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

          ------------------------------------X  SJR NO. 5922
          APPEAL OF                              DOCKET NO. FE 430139 RO
                                              :  DRO DOCKET NO.ZDG 430209 OM
               KEN-ROB COMPANY                     

                                PETITIONER    : 

               On May 9, 1991, the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on April 
          24, 1991, by the Rent Administrator, 92-31 Union Hall Street, 
          Jamaica, New York, concerning the housing accommodations known as 
          236-240 East 5th Street, New York, New York, Various Apartments. 

          Subsequent thereto, the petitioner-owner filed a petition in 
          the Supreme Court pursuant to Article 78 of the Civil Practice Law 
          and Rules requesting that the "deemed denial" of the petitioner's 
          administrative appeal be annulled.  This proceeding was then 
          remitted to the Division for a determination of the petitioner's 

          The Administrative Appeal is being determined pursuant to the 
          provisions of Section 2202.4 of the Rent and Eviction Regulations 
          and Section 2522.4 of the Rent Stabilization Code.

          The issue herein is whether the Rent Administrator's order 
          was warranted.

          The Commissioner has reviewed all of the evidence in the 
          record and has carefully considered that portion of the record 
          relevant to the issue raised by the administrative appeal.  

          The owner commenced this proceeding on July 27, 1989, by 
          filing an application for a rent increase based on a major capital 
          improvement (hereafter MCI), to wit: electric rewiring, new 
          hallway windows, and repiping basement overheads at a total cost 
          of $83,938.00.  The owner submitted proof of the above costs and 
          documentary evidence in support of its application.

          On April 24, 1991, the Rent Administrator issued the order 
          here under review finding that the rewiring, except for $3725.00 
          attributed to the construction of a new electric room and steel 
          stairs leading into such room, qualified as a MCI, that the new 
          hall windows qualified as an MCI, and that the basement repiping 
          at a cost of $21,500 did not qualify as an MCI.  Appropriate rent 
          increases were granted for those items found to qualify as MCIs.

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          In its petition, the owner contends in substance that the 
          repiping consisted of new hot and cold water overhead mains with 
          all necessary valves and should have been considered an MCI in 
          accordance with the DHCR Schedule of Major Capital Improvements 
          No. 20, that the construction cost of the electric room and stairs 
          should have been included as other necessary work performed in 
          connection with and directly related to a MCI pursuant to Section 
          2522.4 (a) (2) (ii) of the Rent Stabilization Code and that the 
          electric room was required by Con Edison for the electric 

          In an answer to the owner's petition dated June 1, 1991, the 
          tenants allege in substance that the main purpose of the new 
          electric room is to allow storage space to the owner in that the 
          room encompasses approximately 325 square feet and only about 15 
          square feet of this space is taken up by electric equipment, that 
          Con Edison's layout plan does not include a recommendation for 
          constructing an electric room but merely recommended moving the 
          meters to one area, that in regard to the repiping, the letter of 
          completion dated April 6, 1989 appears false and misleading in 
          that it contains no letterhead or signature of the Borough 
          Superintendent and refers to Plumbing Repair Approval Number 
          100000776 for a job performed at a total estimated cost of $7400 
          whereas in the MCI application, the owner submitted a total cost 
          of $21,500, that the invoices and payment dates do not coincide 
          with the completion date on the MCI application, and that the cost 
          of asbestos removal in the subject premises may have been 
          improperly included in the repiping charges.

          The Commissioner is of the opinion that this proceeding 
          should be remanded to the Rent Administrator.

          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.

          DHCR policy as enunciated in its Schedule of Major Capital 
          Improvements No. 20 regarding repiping is that the following 
          constitutes an MCI: " new hot and / or cold water risers, returns, 
          and branches to fixtures in every housing accommodation including 
          shower bodies, and /  or new hot and /  or new cold water overhead 
          mains, with all necessary valves in basement".

          In the instant case, the Commissioner is of the opinion that 
          the basement repiping done by the owner which consisted of new hot 
          and new cold water overhead mains, with all necessary valves in 

          FE 430139 RO
          basement, would constitute an MCI.  However the proceeding must be 
          remanded to consider the tenants' allegation in their June 1, 1991 
          answer to the owner's petition as described above.  It is noted 
          that the owner on July 2, 1991, was served with a copy of the 
          tenants' answer.  In the remanded proceeding, the owner should be 
          given twenty days to submit a response to the tenants' answer. 

          In addition, in the remanded proceeding, the Rent 
          Administrator should reconsider whether the installation of the 
          new electric room and stairs should be considered as part of the 
          MCI of rewiring or as other necessary work performed in connection 
          with and directly related to an MCI.  The tenants' answer dated 
          June 1, 1991 as it relates to the installation of the electric 
          room and stairs should be considered and again the owner should be 
          afforded twenty days to submit any response to said answer as well 
          as any additional proof it may have that Con Edison required this 
          installation due to electric rewiring.

          THEREFORE, in accordance with the provisions of the Rent 
          Stabilization Law and Code, and the Rent and Eviction Regulations 
          for New York City, it is

          ORDERED, that this petition for administrative review 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 of the Rent 
          Administrator remains in full force and effect until a new order 
          is issued on remand. 


                                          ELLIOT SANDER
                                          Deputy Commissioner


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