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 
          IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
          APPEALS OF                             DOCKET NOS.: 
          WHITEHALL REALTY COMPANY AND        :  EE610002RT/EE610006RT/
          VARIOUS TENANTS                        EE610008RT/EE610083RT/
          3333 HENRY HUDSON PARKWAY              EE610085RT/EE610141RT/
          BRONX, NY               PETITIONERS :  EE610142RT/EE610145RT/
          ------------------------------------X  EE610148RT/EE610150RT/      
                                                 EE630116RT/EE610267RT/
                                                 EF610214RT/EF610218RT/
                                                 EF610221RT/EF610335RT/
                                                 EF610336RT/EG610031RT/
                                                 EG610190RT/EG610590RT/
                                                 EH620471RT/EH610366RT/
                                                 EE610378RT/ED610189RT/
                                                 EE630200RO/EF610361RT/
                                                 EF610254RT

                                                 RENT ADMINISTRATOR'S
                                                 DOCKET NO.: BS0001110M

            ORDER AND OPINION DENYING OWNER'S PETITION FOR ADMINISTRATIVE
              REVIEW UNDER DOCKET NO. EG630200RO AND GRANTING TENANTS'
                         PETITIONS FOR ADMINISTRATIVE REVIEW

          The above named petitioner-tenants and owner timely filed and 
          refiled administrative appeals against an order issued on April 12, 
          1990 by a Rent Administrator (Gertz Plaza, Jamaica, New York) 
          concerning the housing accommodations known as 3333 Henry Hudson 
          Parkway, Bronx, New York, various apartments, wherein the 
          Administrator granted, in part, the owner's major capital 
          improvement (MCI) rent increase application by authorizing a rent 
          increase adjustment for a new roof, roof insulation and copings at 
          parapet walls.  Disallowed by the Administrator was the claimed 
          cost ($2,626,941,22) for the restoration of a glazed brick curtain 
          wall.

          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 these administrative appeals.

          Since these appeals pertain to the same order and involve common 
          issues of law and fact, they have been consolidated herein for a 
          uniform disposition.

          On appeal, the petitioner-owner contends, in substance, that the 
          Rent Administrator improperly disapproved the restoration of the 
          glazed brick curtain wall; that the mere fact that the work in 
          question was required for the maintenance of the structure is no 
          bar to an MCI rent increase; that the owner submitted a detailed 
          statement from the contractor in lieu of a contract which should 







          ADMIN. REVIEW DOCKET NO.: EE610002RT, et al
           
          suffice, especially in light of the fact that the DHCR request came
          eleven years after the contract was executed and five years after 
          the application was filed; that the Administrator improperly relied 
          on Section 2522.4(a)(3) of the Rent Stabilization Code as that 
          section has been declared null and void by the courts; that the 
          work commenced in 1979 and, therefore, the former Code should 
          apply; that the work in question meets the requirements for an MCI; 
          and that the statement in an amendment to the offering plan by the 
          owner to "pay for all cost and expenses" for the work in question 
          should not disqualify the owner to from an MCI rent increase.

          The tenants alleged in their responses to the owner's petition that 
          the brick replacement was an ongoing repair program which took 
          eight years to complete; that the facade work is shoddy, 
          inadequate, cosmetic in nature and was not done building-wide; that 
          Ambassador Associates was the former owner of the building at the 
          time it filed the application and therefore lacked standing to 
          file; that a portion of the cost of the brick restoration work was 
          charged against the co-op's reserve fund; that the alleged expenses 
          were not properly substantiated or documented and improperly 
          included litigation expenses; that the commercial income for the 
          building was grossly miscalculated; and that the owner's promise to 
          pay for the work precludes an MCI increase.

