DOCKET NO.: FE 430242-RO
STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
IN THE MATTER OF THE ADMINISTRATIVE : SJR NO. 6237
APPEAL OF ADMINISTRATIVE REVIEW
: DOCKET NO. FE 430242-RO
RIVINGTON MANAGEMENT CORP., DRO DOCKET NO. EF 410003-UC
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
This Order and Opinion is issued pursuant to a Mandamus Order after an
Article 78 Proceeding before the Supreme Court, County of New York, Justice
Nardelli, dated May 6, 1992, Index Number 3402/92, which directed the
Division to issue an Order and Opinion in the underlying Petition for
On May 21, 1991, the above named petitioner-owner filed a Petition for
Administrative Review against an order issued on April 29, 1991, by the Rent
Administrator, 92-31 Union Hall Street, Jamaica, New York, concerning
housing accommodations known as various apartments, 168 Rivington Avenue,
New York, New York, wherein the Rent Administrator determined that the
subject building was subject to the Rent Stabilization Law and Code because
the work done thereto did not constitute a substantial rehabilitation in
accordance with Rent Stabilization Code ("Code") Section 2520.11(e).
The issue in this appeal is whether the subject building had been
substantially rehabilitated within the meaning of the Code.
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.
The owner commenced this proceeding on June 11, 1990 by filing an
application to determine whether the subject building was exempt from Rent
Stabilization by virtue of a substantial rehabilitation.
In its application the owner alleged that it had purchased the subject
building on May 29, 1990; that it had been substantially rehabilitated by
the prior owner in or about 1983; that the building had been "a vacant
shell" prior to the rehabilitation; that ten new housing units were created
thereby; that the prior owner had registered the building with the Division
as stabilized through error.
Attached to the owner's application was a copy of a letter to the DHCR from
the prior owner, dated May 28, 1990 (the day before the sale of the
building) stating the owner's belief that the building is exempt from
stabilization for the reasons set forth in a second application form for
exemption attached to the letter. The second application form, dated May
DOCKET NO.: FE 430242-RO
28, 1990 shows the prior owner as the owner and includes, in substance, the
same allegations as made by the current owner-petitioner in its application.
Also attached to the application is a copy of a February 6, 1984 Certificate
of Occupancy for the building showing a cellar plus ten apartments divided
equally among floors one through five. However, the application did not
contain any specification of the work done, the cost thereof, or proof of
Several tenants objected to the owner's application based, in part, on the
allegations that none of the work upon which the application was based had
been done by the current owner; that the prior owner had charged market
rents of $700.00 to $750.00 per month after the building had been
"completely renovated in 1983"; that the tenants took occupancy subsequent
to the renovations under leases which stated apartments were subject to Rent
Stabilization; and that the rents being paid already reflect the work done
On October 18, 1990 and December 7, 1990 the Administrator requested the
following additional information and evidence, stating that only clear
readable copies would be accepted:
"1. A detailed description of the subject premises
before the alteration and after (please include
sketches of same). The description must
include the work actually performed by each
contractor with proof of same (i.e. contracts,
. 2. A copy of past Certificates of Occupancy.
3. A copy of approved alteration plans (with
specifications) and all required permits.
4. Proof of the cost of the alteration (proof can
be in the form of cancelled checks bills,
5. Proof that no tax abatement or governmental
loans were used to finance the alteration.
6. Rent roll for the building indicating the names
of each tenant, apartment number date of first
occupancy, amount of rent being paid, number of
rooms and status of each apartment.
7. Any other pertinent information regarding the
status of the subject premises."
On January 10, 1991 the owner filed a response to the objections of one of
the tenants and to the Administrator's request for addition information.
The owner noted that the tenant had "admit(ted)" that the building was
"completely renovated in 1983." The owner argued that the tenant's
objection that the renovation had been performed by the prior owner was
irrelevant. However, the owner failed to dispute that after the renovation
the prior owner had charged market rents based thereon.
In response to the Administrator's request for additional information the
owner submitted floor plans of typical floors of the building before and
after the alteration. The owner alleged the building had had 17 apartments
and two stores (all vacant) prior to the alteration. The owner further
DOCKET NO.: FE 430242-RO
alleged that no prior Certificate of Occupancy was on file at the Department
of Buildings of New York City. However, the owner did submit a copy of an
Altered Building Application dated November 2, 1983 which describes the
proposed alteration as the "complete rehabilitation of existing building
including structural repairs and revised plumbing and heating, reducing the
number of apartments from 4 apartments per floor to 2 apartments per floor."
Also submitted to the Administrator was a copy of the Contractor's Cost
Affidavit which had been part of the 1983 application stating the proposed
work would cost $150,000.00. No other evidence of the cost of the
alteration, such as invoices, contracts, and/or cancelled checks, was
submitted to the Administrator.
On April 29, 1991 the Administrator issued order number ZEF 410003-UC,
denying the owner's application for exemption, finding the "extent of the
work completed does not constitute a substantial rehabilitation in
accordance with Section 2520.11(e) of the Rent Stabilization Code."
