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 NOS.:EH110255RT
          APPEALS OF                                          EH130174RT

          Jeffery Dunayer & Ruth Rothstein
          (authorized tenant representative)
                                                  RENT ADMINISTRATOR'S
                               PETITIONER         DOCKET NO: BJ110203OM
                                                             EI110014RK
          ------------------------------------X


          ORDER AND OPINION GRANTING PETITIONS FOR ADMINISTRATIVE REVIEW

          The above-named petitoner-tenants timely filed petitions for 
          Administrative Review (PARs) against an order issued on July 20, 
          1990 by the Rent Administrator (Gertz Plaza) concerning the housing 
          accommodations known as 102-55 67th Drive Forest Hills, New York, 
          various apartments, wherein the Rent Administrator determined that 
          the owner was entitled to a rent increase based on major capital 
          improvements (MCIs).

          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 these Administrative Appeals. Furthermore, the 
          Commissioner deems it appropriate to consolidate these petitions 
          for disposition since they pertain to the same order and involve 
          common issues of law and fact.

          The owner commenced this proceeding on October 30, 1987 by filing 
          an application for an MCI rent increase predicated on the 
          installation of new windows and a new boiler/burner. In response to 
          the owner's application, three (3) tenants filed individual answers 
          while thirty-eight (38) other tenants filed one joint answer 
          contending, inter alia, that their windows were defectively 
          installed; and that the second Amendment to the Offering Plan dated 
          July 8, 1985 clearly states that the sponsor shall install new 
          windows and a new boiler/burner at its own cost. In support of 
          their contention, the tenants submitted copies of the Second 
          Amendment to the Offering Plan and a letter dated July 23, 1985 
          addressed to all tenants from Rothschild, Esposito, Himmelfard, 
          Sher and Pearl, attorneys for the sponsor.















          Admin Rev. Docket No. EH110255RT

          On May 23, 1990, the Division sent a notice to the owner 
          requesting, among other things, that the owner respond to the 
          tenants' allegations and answer questions relating to the co- 
          op/condo plan. 

          On May 29, 1990 the owner replied stating, among other things, that 
          any necessary adjustments have been done with the windows; that the 
          sponsor paid for the improvements; that there was no credit against 
          the reserve fund; and that there was no special assessment to the 
          cooperative's shareholders. The owner further submitted on July 16, 
          1990, a letter from Blum, Ross, Weisler, Bergstein, Golden and 
          Weingold, the law firm who handled the closing of the cooperative 
          for the subject building stating that the Second Amendment to the 
          Offering Plan states that the sponsor, Boulevard Gardens 
          Associates, will pay for the boiler/burner and window improvements; 
          that this in no way meant that the sponsor would not apply for an 
          MCI rent increase for these improvements; and that the reason the 
          sponsor agreed to pay for the improvements and also give up its 
          rights to use the cost of such improvements as a credit to the 
          reserve fund is so that it would be permitted to  file an 
          application and receive rent increases.

          Thereafter, the Administrator issued the order appealed herein, 
          granting the owner's application and authorizing rent increases for 
          the rent stabilized apartments at the subject premises. The total 
          approved cost was reduced from $117,300.00 to $115,833.60 to 
          reflect the commercial tenants' share of the MCI cost.

          By letter dated July 26, 1990, the owner through its agent, JMS 
          Rehab consultants, requested reconsideration of the Administrator's 
          order and contended that none of the improvements benefit the 
          commercial tenants since there were no windows installed in the 
          garage nor are there any radiators to heat same; and that the MCI 
          increase should be recalculated based on the total cost of the 
          improvements.

          On February 11, 1991, the Administrator issued an order (Docket 
          No.EI110014RK) modifying the order issued under Docket 
          No.BJ110203OM and recalculated the increase to reflect an approved 
          cost of $117,300.00.

          In response to the tenants' petitions, the owner again submitted a 
          copy of a letter from its attorney stating that although paragraph 
          II(e) of the second amendment to the offering plan states that the 
          sponsor would not apply for an MCI rent increase for such 
          improvements, this in no way meant that the sponsor would not apply 
          for an MCI rent increase for such improvements; and that the reason 
          the sponsor agreed to pay for the such improvements and also give 
          up its right to use the cost of said improvements as a credit to 
          the reserve fund is that it would be permitted to file and receive 
          rent increases.
                                         [2]







          Admin Rev. Docket No.EH110255RT

          After careful consideration of the entire evidence of record, the 
          Commissioner is of the opinion that these petitions 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 pain 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 application along with the offering plan, 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.

          In the instant case, paragraph II(e) of the second amendment to the 
          offering plan of cooperative ownership states as follows:

               "Work to be performed by sponsor: At its own cost, and
          without diminution of the reserve fund, the sponsor shall perform 
          the following work within four(4) months of closing.

               1) Install all new double glazed, thermal replacement    
                  windows in each apartment.
               2) Install a new boiler and burner-Federal three pass,   
                  forced draft, series FST model 100 or Rockmills MP 100  
                 boiler, or equal, and new industrial combustion, HEV-E  
                 oil combustion gas-oil burner Model MEG-42 with        
                 necessary accessory equipment and installation."

          The Commissioner notes that the sponsor's statement in the offering 
          plan to perform the work in question at its own expense clearly 
          precludes the sponsor from recovering the cost of the work in an 
          MCI increase pursuant to Policy Statement 89-9 cited above. In 

                                         [3]














          Admin Rev. Docket No. EH110255RT

          this connection the Commissioner further notes that Policy 
          Statement 89-9 does not reflect a change of policy but rather 
          reflects a judicially approved line of Administrative Rulings 
          (AE730001-RT; ART 13,197-8L and BL 420122-4RT) rendered prior to 
          the issuance of this policy statement which precluded major capital 
          improvement rent increases where the sponsor undertook to perform 
          the work at no expense to the tenants (who had reason to rely on 
          the representation made in the public offering) but rather at the 
          sponsor's sole cost and expense.

          Accordingly, the Commissioner finds that the Administrator 
          improperly granted the owner's MCI rent increase application.

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

          ORDERED, that these petitions be, and the same hereby are granted; 
          that the orders of the Rent Administrator be, and the same hereby 
          are revoked; and it is further

          ORDERED, that the owner cease collection of the rent increase 
          provided for in the Administrator's orders, effective immediately, 
          and that the owner credit to the tenants 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.

          This order has the effect of reducing the rent to the amount in 
          effect immediately prior to the issuance of the instant major 
          capital improvement increase adjustment revoked herein, to which 
          may then be added any authorized rent increase unrelated to the 
          major capital improvement. The resulting reduction in rent 
          continues in effect notwithstanding that an Article 78 proceeding 
          for judicial review or any other legal action may have taken in 
          connection with this order of the Commissioner unless and until an 
          order is issued to the contrary.

           


          ISSUED:




                                                                          
                                                  JOSEPH A. D'AGOSTA
                                                  Deputy Commissioner
































































    

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