STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
-------------------------------------X ADMINISTRATIVE REVIEW
IN THE MATTER OF THE ADMINISTRATIVE DOCKET Nos.: EC430136RO
APPEALS OF EC430251RT
ZH CONTROL CO. AND
LARRY FRIEDMAN RENT ADMINISTRATOR'S
DOCKET NO.: CL430301OM
ORDER AND OPINION REMANDING PROCEEDING ON APPEAL
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