In its appeal the owner contends that the Administrator's order is incorrect
and should be modified because the subject building was "completely
renovated" in 1983, the work being a "gut renovation" including the
construction and installation of new heating and hot water systems
throughout the building; construction of new bathrooms and new kitchens at
new locations in all apartments; the installation of new plumbing, new
wiring and new gas and electric meters. Attached to the owner's petition is
a copy of a letter from an appraiser to a bank stating the building was
"'gut' renovated in 1984." Also attached is a portion of DHCR Policy
Statement 89-7 stating that a "gut rehabilitation" on or after January 1,
1974 exempts a building from Stabilization.
In answer to this petition, several tenants contend that the order should be
upheld, in part because the underlying renovation of 1983 was done by the
prior owner and because the tenants' leases state that the apartments were
subject of Rent Stabilization.
The Commissioner is of the opinion that this petition should be denied.
Because the Commissioner finds that the alleged renovations which are the
subject of this proceeding do not constitute a substantial rehabilitation
within the meaning of Section 5(a)(5) of the Emergency Tenant Protection Act
("ETPA") or the corresponding Section 2520.11(e) of the Code, it is not
necessary to address the issues raised in the tenants' answers to this
petition. Nor is it necessary to determine whether the owner's submission
of an affidavit by the prior owner that it did not finance the renovation by
governmental loans or receive tax abatements constitutes sufficient proof of
that allegation. Similarly, the Commissioner makes no finding as the
adequacy of the proof that the alleged renovations were actually done, or
the cost thereof.
In general, for a renovation to be substantial rehabilitation within the
meaning of ETPA Section 5(a)(5) (or Policy Statement 89-7) the building must
have been vacant, such vacancy not being the result of harassment on the
part of the owner. Further, Section 5(a)(5) exempts buildings completed or
substantially rehabilitated on or after January 1, 1974. Thus, to be a
substantial rehabilitation the renovation must be akin to a new
construction, that is, there must have been a so-called "gut demolition" and
the replacement of all the major building-wide systems such as plumbing,
heating, roof, windows, stairs, fire escapes, electrical, etc. In
DOCKET NO.: FE 430242-RO
addition, the components within the individual apartments such as kitchens,
bathrooms, floors, ceilings, and non-loadbearing walls, etc., must be
replaced. The fact that then parties and/or the appraiser or the contractor
refer to the work done as a gut renovation, or complete renovation or a
substantial rehabilitation or any other term does not, and can not, alter
the requirements of Section 5(a)(5) for a building to be removed from Rent
In the present proceeding there has not even been an allegation that the
roof, windows, stairs, floors, ceilings, or non-loadbearing walls had all
been replaced in the 1983 renovation. Indeed, the plans for the renovation
explicitly state that the existing stairs, fire escapes and wood between the
left and right apartments on each floor were preserved. This alone
constitutes proof that the renovation did not constitute a substantial
rehabilitation within the meaning of ETPA or the Code. Therefore, the
Commissioner finds it is unnecessary to resolve whether the other building-
wide systems were replaced or not. For example, the owner's allegations
that new plumbing, wiring, gas and electric meters were installed are
compatible with the installation of less than the entire building-wide
plumbing, heating and electric systems. Indeed, the Altered Building
Application merely referred to "structural repairs and revised plumbing and
heating" (emphasis added).
According to the plans submitted by the owner, a typical floor before the
alteration had four apartments, say left front and rear and right front and
rear. After the alteration there were left and right apartments running
from front to rear, i.e., the left front and rear apartments were combined
into one apartment, as were the right front and rear apartments. It is
undisputed that the prior owner then charged market rents for these
apartments. The record shows that the prior owner registered the apartments
in the subject building as stabilized. This is alleged to have been an
"error" on the part of the prior owner. The Commissioner notes with
interest that this "error" of the former owner was first alleged in a
letter to the DHCR dated May 28, 1990 (the day before the closing on the
building) and submitted by the purchaser with its application.
Based on the record as a whole, the Commissioner finds that the alleged
renovations amounted to the combining of the former four apartments on each
floor into two new apartments, for which it is undisputed that the former
owner charged market rents under the so-called "first rent" concept. This
allows an owner who has so altered an apartment, including its outer
dimensions, that it can be said the apartment did not exist on the base
date, to charge a market rent. See Administrative Review Docket Number ARL
01231 (sic). However, even such an alteration of every apartment does not,
in general, add up to a substantial rehabilitation within the meaning of
ETPA Section 5(a)(5), the essence of which is building-wide, as stated
above; and the Commissioner finds that it did not in this case.
THEREFORE, in accordance with the Emergency Tenant Protection Act and
Regulations, it is
ORDERED, that this petition be, and the same hereby is, denied and the Rent
Administrator's order be, and the same hereby is, affirmed.
DOCKET NO.: FE 430242-RO
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner