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


          ------------------------------------X
          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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