ADM. REVIEW DOCKET NOS.: FC810422RT 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
APPEAL OF DOCKET NOS.:
FC810422RT
FD810003RT
FD810038RT
FG810087RT
VARIOUS TENANTS,
PETITIONERS D.R.O. ORDER NO.:
------------------------------------X YEG910035OM
Owner: Pan Am Equities
ORDER AND OPINION GRANTING THREE PETITIONS FOR ADMINISTRATIVE
REVIEW TO THE EXTENT OF REMANDING THIS PROCEEDING TO THE
RENT ADMINISTRATOR AND REVOKING THE ADMINISTRATOR'S ORDER;
AND DENYING ONE PETITION FOR ADMINISTRATIVE REVIEW
These petitions are being consolidated as they involve common
issues of law and fact.
Various petitioner-tenants timely filed and/or refiled
Petitions for Administrative Review against an order issued on
February 25, 1991, by the Rent Administrator, 55 Church Street,
White Plains, New York, concerning housing accommodations known as
various apartments, 411 Bronx River Road, Yonkers, New York,
wherein the Rent Administrator determined that the owner should be
granted a rent increase for a Major Capital Improvement (MCI)
consisting of replacement windows, at a total cost of $186,310.00
for a monthly increase of $4.55 per window.
The issue in this appeal is whether the Administrator properly
granted the MCI increase.
The applicable section of the Tenant Protection Regulations
(TPR) is Section 2502.4.
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 the administrative appeal.
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
The owner commenced this proceeding on May 17, 1990 by filing
an application for an MCI increase for replacement windows,
alleging the old windows, which were replaced during the period
June 1987 through February 1988, were over 25 years old and
"obsolete" and "drafty." Attached to the application was a copy of
a contract with Aluminum Building Products Corporation for the
replacement of 660 windows at the above-stated price (including
screens). Also submitted with the application was a cover letter
dated May 16, 1990 in which the owner notes that although the
contract called for 660 windows, "[o]ur count is 683 total windows
(apartments only). Therefore, it is to the benefit of the tenants
that more windows were installed at the same contract price of
$186,310.00, lowering the requested rent increase to $4.55 per
windows, as opposed to $4.70 per window."
Approximately 50 tenants filed objections to the owner's
application. Their objections included allegations that the new
windows were not necessary, were not requested or approved by the
tenants, were overpriced, were of low quality and/or improperly
installed. Some tenants stated the MCI increase would be unfair as
to them in particular because as new tenants their initial rents
were based on moving into "completely renovated" apartments and
they had no notice that they would have to pay extra at a later
date for the new windows which were already in place.
In addition, the tenants alleged that the applications failed
to indicate how the requested $4.55 increase per window was
calculated. (The calculation does appear in the complete
application but not on the portion of the application submitted to
the tenants.)
In a one page reply to the tenant responses the owner implied
that the tenants were merely trying to avoid the rent increase; and
that they are misinformed as to the law regarding MCIs under ETPA,
wrongly thinking that the increases are retroactive and/or subject
to a two year limitation. The owner stated that one tenant's
picture window had already been replaced and that all other
complaints regarding the windows would be looked into.
The Administrator did not order an inspection of the building
but granted the MCI increase, finding that the tenants' replies
were "non-sustainable since it is determined that this improvement
does constitute a Major Capital Improvement within the meaning and
intent of the Regulations and the Act and is consistent with past
practices."
In petition number FC810422RT, signed by 54 tenants, the
petitioners contend that the Rent Administrator's Order is
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
incorrect and should be modified because the owner's complete
application was not available for examination in the building
rental office. Only after the approval of the MCI increase did the
tenants obtain copies of the complete application from the DHCR and
based thereon the tenants raise the following objections in this
petition:
The installation cost lacks credibility since the contract
called for 660 windows, the application stated there were 683, and
in fact 702 were installed. Because the proven cost (via cancelled
checks) was for the contract price for 660 windows, the tenants
ask: "Does this mean that [the contractor] simply supplied Pan Am
with 42 free windows and screens, a value of several thousand
dollars?" The tenants allege the contractor was no longer at the
former address; has disconnected its phones, and left no forwarding
addresses or other means of contact.
The tenants also allege they have researched the cost of
window replacement, using the actual specification of the windows
installed (HS-AZ-HP60). They state that the specification, which
was for 5/8 inch windows is now obsolete and they allege they
received estimates, based on an "updated specification" using 7/8
inch glass at 1991 prices for 702 window with screens, of
$125,833.00 and $90,895.00, rather than the owner's alleged cost of
$186,310.00. The tenants contend that the owner erred by not
taking bids on the windows and that the tenants should not be
penalized for this error.
