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 ADMINISTRATIVE REVIEW
IN THE MATTER OF THE ADMINISTRATIVE DOCKET NO.: FK230074RO
APPEAL OF
LEMUEL STEWART
RENT ADMINISTRATOR'S
PETITIONER DOCKET NO.: DI230156OM
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On November 20, 1991, the above-named petitioner-owner timely filed
a Petition for Administrative Review (PAR) against an order issued
on November 1, 1991 by the Rent Administrator, Gertz Plaza, 92-31
Union Hall Street, Jamaica, New York, concerning the four-unit
housing accommodations known as 159 Washington Park, Brooklyn, New
York, various apartments. One of the four units in the buildingis
subject to rent control.
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 this administrative appeal.
This proceeding was commenced by the landlord's filing of an
application for a major capital improvement rent increase
predicated on the waterproofing of the subject building. In
support of his application, the landlord submitted documentary
evidence showing that he made expenditures in the amount of
$19,500.00 for said work.
One tenant answered opposing the landlord's application. She cited
several service complaints within her unregulated apartment but
failed to identify any pertinent reason why the request for a rent
increase, based on the work performed, should not be granted.
The documentation submitted by the landlord included a copy of the
contract which indicated that the following work was performed:
- stripping the paint from the front facade
- washing front facade
- cutting away all deteriorated brownstone from the front
facade
- scraping, caulking and painting the wood and windows
ADMIN. REVIEW DOCKET NO.: FK230074RO
- stripping and painting the door
- scraping the loose cement and waterproofing the entire back
wall with Thoroseal
- scraping the loose mortar and chipping off the loose cement
from the side wall of the building wherever needed
- pointing the brick joints and patching the cement as needed
on the side wall
- waterproofing the complete side wall with Thoroseal
The landlord also submitted copies of the cancelled checks and a
Contractor / Vendor Information form (RA-79 Supplement 1) to
support his application. In addition, the landlord also submitted
a diagram of the work performed which contained an outline of the
subject building and a statement stating "square feet area pointed,
waterproofed, front facade restored, including decorative details-
rear 800 sq. ft., side 1800 sq. ft., and front 1125 sq. ft."
In the herein appealed order, the Rent Administrator determined
that the waterproofing work, done by the landlord, did not
constitute a major capital improvement under the provisions of the
code and regulations and denied the landlord's application.
In his petition for administrative review, the landlord contends,
in substance, that the order of the Rent Administrator is
arbitrary, capricious, unreasonable and illegal; that he had
applied for a rent increase for the one rent controlled apartment
in the building; that the sum of $19,500.00 was spent in
brownstoning and cementing the front and pointing and waterproofing
the rear and one side of the building; that the order issued by the
Rent Administrator stating that waterproofing does not constitute
a major capital improvement is in error; and that he is submitting
a copy of a rent increase order from a two-family home where the
apartments are rent controlled, proving that rent increases are
granted for waterproofing. Said order actually indicates that the
increase was granted for pointing and waterproofing.
After a careful consideration of the entire evidence of record, the
Commissioner is of the opinion that this petition should be denied.
Rent increases for major capital improvements are authorized by
Section 2202.4 of the Rent and Eviction Regulations for rent
controlled apartments. Under rent control, an increase is
warranted where there has been since July 1, 1970 a major capital
improvement required for the operation, preservation, or
maintenance of the structure.
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ADMIN. REVIEW DOCKET NO.: FK230074RO
It is the established position of the Division that comprehensive
pointing and waterproofing as necessary on the exposed sides of the
building constitute a major capital improvement for which a rent
increase may be warranted, providing the landlord otherwise so
qualifies.
As interpreted by the Internal Revenue Service, the relevant
sections of the Internal Revenue Code and accompanying regulations,
as applied to the matter at issue, provide as follows:
Payments for the purpose of keeping the property in ordinary
efficient operating condition, such as replacement of short
lived parts, and that do not add to its value or appreciably
prolong its life are in the nature of incidental repairs.
Subject to specific facts and circumstances, examples of such
repairs and maintenance could include repainting, mending
leaks, patching a roof, replastering etc. Tuck pointing of
limited, specific areas of a brick wall showing weathering
damage would generally not prolong the life of the property,
nor materially add to its value, and would be currently
deductible.
However, if replacement, repair or renovation acts to retard
deterioration and prolong the life of a property, then such
expense should be capitalized and depreciated. This is
because there is a resulting increase in value, extension of
useful life or improvement in useability of the property,
factors that tend to indicate a capital expenditure.
Examples of such expenditures would include a new or
resurfaced roof, complete waterproofing of brick walls or
roof (rather than repair of specific leaks), added structural
support, etc.
The complete pointing and waterproofing of a multiple unit
dwelling is in the nature of a permanent improvement or
betterment, and thus would appear to be capital in nature and
depreciable subject to specific facts and circumstances.
Repair of specific leaks and limited tuck pointing of
specific trouble spots, if not part of some larger, overall
plan of renovation, rehabilitation or improvement of the
property, would likely constitute incidental repairs and be
a currently deductible expense.
The above-stated interpretation by the Internal Revenue Service
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ADMIN. REVIEW DOCKET NO.: FK230074RO
fully supports the Division's policy to consider comprehensive
pointing and waterproofing as necessary on exposed sides of a
building as qualifying for treatment as a major capital
improvement. The work performed, for example, must be greater than
mere spot patching to repair current leaks or trouble spots so as
to be in the nature of an improvement or betterment that prolongs
or extends the useful life of the structure.
The Commissioner notes that waterproofing cannot be substituted for
pointing for the purpose of determining whether comprehensive
pointing and waterproofing as necessary were performed because
pointing involves the physical examination of the mortar between
all of the exposed brick and includes a testing of the mortar by
scraping out same and replacing removed, missing and/or eroded
mortar while waterproofing, as distinguished from pointing for DHCR
purposes, is merely the application of a sealing or covering
material (such as silicone or, waterproof cement) by brush or spray
and is, therefore, less extensive and of a less structural nature
than pointing. Also, waterproofing is more likely to chip and may
only last a few years before weathering requires reapplication,
whereas pointing lasts a substantially longer period of time.
Therefore, the use of waterproof cement and Thoroseal as
waterproofing materials on the front and rear walls do not
substitute for the absence of brick pointing on the front and rear
walls before the waterproof cement was applied.
The evidence of record in this proceeding does not establish that
comprehensive pointing and waterproofing as necessary were
performed at the subject premises.
On appeal, the landlord's statement that pointing and waterproofing
of the front and rear walls were performed was not entirely
supported by the statement from the contractor. The contractor's
statement did not support the landlord's claim that the front and
rear walls ofthe building was pointed. Additionally, the
application submitted by the owner did not contain a statement from
the contractor to the effect that prior to the commencement of the
work, he had examined all the exposed sides of the building and
determined the sections that needed pointing and waterproofing.
Based on the foregoing, the Commissioner finds that the work herein
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ADMIN. REVIEW DOCKET NO.: FK230074RO
did not constitute comprehensive pointing and waterproofing as
necessary and does not qualify for a major capital improvement rent
increase.
THEREFORE, in accordance with the Rent and Eviction Regulations of
New York City, it is
ORDERED, that this petition be, and the same hereby is, denied and
that the Rent Administrator's order be, and the same hereby is,
affirmed.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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