTY COMMISSIONER


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