In answer to their petition the owner contends that the Order
should be upheld because the RA-79 Suppl. IV form served on the
tenants states that the complete application was available for
review at the owner's Park Avenue South address in Manhattan. The
owner offers no reason or excuse for the complete application not
to have been available on the premises of the subject building.
Regarding the number of windows, the owner alleges its count
(683) was correct and was for apartments only, not public areas,
implying that the 660 figure was an error on the part of the
contractor and that the 702 figure included public areas. The
owner does not explain why the contractor seems to have accepted
payment at the 660 window cost.
Regarding the price differentials, the owner notes that the
alleged estimates by the tenants are not substantiated by any
documentation. The owner further alleges that the 1987 cost of the
"same windows" was higher than 1991 prices "due in part to a
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
saturated market, price decreases, and company's going out of
business."
In petition number FD810003RT, a single tenant, who is also a
petitioner in FC810422RT, makes additional contentions as to why he
feels the Administrator's order was incorrect and should be
modified.
The petitioner alleges that all residential windows were
replaced in 1987-1988 but not the hallway windows, implying that
the improvement was not building-wide and therefore not eligible
for an MCI increase.
The tenant contends the rent increase should not apply to him
because his February 1, 1990 lease was bargained for on an "as is"
basis and therefore the lease rent stated therein included the
then-existing windows, which had been installed two years earlier
and the tenant was not informed directly or indirectly that the
bargained for rent was subject to a future increase based on the
existing windows.
The petitioner contends that the large difference between his
initial rent and the prior rent for his apartment indicates that
his apartment's rent had already been adjusted for the windows and
therefore under TPR Section 2502.4(a)(iii) could not be adjusted a
second time.
The tenant further argues that under Ansonia Associates v.
DHCR, 550 N.Y.S. 2d 328 (1st Dep't 1990), the MCI increase could
not be added to his rent since his initial rent had been a "free
market" rent.
In addition, the tenant argues that to allow a further
adjustment to his rent for this MCI would be inequitable under
Section 2502.4(a)(2)(iv).
The tenant further alleges that he signed his 1991 renewal
lease based on the oral promise of an owner's agent that the MCI
increase would not be applied to his apartment.
The petitioner recites the estimates allegedly received by the
tenants for replacement windows and argues that,since the owner
failed to take bids on the improvement, the DHCR should base the
value of the MCI increase on the lowest of the two bids allegedly
received by the tenants.
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
The tenant further alleges that none of the subject windows in
his apartment locked and he was told by the superintendent that it
was not possible to "secure" the windows as the windows are no
longer being made. The tenant asserts that he spent $150.00 to
secure the windows and "should not be required to pay for windows
which do not function as would be expected."
In a further contention, the petitioner asserts that the cost
of disposal of the old windows should be deducted from the total
cost of the MCI.
The tenant also contends that tenants were so prejudiced by
the owner's failure to provide a copy of the complete application
on the premises, thereby depriving them of "information essential
to oppose the MCI application," that the application should be
dismissed and the owner required to reapply.
Finally, the tenant argues that the 60 month amortization
period is unfair to the tenants and a windfall to the owner and
that 20 years, being the expected life of the windows, should be
used instead.
In petition numbered FD810038RT another individual tenant
argues that the MCI increase should not be applied to his
apartment, which was advertised as "renovated," because as a new
tenant he was not informed of the future rent increase for windows.
(The petitioner moved from another apartment in the complex "with
few windows" to his current apartment "with many windows" about a
month after the MCI application was signed. Nevertheless, he
allegedly was not notified of the potential rent increase.)
Regarding the MCI increase in general, the petitioner argues:
(1) that the two year delay in applying for the MCI increase is
grossly unreasonable, (2) that the owner's alleged failure to
provide promised parking should preclude its being awarded an MCI
increase; and (3) that the windows are "now so old that they are
already in disrepair," due either to prior tenants and/or improper
installation.
In answer to this petition the owner states (1) it satisfied
the due process requirements of the DHCR regarding this MCI, (2)
this tenant will not be billed until his next renewal lease, and
(3) an inspection of the alleged disrepair is being arranged.
In petition FG810087RT, another individual tenant argues that
because the windows were installed three years before he moved in,
and since his initial rent was "approximately 100%" higher than
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
that of the prior tenant, the cost of the windows must have been
included in the initial rent.
