Adm. Rev. Docket No.: DB830076RO
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 SJR No.: 5941
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
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
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
stockholders.
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
affirmed.
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.
ISSUED:
JOSEPH A. D'AGOSTA
DEPUTY COMMISSIONER
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