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   ADMINISTRATIVE REVIEW
          IN THE MATTER OF THE ADMINISTRATIVE      DOCKET NO.:  EE230476RO
          APPEAL OF
                    ERIC BASHFORD                  RENT ADMINISTRATOR'S
                                                   DOCKET NO.:  BH230009OM

                                   PETITIONER
          -------------------------------------X

                  ORDER AND OPINION REMANDING PROCEEDING ON APPEAL

          On May 24, 1990, the above-named petitioner-owner timely filed a 
          petition for administrative review (PAR) against an order issued on 
          May 18, 1990, by a Rent Administrator 92-31 Union Hall Street, 
          Jamaica, New York, concerning the housing accommodations known as 
          454 15th Street, Brooklyn, NY, various apartments.

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

          The owner commenced this proceeding on August 3, 1987, by initially 
          filing an application for a rent increase based on the installation 
          of windows at a total cost of $14,570.00.  In response to a request 
          for additional information, the owner advised the Division that a 
          credit was taken from the reserve fund for the improvement as 
          allowed by the rules governing cooperative conversions.

          The order of the Rent Administrator denied the owner's application 
          upon a finding that the windows were paid for with funds from the 
          cash reserve fund for the cooperative apartments.  

          In this petition, the owner contends, in substance, that only 
          $5,600.00 of $14,570.00 was funded with cash reserve funds.  With 
          his appeal, the owner submitted a copy of a page from a cooperative 
          conversion offering plan which includes such $5,600.00 figure in a 
          hypothetical example of how the reserve fund credit for capital 
          replacement would be computed.

          After careful consideration of the entire record, the Commissioner 
          is of the opinion that this petition should be remanded to the Rent 
          Administrator for further consideration. 
















          ADMIN. REVIEW DOCKET NO. EE-230476-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.

          Rent increases based on the installation of major capital 
          improvements are made available to owners as an incentive for them 
          to invest in their property.  It is thus the well established 
          policy of the Division, as restated in Supplement No. 1 to 
          Operational Bulletin 84-4 and Section 2522.4 of the Rent 
          Stabilization Code, that improvements paid for out of a cooperative 
          corporation's negotiated cash reserve fund contributed by the 
          sponsor to entice purchasers or under compulsion of law, may not 
          form the basis for a rent increase.  Likewise, if a major capital 
          improvement is installed subsequent to transfer of title to a 
          cooperative corporation, the corporation will not be eligible for 
          a rent increase to the extent the cost of the improvement is paid 
          for out of the cash reserve fund of the  corporation.

          The evidence of record is unclear as to the amount of funds, if 
          any, that were distributed from the reserve fund.  This proceeding 
          is being remanded to the Administrator for determination of such 
          amount.  If any part of the cost of the new windows is found not to 
          be from the reserve fund then an increase based on said amount 
          should be granted to the owner provided the owner otherwise so 
          qualifies.

          THEREFORE, in accordance with the Rent Stabilization Law and Code, 
          and the NYC Rent and Eviction Regulations, it is

          ORDERED, that this administrative appeal be, and the same hereby is 
          granted to the extent of remanding this proceeding to the Rent 
          Administrator for further consideration in accordance with this 
          order and opinion.  The order and determination of the Rent 
          Administrator remains in full force and effect until a new order is 
          issued on the remand.

          ISSUED:



                                                       ____________________
                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner
                                          2
    

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