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

          -------------------------------------X   ADMINISTRATIVE REVIEW
          APPEALS OF                                            EC430251RT
                    ZH CONTROL CO. AND                           
                    LARRY FRIEDMAN                 RENT ADMINISTRATOR'S
                                                   DOCKET NO.:  CL430301OM



          On various dates, the above named petitioners timely filed 
          Petitions for Administrative Review (PARs) against an order issued 
          on February 14, 1990 by a Rent Administrator (Gertz Plaza) 
          concerning the housing accommodations known as 83-89 Barrow Street, 
          New York, New York, various apartments, wherein the Rent 
          Administrator determined that the owner was entitled to rent 
          increases based on the installation of major capital improvements 

          The Commissioner deems it appropriate to consolidate these 
          petitions for a uniform disposition since they pertain to the same 
          order and involve common issues of law and fact.

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

          The owner commenced this proceeding on December 30, 1988 by filing 
          an application for a rent increase based on the installation of the 
          following items at a total cost of $194,625.40:  an oil 
          burner/boiler, a new roof and replacement windows, building-wide.

          Various tenants objected to the owner's application alleging, in 
          substance, that the new roof leaked causing damage to ceilings and 
          walls in various apartments, and that the window installation was 
          faulty. The tenant of apartment 5B claimed that an order reducing 
          the maximum legal regulated rents (building wide), issued on August 
          24, 1989, bars the owner from applying for an MCI increase. 

          ADMIN. REVIEW DOCKET NO. EC-430130-RO

          The Morton/Barrow Tenant Association (Tenant Association) objected 
          to the MCI application in an answer dated May 17, 1989 and in a 
          supplemental answer dated July 24, 1989 on various procedural and 
          substantive grounds and submitted a tenant complaint list regarding 
          the roof work; and a letter and petition signed by various tenants 
          dated December 16, 1988 claiming that the new burner/boiler was 
          unreliable.  Other issues raised in the Tenant Association's 
          answers included the following: the landlord had failed to sign the 
          certification of service; the Tenant Association had to file a FOIL 
          request to obtain a copy of the MCI application; the application 
          did not have a contractor's certification for the boiler work; the 
          new windows were installed in the old sills; the useful life of the 
          replaced items had not expired; a cancelled check for the boiler 
          and a promissory note for the windows represent costs incurred for 
          work done in another building.

          The owner responded on August 24, 1989  to the tenants' allegations 
          by stating, in substance, that the installation of windows building 
          wide, the roof and new boiler/burner installations were MCIs; that 
          the owner had a 5 year guarantee for the roof installation; that 
          the windows were properly installed; and that a copy of the 
          application was at the building manager's office.

          On October 25, 1989, the owner requested an amendment of his 
          application to include the costs of asbestos removal performed in 
          conjunction with the installation of a new boiler pursuant to DHCR 
          Policy Statement 89-8.

          On November 15, 1990 the Tenant Association submitted a summary of 
          tenant answers to a questionnaire regarding the effectiveness of 
          the roof installation, the boiler/burner and the windows.

          The DHCR conducted a physical inspection of subject premises on 
          November 21 and 22, 1989. The inspector went to several apartments 
          of tenants that had filed objections to owner's application and 
          found that Apartment 3R and 3B contained defective windows.  The 
          inspection report also stated that the roof was in very good 
          condition, and that there was no evidence of leaks.

          On February 14, 1990 the Rent Administrator issued the order here 
          under review, finding that the boiler/burner, window and roof 
          installations qualified as MCIs, determining that the application 
          complied with the relevant laws and regulations based upon the 
          supporting documentation submitted by the owner, and allowing rent 
          increases for the rent controlled and rent stabilized tenants.  The 
          collectibility of the increase was stayed for the tenants of 
          apartments 3B and 3R until the owner made the necessary repairs.  
          The increase was adjusted to exclude the commercial tenants' share 
          of the costs.  


          ADMIN. REVIEW DOCKET NO. EC-430130-RO

          The owner's petition  contends, in substance, that the Rent 
          Administrator should have considered the cost of asbestos removal 
          performed in conjunction with the boiler installation which was 
          submitted as an amendment to his application. 

          In response to the owner's petition, various tenants responded with 
          complaints about the workmanship of all the installations and 
          contend that they were not apprised of the asbestos removal.  One 
          tenant objected to the increase due to an overcharge order against 
          the owner. The Tenant Association responded by stating, in 
          substance, that the owner should not be allowed to amend his 
          application  a year after the filing date; that the Tenant 
          Association was never notified of the asbestos removal or the 
          amendment to the application; that there was no proof that the 
          asbestos removal was performed in conjunction with an MCI; and that 
          the owner's PAR was not signed by the owner or its agent.  

          In rebuttal, the owner contended that the tenants' complaints 
          concerning the MCI installations should be dismissed because his 
          PAR relates only to asbestos removal; that the asbestos work had 
          been performed; that no rent reduction order is in effect; that the 
          DHCR allows an owner to amend an MCI application to include 
          asbestos removal; that the work was performed in conjunction with 
          the boiler replacement; and that the Petition was signed by a 
          partner in the owner-company. 

