OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          -------------------------------------X   SJR NO. 7178
          APPEALS OF                               DOCKET Nos.:  GD430101RO,
                                                   GD410172RT,   GD410173RT,
               DAVID FRANKEL REALTY INC (OWNER)    GD410178RT,   GD410212RT,
               AND VARIOUS TENANTS OF              GD410274RT,   GD410299RT,
               230 EAST 48TH STREET, NY, NY        GD410300RT,   GE410189RT 

                                                   RENT ADMINISTRATOR'S
                                                   DOCKET NO.:  EK430062OM



          On various dates the above named petitioners timely filed petitions 
          for administrative review (PAR) against an order issued on March 
          12, 1992 by a Rent Administrator (Gertz Plaza) concerning the 
          housing accommodations known as 230 East 48th Street, New York, New 
          York, various apartments, wherein the Rent Administrator granted in 
          part the owner's application for a rent increase based on the 
          installation of Major Capital Improvements (MCIs).

          Subsequent thereto the owner filed a petition in the Supreme Court 
          pursuant to Article 78 of the Civil Practice Law and Rules seeking 
          an order of mandamus.  This resulted in a court ordered stipulation 
          remitting the proceeding for a determination of the owner's 
          administrative appeal herein.

          The Commissioner deems it appropriate to consolidate these 
          petitions for disposition since they pertain to the same order and 
          involve common issues of law and fact.

          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 these administrative appeals.

          The owner commenced this proceeding on November 13, 1990 by 
          initially filing an application for a rent increase based on the 
          installation of the following items at a total cost of $519,971.00: 
          apartment windows building-wide, steel roof door, exterior 
          rehabilitation, and engineering/consultation fees. 

          On January 9, 1992 the Rent Administrator sent a Request for 
          Additional Information to the owner requesting, among other 
          matters, a breakdown of claimed costs for the exterior 


          The owner submitted an affidavit from the president of the 
          contracting company (Cole Restoration) that included a list of 
          items, and the quantity and costs of the work that comprised the 
          exterior work. In pertinent part, the list included 14 items among 
          which were roof replacement, 2,530 square feet at a claimed cost of 
          $15,180.00 and replacement of the terrace deck, 3,000 square feet, 
          at a claimed cost $114,000.00. 

          Various tenants objected to the application stating, in substance, 
          that the claimed costs for he exterior work was questionable; that 
          windows had drafts and that the full application was not available 
          on the premises to review. Several tenants had complaints regarding 
          services in their individual apartments.

          The owner responded to the tenants' objections by submitting work 
          orders showing that the windows and individual service complaints 
          were taken care of and stated that the full application was 
          available in the superintendent's apartment. 

          The 230 East 48th Street Tenants Group (Tenants' Group) objected to 
          the owner's MCI application alleging, in substance, that the roof 
          and terrace work are separate items; that  the  5,530 square 
          footage of roof replacement cited in the owner's application 
          includes the terrace deck; that the terrace deck is not a MCI 
          eligible cost as it benefits only two apartments (penthouses) and 
          not all 62 apartments; that the cost of the terrace deck is much 
          higher than the cost of the roof ($38.00 per square foot for the 
          terrace deck compared to $6.00 per square foot for the roof); that 
          tenants should not pay for repairs; that the professional tenants' 
          share of the MCI costs is 12 percent to 15 percent; and that the 
          work did not undergo competitive bidding.

          The owner responds to the Tenants' Group's contentions, stating in 
          substance, that the terrace decks and roof are one and the same; 
          that the terrace deck is an integral part of the building's roof 
          system and that it was absolutely  necessary to replace the terrace 
          deck for the operation, maintenance and preservation of the 

          On March 12, 1992 the Rent Administrator issued the order here 
          under review finding that the exterior rehabilitation (less 
          $4,244.31 for repairs), apartment windows, and the steel roof door  
          qualified as MCIs, finding that the application compiled with the 
          relevant laws and regulations based upon the supporting 
          documentation submitted by  the owner, and allowing appropriate 
          rent increases for rent controlled and rent stabilized tenants. 
          Disallowed by the Rent Administrator was $2,545.00 and $12,850.00 
          for the engineering consultation fees, for the windows and exterior 
          work, respectively, finding that the consultant fees did not 
          qualify as MCIs.



          In its petition, the owner contends in substance that, that Rent 
          Administrator erred in disallowing the engineering consultant fees; 
          that the engineering reports were necessary; that the DHCR  policy 
          of determining commercial tenants' share of the MCI costs is 
          inaccurate; that the DHCR should allocate the rent increase to 
          commercial tenants by adding the number of rooms used by commercial 
          tenants to the room count pursuant to Section 2522.4 (a) (12) of 
          the Rent Stabilization Code and Administrator's Interpretation No.8 
          (rev.) effective January 16, 1972.

