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
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