          The tenants' petition dated March 13, 1990 contends in substance, 
          that the MCI increase should not be granted because tenants still 
          have complaints regarding the installations; and the DHCR inspector 
          did not contact the tenants cited in the Tenant Association's 
          letter of November 15, 1989.  Complaints in the November 15, 1989 
          letter included a leaky roof and ceiling, two complaints regarding 
          windows, and inadequate heat and hot water during the winter. The 
          Petition also included a letter from the tenant of apartment 6k  
          complaining of poor heat service, and a leaky roof and ceiling; and 
          an inspector's report of apartment  3-O regarding a poor ceiling 

          The owner responds to tenants' petition  by challenging the 
          petitioner's status as a tenant and his authorization to represent 
          the Tenant Association and challenges whether the Tenant 
          Association is authorized to represent tenants.  The owner also 
          objects to the inclusion of the November 15, 1989 letter; denies 
          that the installations are faulty and claims that he has corrected 
          the complaints listed in the November 15, 1989 letter; that the 
          letter from the tenant of apartment 6K is not sufficient proof that 
          the roof is leaking; and the inspection report concerning the 
          ceiling in apartment 3-O is not valid complaint as to the roof.

          After careful consideration of the entire record, the Commissioner 
          is of the opinion that this proceeding should be remanded for 
          further consideration.          3

          ADMIN. REVIEW DOCKET NO. EC-430130-RO

          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.

          As for the owner's petition, Policy Statement 89-8 permits asbestos 
          removal costs to be included in the cost of an MCI installation in 
          cases where the asbestos removal work was connected with and 
          directly related to the MCI.  The evidence in the instant case 
          shows that the owner submitted documentation which indicated that 
          asbestos was removed from the boiler room.  However, the 
          Administrator failed to process the owner's amendment to its 
          application.  Furthermore, the record indicates that the proposed 
          amendment and supporting documentation were never distributed to 
          the tenants.  Therefore, this proceeding must be remanded to 
          determine whether the asbestos removal work meets the criteria of 
          Policy Statement 89-9.  The Administrator will ensure that the 
          amendment and supporting documents are distributed to all of the 
          tenants for their review and comment.  

          With regard to the tenants' contention that the individual (Daniel 
          Zager) who signed the owner's PAR is not the owner of the subject 
          premises and therefore, is not an appropriate petitioner, the 
          Commissioner notes that the petitioner is a partner of ZH Control 
          Company, the registered owner of the subject premises from 1984 
          through 1991, and is therefore, authorized to file a PAR on behalf 
          of the owner.

          As for the tenant's petition, the evidence of record indicates that 
          the tenants' objections which were contained in the Tenant 
          Association letter of November 14, 1989, were never considered by 
          the Administrator.  Specifically, the boiler/heater installation 
          was never examined to verify the tenants' complaints of unreliable 
          heat and hot water service.  Accordingly, this proceeding must also 
          be remanded to investigate all of the tenants' complaints which 
          were made while this proceeding was pending before the 

          As for the tenant-petitioner's standing to file a petition, the 
          Commissioner notes that the tenant is listed on the rent rolls as 
          a rent controlled tenant, and obviously has standing to file a PAR.  
          The issue as to whether the petitioner represents the Tenant 
          Association need not be determined in this proceeding.


          ADMIN. REVIEW DOCKET NO. EC-430130-RO

          Section 2522.4 (a) (13) of the Rent Stabilization Code provides in 
          pertinent part that the Division of Housing and Community Renewal 
          (DHCR) shall not grant an owner's application for a rent increase 
          for the installation of an MCI, in whole or in part, if it is 
          determined by the DHCR prior to the granting of approval to collect 
          such increase that the owner was not maintaining all required 
          services.  However, as determined by the DHCR, such application may 
          be granted upon condition that such services will be restored 
          within a reasonable time.

          Additionally, Policy Statement 90-8 provides that where there is a 
          DHCR order in effect determining a failure to maintain a building- 
          wide service which resulted in a rent reduction, such order will 
          constitute a bar to obtaining an MCI rent increase.  The subsequent 
          restoration of rent based on a finding of service restoration will 
          result in the prospective elimination of this sanction.

          In the instant case, the Administrator approved the owner's MCI 
          application.  However, at the time the Administrator's order was 
          issued, there was an outstanding building-wide rent reduction order 
          (Docket No. CJ430141B dated  August 24, 1989) in effect against the 
          premises.  According to the history of this order, as described in 
          PAR Docket Nos. EH430087RO et al, dated July 20, 1992, the rent 
          reduction order is now pending a final determination in a remanded 
          proceeding (Docket No. GG430032RP), and there is no rent abatement 
          order in effect.  The Commissioner in Docket No. EH430087RO et al, 
          and pursuant to a court order dated October 15, 1990, ZH CONTROL V. 
          DHCR, Index No. 9571/90, Sup. Ct. (Pecora, J.), stayed the 
          implementation of the rent reduction order on the condition that 
          the owner deposit all rent collected in excess of the legal 
          regulated rent into a interest bearing account established by the 
          owner's attorneys.  This stay was continued pursuant to a court 
          order on April 10, 1992.


          ADMIN. REVIEW DOCKET NO.  EC-430103-RO

          The Commissioner notes that the remanded rent reduction proceeding 
          is considering, among other issues, the effective dates of any 
          restoration of services.  The Commissioner further notes that any 
          MCI increase which may be granted in the remanded proceeding is 
          subject to the remanded rent reduction proceeding under Docket No. 
          GG430032RP which is pending a determination, and any such increase 
          will not be collectible during any periods where a building-wide 
          rent reduction is in effect.

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

          ORDERED, that these proceedings be, and the same hereby are, 
          remanded to the Rent Administrator for further consideration in 
          accordance with this order and opinion.  The automatic stay of so 
          much of the Rent Administrator's order as directed a retroactive 
          rent increase for the rent-stabilized tenants (which stay took 
          effect upon the filing of the petitions for administrative review) 
          is hereby continued until a new order is issued upon the remand.  
          However, the Administrator's determination as to a prospective rent 
          increase is not stayed and shall remain in effect until the 
          Administrator issues a new order upon the remand.


                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner


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