          In response to the owner's petition, various tenants stated that 
          the new windows are unsatisfactory; that the hot water is 
          inadequate; that ceilings leak; that the increase is a financial 
          hardship on seniors; and that the room count is incorrect.

          In response to the owner's petition, the Tenants' Group states that 
          the claimed room count in the owner's application, 213, is 
          different than that claimed in the owner's petition, 226; that the 
          owner's contention to calculate the commercial tenants' share of 
          MCI costs by adding commercial tenants' rooms to the total room 
          count is in contravention of DHCR guidelines; and if DHCR  accepts 
          the owner's contention, then commercial tenants should be charged 
          the MCI increase per room.   

          Various tenants filed petitions alleging, in substance,  that the 
          room count for their apartment is incorrect in that their kitchens 
          should not be included in the room count; that their kitchens do 
          not meet any of the definitions set forth in DHCR Policy Statement 
          90-3 which is used for the purposes of calculating MCI rent 
          increases, in particular, paragraph (b) which states, a room is an 
          enclosed area with a window containing at least 60 square feet; 
          that their windowed kitchens are less than 60 square feet; and that 
          expenses incurred by the owner for the exterior work were not 

          In response to the tenants' petitions, the owner states that the 
          room counts are correct; that the room counts were taken from the 
          rent roll; and that the tenants did not raise this issue below. 

          Various tenants responded to the owner's answer re-asserting their 
          claim that their kitchen is not a room.



          The Tenants' Group filed a petition, alleging in substance that the 
          penthouse terrace deck is not part of the roof system; that the 
          owner's MCI application incorrectly combined the terrace deck and 
          roof work as the replacement of 5,530 square feet of roof while in 
          fact 3000 square feet of the terrace deck  and 2530 square feet of 
          roof were replaced; that the Engineer's Report, Progress Reports, 
          and Payment Requisition Forms consider the terrace deck and roof 
          two separate items; that the terrace decks and roof are at two 
          separate levels physically; that replacement of the terrace deck is 
          not a MCI; that only two apartments (penthouses) benefit from the 
          replacement of the terrace deck instead of the total 62 apartments;  
          that the costs of the terrace deck and roof replacement are 
          dramatically different, $114,000 and $15,180.00, respectively; at 
          the very least the tenants should not pay the differential expense 
          of the terrace deck over the cost of the roof; that the DHCR failed 
          to show how the professional tenants' rents were determined; and 
          that the professional tenants' share of the MCI cost should be 12 
          percent to 15 percent.

          In response to the Tenants' Group's petition, the owner states, in 
          substance, that the terrace decks are eligible MCI costs; that 
          replacement of the terrace decks was an integral part of the 
          exterior rehabilitation work; that such work was necessary for the 
          operation, maintenance and preservation of the structure; that the 
          Engineer's Report recommended the replacement of 100%  of the 
          terrace decks; that the replacement of the terrace decks benefits 
          all tenants in that it was part of the work that prevented water 
          intrusion and helped protect the structural integrity of the 
          building; that the owner presented documentation to the Rent 
          Administrator substantiating the cost of the exterior 
          rehabilitation work; that commercial/professional tenants' rents 
          are correct; and that the Tenants' Group does not present a basis 
          for its claim that the commercial/professional tenants' share of 
          the MCI is 12 percent to 15 percent.       

          After a careful consideration of the entire evidence of record, the 
          Commissioner is of the opinion that the owner's petition should be 
          granted in part, and that the tenants' petitions 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 and Section 2522.4 of the Rent Stabilization 
          Code for rent stabilized 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.  Under rent stabilization, the 
          improvement must generally be building-wide; depreciable under the 
          Internal Revenue Code, other than for ordinary repairs; required 
          for the operation, preservation, and maintenance of the structure; 
          and replace an item whose useful life has expired.


          As for the owner-petitioner's contention that the Rent 
          Administrator erred in disallowing the engineering consultant fees, 
          it is the DHCR position that certain engineering or architectural 
          expenses which are directly related to the MCI installation cost 

          and which are not otherwise duplicated, qualify for a rent 
          increase. Thus, preparatory inspections needed for as well as the 
          cost of drawing plans and  specifications for the particular 
          installation or expenses for any other professional services which 
          are established as being both necessary and customary to the 
          accomplishment of the improvement qualify for an MCI rent increase. 
          Applying this principal to the case at hand,  the record discloses 
          that as for the exterior rehabilitation work, of the $12,850.00 
          claimed for engineering specifications and supervision, only  the 
          engineering specifications work is eligible.  The record indicates 
          through invoices and cancelled checks that the costs for the 
          preparation of the specifications is $2,175.00, therefore, the 
          remaining $10,305.00 of the claimed costs comprising construction 
          and window inspections are disallowed.  With regard to the 
          supervision work, the Commissioner is of the opinion that the 
          tenants should not be required to bear supervisory and 
          administrative expenses where, as in the case herein, the owner has 
          employed licensed professional contracting companies which warrants 
          or guarantees all work and materials to be free from any and all 
          defects under the terms of the contracts.