          The tenants filed separate administrative appeals, contending, in 
          substance, that Ambassador Associates is the former owner of the 
          building and lacked standing to file the MCI application; that the 
          roof installation does not qualify as an MCI because only half the 
          roof was repaired; that the roof installation was necessary due to 
          the owner's failure to perform necessary repairs; that the owner is 
          further culpable regarding the deterioration and destruction of the 
          roof by decorating and installing "roof gardens" and "trees" 
          without installing a functional and suitable water drainage system, 
          causing additional water backup and accumulation; that a penthouse 
          tenant was permitted to remove a section of the roof covering to 
          construct an extension to his apartment without a water drainage 
          system in place which resulted in additional water back-up and 
          accumulation; that the owner greatly understated the commercial 
          revenues on its MCI application; that the partial roof replacement 
          was necessitated due to damage caused by the brick repair 
          contractor which is an insurable causality rather than an MCI; that 
          the Sponsor promised to pay for the roof repair in the Third 
          Amendment to the Offering Plan; and that the alleged expenses have 
          not been properly substantiated or documented.

          In response to the tenants' appeals, the owner contends, in 
          substance, that the application was properly filed in November of 
          1989 by the then owner of the building; the roof replacement 
          qualifies as an MCI as all of the roof level area was replaced; 
          that the tenants' claim of a partial roof replacement was raised 
          for the first time on appeal; that the cost for the roof 
          replacement was completely substantiated; that the MCI application 
          accurately represented the rental income derived from commercial 
          space; that there is absolutely no basis for the denial of the 
          increase based on the alleged and unproven negligence of the


          ADMIN. REVIEW DOCKET NO.: EE610002RT, et al

          owner; that the fact that the roof replacement was done out of 
          necessity is not a relevant factor to the propriety of an MCI; and 
          that there was no promise made to the rent regulated tenants that 
          they would not receive a rent increase for the roof replacement.

          After a careful consideration of the entire evidence of record, the 
          Commissioner is of the opinion that the owner's administrative 
          appeal should be denied; and that the tenants' administrative 
          appeals should be granted.

          Policy Statement 89-9 issued August 28, 1989 is entitled "Sponsor 
          Representations, in Cooperative or Condominium Offerings, to Bear 
          Cost of MCI's:  Effect on Entitlement to MCI Increases" and states 
          as follows:

               The DHCR has several MCI applications from sponsors of 
               converted buildings in which the offering plan states 
               that an improvement or improvements will be made at the 
               sponsor's "sole expense" or "sole cost and expense".  The 
               agency has received correspondence from the State of New 
               York Department of Law stating, "This representation can 
               only be interpreted to mean that no non-purchasing tenant 
               would bear any responsibility" for the improvement.  The 
               Department of Law regards the owner who makes a statement 
               such as this in an offering plan as ineligible to recover 
               the cost of the subject improvement in an MCI increase.

               After reviewing the applications along with the offering 
               plans, the Division of Housing and Community Renewal 
               concurs with the Department of Law's interpretation of 
               the phrase "sole cost and expense".  Any MCI application 
               for a cooperative or condominium converted building, 
               where the offering plan includes this (or similar) 
               language without additional exclusionary language 
               relating to an MCI application, will be denied to the 
               extent that the costs for the improvements mentioned are 
               included in the application.

          With regard to the restoration of the glazed brick curtain wall, 
          the Commissioner notes that the first amendment to the offering 
          plan of cooperative ownership states as follows:

               Owner hereby represents that it shall pay for all costs 
               and expenses of the repair and restoration work performed 
               pursuant to its contract with the Grenadier 
               Corporation...

          It is clear from the record that the owner made a binding 
          representation in a public offering during the cooperative 
          conversion process "to pay for all costs and expenses" associated 
          with the restoration of the glazed brick curtain wall.  The tenants 
          of the subject premises, whether they chose to purchase their 
          respective apartments or remain as tenants, as permitted by law, 
          had every right to rely on the clear language of the offering plan.  
          The owner may not renege on its previous commitment and attempt to 