In addition, the tenant argues that no information regarding
the MCI increase was included in his lease.
In answer to this petition the owner argues that it should be
dismissed as untimely.
On the merits, the owner argues that the tenant received
notice of the MCI in the owner's application therefor.
The owner further contends that the tenant's initial rent
could not include the cost of this MCI because such increases can
only be granted by an order of the DHCR.
Finally, the owner states that this tenant will not be charged
for the MCI until the commencement of the renewal lease on July 1,
1991.
The Commissioner is of the opinion that the first three
captioned petitions should be granted to the extent of remanding
this proceeding to the Rent Administrator and revoking the
Administrator's order, and that petition number FG810087RT should
be denied.
On August 23, 1990 the owner filed a Certification of Service
of Notice To Tenants of Filing of Application for Rent Increase
Based on ...[MCI], form RA-79 Suppl. IV(6-84). The Commissioner
notes that, in part because MCI applications can be quite
voluminous, the Division allows an owner to serve tenants with the
completed application forms themselves, without the supporting
documentation and correspondence, etc. Accordingly, the
Certification form includes the following paragraph wherein the
owner must fill in the appropriate blanks:
In addition, I have made available for tenant
review a complete copy of the Application,
all required Supplements and all supporting
documentation, as follows: (Owner must
check and complete one of the items below.)
/ / I have placed a copy of the Tenant Review
package in the Office of the superintendent
or resident manager, located at
and have made it available for tenant review
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
during normal business hours.
/ / Such office is not available for the
following reason,
, and I am instead
submitting this Tenant Review
package to DHCR with this Certification
form.
Thus, an owner is to provide access to the complete
application package, including all supporting documentation, within
the building or complex unless the owner provides an adequate
reason why such on site access is not feasible in which case the
Tenant Review package would be submitted to the DHCR along with the
certification and the tenants would have access to the application
materials at the DHCR office. There is no provision for off-site
availability other than at the DHCR office.
As is clear from the form, the owner is to check off and
complete the first choice only if access is to be granted within
the complex. Otherwise, the second choice must be used and reasons
given why access within the complex is not available.
Nevertheless, the owner herein checked off the first choice, but
put in its then-current Manhattan address on Park Avenue South,
rather than the required address on the premises. Thus, access to
the complete application was not given within the complex and no
reason was given for this lack of access. It is undisputed that a
rental office exists on the premises.
(Seeing that the first choice had been checked off, the
Administrator apparently assumed that an on-site location was given
and did not notice that the address stated was in Manhattan.)
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
While it is true that some or all of the petitioners herein
have been given access by the DHCR to the complete application on
appeal, the owner's blatant disregard of required procedure can not
be condoned or ratified. Furthermore, the petitioners herein only
constitute approximately 57% of the ETPA tenants. There is nothing
in the record to indicate that the remaining 43% of the tenants
were ever given access to the complete application.
Secondly, the Commissioner notes that not only the 1987
contract but the contractor's portion of the application
(Supplement I), signed and dated May 4, 1990 by the president of
the contractor, misstates the number of windows that were
installed. While human error can possibly explain why the contract
called for an incorrect number of windows, it is not credible that
the error was not discovered in the course of installation. Since
the contract is for a specific number of windows (as opposed to
"all windows" or "all residential windows") this discrepancy raises
serious questions as to whether this contract was conducted at arms
length. The Commissioner finds that the Administrator failed to
properly investigate this discrepancy. On remand, the reason for
the discrepancy in window count, the actual cost, and the
relationship, if any, between the now-defunct contractor and the
owner should be determined. The 1987-88 market value of the
windows installed should also be determined, if possible.
(Nothing in the present order should be construed to allow a
higher total cost or higher per window cost to be passed on to the
tenants on remand.)
A third reason for this remand is that the tenants'
allegations before the Administrator of faulty installation should
have been investigated by an inspection. Division policy precludes
the granting of an MCI increase for unworkmanlike improvements. On
remand an inspection should be made to determine, if possible,
whether installation had been done in a workmanlike fashion.
In sum, on remand all tenants must be given an opportunity to
examine the entire application on the premises and to respond
thereto; further fact-finding must be initiated by the
Administrator as to the actual cost of the improvement and the
relationship, if any, between the owner and the contractor; and an
inspection must be held to determine if the improvement was done in
a workmanlike manner. If the owner is determined to be qualified
for a rent increase, the rent increase will be prospective only,
based on the fact that the application process had not been
complete, due primarily to the owner's blatant disregard for the
required procedure.