          As for the $2,545.00 claimed for bid specifications for the 
          windows, the Commissioner finds that the work does not qualify as 
          an MCI, because window specifications are not customary 
          professional services in what otherwise appears to be an ordinary 

          As for the owner's claim that the Rent Administrator incorrectly 
          calculated the commercial tenants' share of the MCI costs by not 
          allocating a portion of the cost of the improvements to the 
          commercial space based upon the number of rooms contained in the 
          commercial space, the Commissioner finds that this contention is 
          without merit.  The pertinent section of the Rent Stabilization 
          Code, Section 2522.4(a)(12) (May 1, 1987), leaves to the Division 
          the method of computing an allowable MCI rent increase and provides 
          that the total increase is to be allocated to the "residential" 
          units on a per room basis, rather than as a percentage of the 
          stabilized income as had been the prior method under the old Code.  
          The Division has devised a uniform MCI increase application, 
          utilized by the owner herein, and has established a uniform and 
          judicially recognized procedure for the computation of the 
          allowable rent increase adjustments for both rent stabilized and 
          rent controlled tenants.  (Accord:  CB430083RO; CE430107RO).

          As for the petitioners-tenants' claim that their apartments contain 
          fewer rooms than stated by the owner by virtue of their kitchens 
          disqualifying as a room for MCI purposes, the Commissioner notes 
          that the Division has ruled and Policy Statement 93-2 provides that 
          a kitchen of any size with a window, enclosed on three sides, 
          constitutes a room for MCI purposes.


          However, the Commissioner notes that the owner may not charge the 
          tenants based on a greater number of legal rooms for MCI purposes. 
          This order is issued without prejudice to the tenants filing a 
          complaint with this Division based on a rent overcharge, if the 
          facts so warrant. 

          The tenants have not established the costs of the exterior work was 
          not competitive.  The record discloses that the owner substantiated 
          its application in the proceeding below by submitting to the 
          Administrator documentation in support of the application, 
          including the contractor's certifications, copies of contracts, 
          invoices, estimates, and cancelled checks.

          As for the Tenants' Group's claims that the penthouses' terrace 
          deck replacement is not part of the roof system, only benefits the 
          penthouse tenants, and does not qualify as an MCI, the Commissioner 
          notes that for an installation to qualify for an MCI rent increase, 
          it must be "an improvement to the building ...  which inures 
          directly or indirectly to the benefit of all tenants, and which 
          includes the same work performed in all similar components  of the 
          building ..." , Section 2522.4 (a) (2) (i) (c).  The Commissioner 
          is of the opinion that the penthouse terrace decks are part of the 
          roof system in that they comprise part of the roof surfaces for the 
          accommodations below.  The Commissioner finds that the replacement 
          of the terrace decks, although of significant cost, was an integral 
          component of the roof system and necessary to prevent water 
          intrusion to protect and preserve the building structure and is 
          therefore a benefit to all tenants.  (Accord:  GC430317RO).

          As for the Tenants' Group's claim that the professional/commercial 
          rent is 12 percent to 15 percent of the building's rental income, 
          instead of approximately 9 percent, the Commissioner finds that the 
          tenants' unsupported contention is insufficient to refute the 
          documentation (rent roll) submitted by the owner and available for 
          tenant review in the proceeding before the Administrator.

          Therefore, the Commissioner is of the opinion and finds that the 
          owner is entitled to a rent increase of $35.42 (rather than $35.27) 
          per room, per month calculated as per the following:

          1.   Total approved MCI cost                 $504,506.69
               (windows, roof door, exterior work, 
               consultant fees)

          2.   Commercial/Professional tenants share   $ 49,643.46

          3.   Net approved MCI cost                   $454,863.23

          4.   Amortization by 60 months               $  7,581.05
               (Line 3  60)

          5.   Total number of rooms                        214

          6.   Rent increase per room per month        $     35.42



          Furthermore, the rent increase is subject to a J-51 tax abatement, 
          which adjusts the increase to $32.85 with respect to rent 
          stabilized apartments ($35.42 - $2.57 offset) and $31.99 with 
          respect to rent controlled tenants ($35.42 - $3.43 offset).

          THEREFORE, in accordance with the Rent Stabilization Law and Code, 
          and the New York City Rent and Eviction Regulations, it is

          ORDERED, that the owner's petition be and the same hereby is, 
          granted in part; that the tenants' petitions be, and the same 
          hereby are, denied; and that the Administrator's order be, and the 
          same hereby is, modified to grant a rent increase of $32.85 per 
          room, per month with respect to stabilized apartments and $31.99 
          per room, per month with respect to rent controlled apartments for 
          the reasons hereinabove provided.  The order and determination of 
          the Rent Administrator is hereby affirmed in all other respects.


                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner



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