EB 430246 RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                              JAMAICA, NEW YORK   11433

          ----------------------------------X     S.J.R. 5982
          APPEAL OF                               DOCKET NO.: EB 430246 RO 

             40 CENTRAL PARK SOUTH, INC.,
                                                  DRO DOCKET NO.:  CG 430133 OM



          On February 20, 1990 the above  named  petitioner-owner  filed  a
          petition for administrative review against  an  order  issued  on
          January 25, 1990 by a Rent Administrator, Gertz  Plaza,  Jamaica,
          New York concerning the housing accommodations known as  41  West
          58th Street, New York, New York, wherein the Administrator 
          ordered a rent increase of $4.05 per room per month based on  the
          installation of a new roof.

          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 the administrative appeal.

          The owner commenced this proceeding on July 21, 1988 by filing an 
          application for a rent increase based on the  installation  of  a
          Major  Capital  Improvement  (MCI).   Specifically,   the   owner
          indicated that a new  roof  had  been  put  on  the  building  in
          September 1986 at a cost of $56,175.  The owner reported  on  the
          application that as of June 31, 1988, the annual  rent  from  the
          building consisted of $450,670.44 from apartments and $431,202.12 
          from commercial units.

          In computing the rent increase, the Administrator determined that 
          the commercial rents consisted of 49% of the total rental  income
          for the building and that the commercial tenants should bear  49%
          of the cost of the roof.  The remaining 51% was amortized over 60 
          months and the result divided by  the  number  of  rooms  in  the
          residential units for a permanent rent increase of $4.05 per room 
          per month.

          In the petition for administrative review, the owner asserts that 
          the method used by the Administrator to  allocate  costs  between
          residential and commercial tenancies is arbitrary and  capricious
          and not sanctioned by the Rent  Stabilization  Code.   The  owner
          cites Sections 2522.4(a)(4) and (12) of the Code and claims  that
          these sections require that the total cost of the MCI be  divided
          by the number of rooms in the building.  There is  no  basis  for
          allocating a portion of the cost to commercial tenants, according 

          EB 430246 RO
          to the owner, and if such allocation is proper, it must be  on  a
          square footage basis.

          Several  tenants  answered  the  petition  and  urged  that   the
          Administrator's order be affirmed.

          After careful consideration of the entire evidence of record, the 
          Commissioner is of the opinion  that  the  Administrator's  order
          should be affirmed.

          It is noted at  the  outset  that  the  Rent  Stabilization  Code
          applies only to housing  accommodations  and  not  to  commercial
          units.  The sections cited by the owner pertaining to the  method
          for computing the rent increase based on the installation  of  an
          MCI do not specify how the total cost  is  to  be  determined  in
          cases where the building contains commercial units.

          The Division has devised a uniform procedure for the  computation
          of allowable  MCI  rent  increase  adjustments.   That  procedure
          allocates a portion of the cost of a MCI  to  commercial  tenants
          who benefit from the improvement based on the rental value of the 
          space occupied by the commercial tenants.   (Accord:   CB  430083
          RO).  Since commercial tenancies are not subject  to  regulation,
          an owner has greater flexibility in  adjusting  commercial  rents
          to  reflect  increased  costs  or  added   improvements   through
          appropriate lease provisions that  are  not  allowable  for  rent
          regulated residential units.

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

          ORDERED, that this petition be, and the same  hereby  is,  denied
          and the  Administrator's  order  be,  and  the  same  hereby  is,

                                                  ELLIOT SANDER
                                                  Deputy Commissioner

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