FE 430432 RO, et al 

                                  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. FE 430432RO,
                                               FE 410085 RT, FE 410125 RT,
                                               FE 410126 RT, FE 410132 RT,
                                               FE 410133 RT, FE 410134 RT,
                                               FE 410135 RT, FE 410136 RT,
                                               FE 410155 RT, FE 410156 RT,
                                               FE 410157 RT, FE 410158 RT,
                                               FE 410159 RT, FE 410160 RT,
                                               FE 410161 RT, FE 410162 RT,
                                               FE 410163 RT, FE 410164 RT,
                                               FE 410170 RT, FE 410171 RT,
                                               FE 410172 RT, FE 410173 RT,
               Rosedale Management Company,    FE 410174 RT, FE 410176 RT,
                         and                   FE 410177 RT, FE 410178 RT,
               Various Tenants of              FE 410208 RT, FE 410233 RT,
               345 West 58th Street,           FE 410237 RT, FE 410238 RT,
               30 West 60th Street,            FE 410259 RT, FE 410275 RT, 
               New York, New York,             FE 410276 RT, FE 410277 RT,
                                               FE 410282 RT, FE 410283 RT,
                                               FE 410284 RT, FE 410303 RT,
                                               FE 410439 RT, FE 410440 RT,
                                               FE 410441 RT.

                                               DISTRICT RENT 
                                               ADMINISTRATOR'S
                                               DOCKET NOS. EA 430066-RP
                                  PETITIONERS              (CK 430262-OM)
          -----------------------------------X

            ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
                 DOCKET NO. FE 430432-RO, GRANTING TENANTS' PETITIONS
                 FOR ADMINISTRATIVE REVIEW DOCKET NOS. FE 410085-RT
                      et al AND REVOKING ADMINISTRATOR'S ORDER


          The above-named petitioners filed timely Petitions for
          Administrative Review against an order issued on April  26,  1991
          by the Rent Administrator, 92-31 Union Hall Street, Jamaica, 
          New York concerning housing accommodations known as 345 West 58th 
          Street and 30 West 60th  Street,  New  York,  New  York,  various
          apartments.  Said order  granted  the  application  for  a  major
          capital improvement rent  increase  as  to  all  rent  stabilized
          apartments.

          This proceeding stems from an application  (CK  430262-OM)  filed
          with the Division on November 30,  1988  by  Rosedale  Management
          Company,  the  managing  agent  for  the  owner  of  the  subject
          premises, a cooperative corporation, on behalf of the sponsor and 
          holder of unsold shares, predicated on the installation  of  3623
          thermal replacement apartment windows  (exclusive  of  commercial






          FE 430432 RO, et al 
          space) throughout the complex at a claimed cost  of  $507,220.00.
          The contractor's certification (Form RA79-Supplement 1) indicates 
          work commenced December 3, 1985 and  was  completed  December  1,
          1986.

          The  application  was  initially  denied   and   the   proceeding
          terminated on the mistaken grounds that the subject premises were 
          not registered with the  Division.   By  order  and  opinion  (DE
          430089-RO) issued on December 29, 1989 the Commissioner  remanded
          the proceeding to the Rent Administrator for consideration of the 
          application on its merits.  

          In this remanded  proceeding  (EA  430066-RP),  numerous  tenants
          objected to the requested rent increase stating, in essence, that 
          the sponsor had applied for and was the  recipient  of  J-51  tax
          abatement benefits for the windows in question; and that  in  the
          official non-eviction cooperative offering plan,  dated  May  26,
          1986, the sponsor stated its intention to claim a credit  against
          the reserve fund for the cost of the  windows  (as  evidenced  by
          copies  of  certain  excerpts  from  the  offering  plan).   Also
          submitted was a copy of a Department of  Buildings  Certification
          for Tax Exemption and Abatement, dated June 22,  1988  indicating
          that a certificate of occupancy had been issued on May 21, 1986.

