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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