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
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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)
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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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