ADM. REVIEW DOCKET NOS. GA430265RO and GB430247RO

                                  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
          APPEALS OF                              DOCKET NOS. GA430265RO and
                                                              GB430247RO
                                                  DISTRICT RENT
            SIXTY-EIGHTH STREET CO.,              ADMINISTRATOR'S DOCKET
                                                  NOS. DL420014AC and
                                                       EL420054AC
                                   PETITIONER
          ------------------------------------X

            ORDER AND OPINION DENYING PETITIONS FOR ADMINISTRATIVE REVIEW

               On January 31, 1992, the above-named landlord filed a petition 
          for administrative review, under Docket No. GA430265RO, of an 
          Administrator's order issued on December 27, 1991, under Docket No. 
          DL420014AC, concerning various housing accommodations known as 315 
          East 68th Street, New York, New York.  On February 14, 1992, the 
          above-named landlord filed a petition for administrative review, 
          under Docket No. GB430247RO, of an Administrator's order issued on 
          January 15, 1992, under Docket No. EL420054AC, concerning the 
          above-mentioned premises.

               The Commissioner notes that the above-mentioned petitions for 
          administrative review involve common issues of law and fact.  The 
          Commissioner is, accordingly, of the opinion that they should be 
          consolidated for disposition.

               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 petitions for administrative 
          review.

               On December 29, 1989, the subject landlord filed an 
          application for a Labor Cost Adjustment (L.C.A.) to the maximum 
          rents of the subject apartments for the 1988-1989 period.

               In its application, the subject landlord alleged that it is 
          employing several building employees, including security guards who 
          are provided by an outside service.

















          ADM. REVIEW DOCKET NOS. GA430265RO and GB430247RO

               On July 9, 1991, the Administrator mailed to the subject 
          landlord a revised copy of its L.C.A. which subtracted the cost of 
          the security guards from the labor costs, and the Administrator 
          mailed a notice to the landlord which pointed out that the expenses 
          for security guards are not included in calculating the labor cost 
          adjustment.

               The subject landlord submitted to the rent agency, among other 
          things, copies of several invoices mailed to it by the Servicelink, 
          Inc.  The invoices listed the amount, including sales tax, that the 
          subject landlord owed the Servicelink, Inc., for providing it with 
          security guards.

               In the Administrator's order under review herein, issued under 
          Docket No. DL420014AC, the Administrator increased the maximum 
          rents of the subject apartments to reflect uncompensated labor 
          costs incurred by the subject landlord, pursuant to Section 2202.11 
          of the City Rent and Eviction Regulations.  (The Commissioner notes 
          that the cost of the security guards was disallowed in calculating 
          the labor cost adjustment.)

               On December 26, 1990, the subject landlord filed an 
          application for a Labor Cost Adjustment (L.C.A.) to the maximum 
          rents of the subject apartments for the 1990-1991 period.

               In its application, the subject landlord reiterated its 
          allegation that it is employing several building employees, 
          including security guards who are provided by an outside service.

               In the Administrator's order under review herein, issued under 
          Docket No. EL420054AC, the Administrator increased the maximum 
          rents of the subject apartments to reflect uncompensated labor 
          costs incurred by the subject landlord, pursuant to Section 2202.11 
          of the City Rent and Eviction Regulations.  (The Commissioner 
          further notes that the cost of the security guards was disallowed 
          in calculating the labor cost adjustment.)   

               In both of its petitions, the subject landlord asserts, among 
          other things, that the labor cost adjustment should include the 
          expenses for the security guards.

               After careful consideration, the Commissioner finds that the 
          landlord's petitions should be denied.







               The Rent and Eviction Regulations were amended in 1970 to 
          provide for the establishment of the Maximum Base Rent system.  






          ADM. REVIEW DOCKET NOS. GA430265RO and GB430247RO

          Included in the formula for establishing Maximum Base Rents is an 
          allowance for payroll expenses.  Section 2202.11 of the City Rent 
          and Eviction Regulations provides that maximum rents may be 
          increased where an owner incurs, or is obligated to incur, payroll 
          expenses for building service employees which exceed the formula 
          provision for labor costs recognized in establishing the maximum 
          gross building rental under Section 2201.4 of the City Rent and 
          Eviction Regulations.

               The Commissioner notes that in the instruction sheets to the 
          L.C.A. applications, promulgated by the rent agency, building 
          service employees are classified as those whose duties are that of 
          superintendent, janitor, handyman, elevator operator, doorman and 
          porter regularly employed throughout the year.

               The Commissioner finds that security guards are not building 
          service employees for purposes of calculating labor cost 
          adjustments.  The Commissioner further finds that the 
          Administrator, in the orders under review herein, properly 
          disallowed the expenses for the security guards from the labor 
          costs.

               Even if security guards were classified as building service 
          employees, the Commissioner is of the opinion that the 
          Administrator's orders under review herein should still be 
          affirmed.

               Based upon the record in these proceedings, the Commissioner 
          finds that the security guards were provided to the subject 
          landlord by an independent company; that the subject landlord paid 
          the expenses for the security guards directly to the independent 
          company; that the subject landlord did not pay the security guards' 
          wages, and that in paying for the cost of the security guards the 
          subject landlord was charged sales tax.

               The Commissioner further finds that the landlord's expenses 
          for the security guards were not a payroll expense, pursuant to 
          Section 2202.11 of the City Rent and Eviction Regulations, as 
          evidenced by the fact that the expenses for security guards were 
          subject to sales tax.

               Accordingly, as the expenses for security guards were not for 
          building service employees, and were not for payroll expenses, the 
          Commissioner finds that the landlord's petitions should be denied.




               THEREFORE, in accordance with the City Rent and Rehabilitation 
          Law and the Rent and Eviction Regulations, it is 

               ORDERED, that these petitions be, and the same hereby are, 












          ADM. REVIEW DOCKET NOS. GA430265RO and GB430247RO

          denied, and that the Administrator's orders be, and the same hereby 
          are, affirmed.

          ISSUED:





                                                                             
                                             JOSEPH A. D'AGOSTA
                                             Deputy Commissioner   
    

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