          ADMIN. REVIEW DOCKET NO.: EE610002RT, et al

          have non-purchasing tenants subsidize the cost for this particular 
          item.  In this regard, the Commissioner notes that nowhere in the 
          offering plan or its amendments has the owner conditioned its 
          unqualified promise to bear all the costs for the brick restoration 
          by reserving a right to apply for an MCI rent increase.  
          Furthermore, any ambiguities in the offering plan and its 
          amendments must be resolved against the owner/sponsor.  The 
          Commissioner finds, therefore, that the owner's statement in the 
          offering plan to perform the work in question at its sole expense 
          clearly precludes the owner from recovering the cost of said work 
          in an MCI increase pursuant to Policy Statement 89-9 cited above.  
          In this connection, the Commissioner notes that Policy Statement 
          89-9 does not reflect a change in policy, but rather reflects a 
          line of administrative rulings (AE730001RT; ART13197-8L; and 
          BL420122-4RT) rendered prior to the issuance of this policy 
          statement which precluded MCI rent increases where the sponsor or 
          owner undertook to perform the work at no expense to the tenants, 
          but rather at the owner's or sponsor's sole cost and expense.  
          Based on the foregoing, the Commissioner finds that the 
          Administrator properly denied the owner's MCI application with 
          regard to the brick curtain wall.

          The Commissioner also finds that the restoration of the glazed 
          brick curtain wall does not qualify as an MCI, but rather 
          constituted an ongoing maintenance program (a replacement of only 
          10% of the bricks over a four year period [1979-1983]).  Moreover, 
          said work was defective and/or not comprehensive in scope since the 
          owner's very engineer, in a report just six years later (April 19, 
          1989), states that a comprehensive program of exterior masonry 
          repair work was needed.  Another reason that said brick restoration 
          work does not qualify as an MCI is because the original brick 
          curtain wall had clearly not exhausted its useful life as the 
          subject building was newly constructed in 1969-70, yet the brick 
          restoration program began just nine years later in 1979.  Clearly, 
          the free market rents charged when the subject premises first 
          became subject to stabilization jurisdiction (1974) reflected the 
          value of this newly constructed building, and the tenants have 
          every reason to expect that the building was properly constructed 
          and should not have to bear a rent increase to restore a 9 year old 
          exterior wall.

          Additionally, the Commissioner notes that the Cooperative Offering 
          Plan states as follows:

               Pursuant to Local Law 70, the amount of the Reserve Fund 
               will be reduced to take into account the cost of major 
               capital replacement of parapets and portions of the 
               exterior brick curtain wall aggregating approximately 
               $2,608,850.00...

          In this respect, the Commissioner notes that it is 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 


          ADMIN. REVIEW DOCKET NO.: EE610002RT, et al

          sponsor to entice purchases or under compulsion of law, may not 
          form the basis for a rent increase.  Accordingly, since a reserve 
          fund credit was taken for the work in question, said work does not 
          qualify for an MCI rent increase.  (Accord: FE430432RO et al).

          Finally, with regard to the roof replacement, the Third Amendment 
          to the Cooperative Offering Plan states as follows:

               Sponsor shall cause the quarry tile roof of the Building 
               to be replaced at its own cost and expenses...

          The Commissioner finds that the above-cited owner's statement in 
          the offering plan to replace the roof "at its own cost and expense" 
          precludes the owner from recovering the cost of the work in an MCI 
          increase as discussed, supra.  Accordingly, the Commissioner finds 
          that the Rent Administrator improperly granted the owner an MCI 
          rent increase for the roof installation.

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

          ORDERED, that the owner's petition for administrative review be, 
          and the same hereby is, denied; that the tenants' petitions for 
          administrative review be, and the same hereby are, granted; that 
          the order of the Rent Administrator be, and the same hereby is, 
          modified in the manner and to the extent indicated above to deny an 
          MCI rent increase for the roof installation and related work, and 
          that as so modified, said order be, and the same hereby is, 
          affirmed; and it is further

          ORDERED, that as to the rent stabilized tenants, the owner shall 
          credit any excess rent collected at the rate of 20% per month, 
          commencing on the first rent payment date after issuance of this 
          order of the Commissioner, until all overpayments have been 
          refunded.

          ISSUED:










                                                                        
                                               JOSEPH A. D'AGOSTA
                                               Deputy Commissioner




             





    

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