          In answer to the tenants' allegations and in response to a Notice 
          dated February 5, 1991, one Bernard Aisenberg,  as  president  of
          Rosedale  Management  Company  (the  managing   agent   for   the
          cooperative corporation) and also a general partner  in  Coliseum
          Park  Apartments  Company  (the  sponsor   of   the   cooperative
          conversion plan) submitted a copy of the offering plan and stated 
          1) receipt of J-51 tax abatement benefits is irrelevant since the 
          work was completed by December 1, 1986, prior  to  the  effective
          date of the amendment to  the  J-51  law,  2)  reference  in  the
          offering plan with respect to replacement windows indicated  that
          the sponsor may (emphasis supplied) use reserve funds  to  offset
          the cost of the window installation but it opted not to do so, 3) 
          the applicable law permitted the sponsor to claim and  receive  a
          credit against the reserve fund of up to one (1) percent  of  the
          total sales proceeds from the sale of cooperative  units  and  4)
          prior to closing (December 15, 1986) the sponsor completed  other
          specified improvements (hallway carpeting,  lobby  doors,  roofs,
          upgraded elevator cabs, oil burner and Local Law  No.  10  facade
          restoration) having a total value of $1,034,123.14 against  which
          it applied a $509,783.68 credit against the reserve fund but  "no
          credit against the reserve fund was taken for the installation of 
          replacement windows at the building." (Emphasis supplied).

          The order of the Rent Administrator, appealed  herein  ,  granted
          the application and authorized a major capital  improvement  rent
          increase of $5.03 per room, per month,  based  on  a  total  room
          count of 1,680  rooms,  as  specified  in  the  application.   In
          issuing   the   order   the   Rent   Administrator   noted    the
          sponsor/owner's categorical denial of  the  tenants'  allegations
          and the sponsor/owner's sworn statements that it neither  claimed
          nor took any credit against  the  reserve  fund  for  the  window
          installation.

          Both the sponsor/owner, via its agent, and various  tenants  (41)
          filed petitions for administrative review of the  Administrator's






          FE 430432 RO, et al 
          order, which petitions have been consolidated for disposition.

          The sponsor/owner, in its  petition  for  administrative  review,
          contends,  in  substance,  that  the   Administrator   erred   in
          computing the increase using the number of rooms listed in the 
          application since its response in the proceeding below  contained
          a thirty (30) page "rent roll showing  the  room  count  for  the
          subject premises." 

          Various tenants, in their substantially identical  petitions,  as
          supplemented  on  appeal,  contend,  in   substance,   that   the
          Administrator's order should  be  reversed  and  the  application
          denied, since I) the application was untimely, having been  filed
          more  that  two  years  after  the  completion  of   the   window
          installation, II) pursuant to an order  issued  on  November  30,
          1990 under Docket No. DE 430206-OM,  which  order  has  not  been
          revoked, a rent increase for the very same windows was denied due 
          to the owner's failure to file its application within  two  years
          of completion and III) the owner/sponsor did,  in  fact,  take  a
          credit against the reserve fund for the window installation.  
          This third claim is advanced by  various  tenants  by  way  of  a
          "REPLY TO OWNERS ANSWER AND SUPPLEMENTAL  STATEMENT  TO  TENANT'S
          PAR DOCKET NO. FE 410085 RT"  received by the Division on October 
          21, 1991.  Submitted in support of the this third claim is a copy 
          of the financial report of the Coliseum Tenants  Corp.  from  the
          inception of the cooperative  ownership,  December  15,  1986  to
          December 30, 1986, prepared by  a  certified  public  accountant,
          wherein it is noted that "the sponsor took a credit  of  $509,783
          against the [reserve] fund contribution for  windows  and  boiler
          replacement" in accordance with the terms of the  offering  plan.
          (Emphasis added).  (This document appears as an addendum  to  the
          Ninth Amendment Dated July 30, 1987 to the Plan  for  Cooperative
          Organization, being  the  Sixth  Amendment  to  the  amended  and
          restated Plan of Cooperative Organization dated April 6, 1983).  

          Copies of these documents were  served  on  the  owner,  via  its
          attorney, which was afforded the opportunity to respond thereto.

          In answer to the tenants'  petitions  the  owner/sponsor  states,
          among  other  things,  that  A)  the  tenants  never  raised  the
          timeliness argument before the Rent Administrator  and  thus  are
          precluded form doing so on appeal, B) the June 1986  "completion"
          date specified in certain J-51 documentation  related  solely  to
          the boiler/burner portion of the J-51 application, filed with the 
          Department of Housing,  Preservation  and  Development  (HPD)  in
          September 1986, C) it  was  disclosed  to  HPD  that  the  window
          installation was still in progress as per an  attached  affidavit
          and D) the installation was deemed completed upon  final  payment
          to the contractor by check dated  December  1,  1986  after  "the
          remaining installations and adjustments necessary for the windows 
          to  operate  properly  were  substantially   completed   by   the
          contractor."  The affidavit of Charles Punia, a  partner  of  the
          sponsor, sworn to on September 29,  1986,  states  "3676  windows
          were installed" at the subject premises for which the  contractor
          was paid $475,000.00 with the the balance of  $39,640.00   to  be
          paid by November 14, 1986.