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
Accordingly, the Administrator's February 25, 1991 rent
increase is hereby revoked without prejudice to the owner's right
to a possible prospective rent increase on remand.
The owner is hereby directed to refund all rent increases
collected pursuant to the Administrator's Order within thirty days
of the issuance of this Order. Copies of this Order will be served
on all ETPA tenants in the building.
Despite the remand and revocation of the rent increase, the
Commissioner deems it appropriate to briefly discuss the other
issues raised by these petitions. This discussion will hopefully
clarify Division policy and the rights of the parties as well as
narrow the scope of the remand and any subsequent appeal(s).
Accordingly, the Commissioner notes that:
(1) Tenant approval is not required to receive an MCI
increase.
(2) Furthermore, normally a building-wide replacement of
windows which have outlived their useful life will qualify for an
MCI increase.
(3) Unlike New York City Stabilization, ETPA does not impose
a specific time limit from the completion of an MCI within which an
MCI must be filed. The Commissioner finds that the less than
three year period that occurred in the present case is not
excessive.
(4) A window replacement is deemed building-wide even if
hallway windows were not replaced. See Policy Statement 89-6.
(5) As stated in the Administrator's order, unless the lease
(whether vacancy or renewal) in effect on the effective date of an
MCI increase contains an authorized provision permitting the
increase during that lease term, the increase can not be collected
until the beginning of the next lease term. This provision must
specifically identify the particular MCI. If an owner collects an
MCI increase prematurely an overcharge complaint may be necessary
to recoup the excess rent. However, such illegal collection does
not constitute an error in the Administrator's order and is
therefore beyond the scope of review of an Order granting an MCI
increase.
(6) Similarly, if an owner collects an MCI increase in
violation of a lease or contract, that violation is beyond the
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
scope of review in an appeal of an MCI increase. However, this
Order is without prejudice to the tenants' rights to seek a remedy
in a court of competent jurisdiction.
(7) If an owner had added an MCI increase to an apartment's
rent prior to the granting by the DHCR of a rent increase for the
MCI, that premature increase would constitute a rent overcharge.
However, such overcharge would not prevent the granting of an
otherwise proper building-wide MCI increase. This order is without
prejudice to the tenants' right to file overcharge complaints, if
the facts so warrant.
(8) A stabilized initial rent following a prior stabilized
tenant is determined by the applicable Rent Guidelines Order and is
not a free market rent within the meaning of the Ansonia decision.
(9) An owner is not required to take bids on an MCI or to use
the lowest bid received. Instead, an MCI increase is based on the
actual proven cost of an improvement based on an arms length
contract.
(10) On remand, the workmanship of the installation will be
determined. This order is without prejudice to the right of the
tenants to file service complaints if the facts so warrant.
(11) In general, the costs of removal of old windows, when
included in a contract with an independent contractor (as opposed
to removal by employees of the owner) is a valid component of the
cost of an MCI.
(12) The amortization period of an MCI increase is set by
statute which the DHCR is charged to implement.
Finally, for the reasons stated above in paragraphs numbered
(5), (6), (7), and (8), petition number FG810087RT is hereby denied
since based solely on the collectibility of the MCI as applied to
the tenant's specific apartment. (The petition was, however,
timely being the timely refiling of a previously rejected but
timely petition.)
The other three petitions are granted in part to the extent of
remanding this proceeding for further processing. However, they
are denied to the extent they conflict with the above twelve
numbered paragraphs. In particular, the points made in the twelve
numbered paragraphs are hereby settled and are therefore beyond the
scope of the processing on remand.
THEREFORE, in accordance with the Emergency Tenant Protection
Act and Regulations, it is
ORDERED, that petition number FG810087RT be, and the same
ADM. REVIEW DOCKET NOS.: FC810422RT ET AL.
hereby is, denied, and it is further
ORDERED, that the first three captioned petitions be, and the
same hereby are, granted to the extent of remanding this proceeding
to the Rent Administrator for further processing in accordance with
this Order and Opinion and the Rent Administrator's order and the
rent increase granted therein be, and the same hereby are, revoked;
and it is further
ORDERED, that the owner refund to all tenants any excess rent
collected as a result of this Order within thirty days of its
issuance.
NOTE: This Order has the effect of immediately reducing the
regulated rents to the amount in effect immediately prior to the
MCI increase revoked herein, to which may then be added any
authorized rent increases unrelated to the MCI improvement covered
by the Administrator's order. The prospective effect of this rent
reduction will not be automatically stayed by the filing of an
appeal of this Order by the owner.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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