          After a careful consideration of the entire record, as  amplified
          upon appeal, the Commissioner is of the opinion that the  owner's






          FE 430432 RO, et al 
          petition should be denied; and that the tenants' petitions should 
          be granted.

          At  the   outset   the   Commissioner   notes   that   the   Rent
          Administrator's order (DE 430206-OM) of November 30, 1990,  which
          denied as untimely filed the sponsor/owner's  second  application
          (filed May 18, 1989) for the windows, is  not  controlling  under
          the circumstances herein.  At the time said order was issued  the
          Administrator  had  already  reopened   for   consideration   the
          original application, which application was previously terminated 
          on erroneous grounds.  In point of fact, the  second  docket  was
          brought to the Administrator's attention during the processing of 
          the instant proceeding.

          It is the well established, and judicially  recognized,  position
          of the Division that expenditures coming out of  a  cash  reserve
          fund established by a sponsor may not form the basis for a  major
          capital improvement rent increase.  In a  similar  vein,  to  the
          extent that the owner/sponsor takes a credit against the  reserve
          fund which it is required by  law to establish, thereby  reducing
          the  sponsor's  out  of  pocket  costs  for  the  major   capital
          improvement, the dollar value of such reserve fund credit may not 
          form the basis of a  major  capital  improvement  rent  increase.
          (Accord: ART 12,441-L, ART 12,437-L).

          Section 26-703 of the New York City  Administrative  Code  (which
          section mandates the establishment of a reserve fund for  capital
          expenditures in connection with cooperative conversions)  clearly
          specifies that "an offeror may claim and receive a credit against 
          the mandatory initial contribution for the actual cost of capital 
          replacement begun after the plan is presented to  the  department
          of law and before  the  plan  is  declared  effective;  provided,
          however, that any such replacements must be set forth in the plan 
          together with their  actual  or  estimated  costs;..."  (Emphasis
          added).  

          The cooperative offering plan  submitted  by  the  owner  in  the
          proceeding below sets forth  only  two(2)  capital  replacements,
          windows and oil burner/boiler (as well as the projected  cost  of
          said items) against which the sponsor indicated it would apply  a
          credit against the mandated reserve fund  contribution.   On  the
          other hand the  sponsor/owner  explicitedly  represented  to  the
          Administrator that it applied a reserve fund  credit($509,783.68)
          against a list of six claimed improvements none  of  which,  with
          the exception of an oil burner, are listed in the offering  plan.
          Said representation  is  both  misleading  and  contrary  to  the
          express provision of law.  The record, which  includes  notes  to
          the 1986 financial report, contained in the same amended offering 
          plan, confirms that the sponsor/owner did, in fact, take a credit 
          against the reserve fund contribution for  the  windows  here  in
          question.

          Since the owner/sponsor misrepresented to the Administrator  that
          the reserve fund credit was not taken for the window  replacement
          and since the amount of said  credit  ($509,783.68)  exceeds  the
          cost of the windows listed in the application ($507,220.00),  the
          Commissioner  finds  that  a  rent  increase   for   the   window
          installation is not warranted under the circumstances herein  and
          that the Administrator's order should  be  revoked.   See  Lucot,






          FE 430432 RO, et al 
          Inc. v. Gabel, 20 A.D. 2d 94, 244 N.Y.S. 2d 582 (App.  Div.,  1st
          Dept., 1963), affd. 15 N.Y.2d 774, 257 N.Y.S. 2d 343. 

          In view of the determination herein with respect to  the  reserve
          fund, the Commissioner need not address the issue of  timeliness.
          Furthermore, in view of the above finding, the Commissioner  need
          not address the merits of the owner's petition under  Docket  No.
          FE 430432-RO.  

          THEREFORE,  in  accordance  with  the  provision  of   the   Rent
          Stabilization Code, it is


          ORDERED, that the owners/sponsor's  petition  for  administrative
          review (Docket No. FE 430432-RO), be,  and  the  same  hereby  is
          denied;   that   the   consolidated   tenants'   petitions    for
          administrative review under Docket Nos. FE 410085-RT, et al,  be,
          and the same hereby are granted; and that the order of  the  Rent
          Administrator and the rent increase provided for therein be,  and
          the same hereby are revoked; and it is further

          ORDERED, that the owner refund to the  tenants  any  excess  rent
          collected as a result of this order within thirty (30) days  from
          the date of issuance hereof.

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


          ISSUED:
                                                                           
                                                       ELLIOT SANDER
                                                       Deputy Commissioner


           

    

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