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  SJR No. 6976
          IN THE MATTER OF THE ADMINISTRATIVE     ADMINISTRATIVE REVIEW
          APPEALS OF                              DOCKET Nos.:   GF430083RO,
                    METROPOLITAN                  GE410278RT,    GE410338RT,
                    LIFE INSURANCE CO. (OWNER)    GE410350RT,    GF410197RT,
                                                  GF410286RT,    GF410562RT,
                    AND VARIOUS TENANTS OF        GF430229RT,    
                    390 FIRST AVENUE, 420, 440,   
                    510 AND 530 E. 23RD ST.,
                    New York, New York,
                                                   RENT ADMINISTRATOR'S
                                                   DOCKET NO.:    EC410240OM
                                   PETITIONERS   
          -------------------------------------X
                                                
          ORDER AND OPINION GRANTING IN PART OWNER'S PETITION (DOCKET NO. 
          GF430083RO), AND THE TENANT ASSOCIATION'S PETITION (DOCKET NO. 
          GF430229RT) AND DENYING TENANTS' PETITIONS (DOCKET NOS. GE410278RT, 
          GE410338RT, GE410350RT, GF410197RT, GF410286RT, AND GF410562RT) FOR 
          ADMINISTRATIVE REVIEW

          On various dates, the above-named petitioners timely filed or 
          refiled petitions for administrative review (PARs) against an order 
          issued on May 12, 1992 by a Rent Administrator (Gertz Plaza) 
          concerning the housing accommodations known as 420, 440, 510 and 
          530 East 23rd Street and 390 First Avenue, New York, New York, 
          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 petitioner-owner commenced a proceeding in 
          the Supreme Court pursuant to Article 78 of the Civil Practice Law 
          and Rules, having deemed its petition denied by operation of law.  
          This resulted in a decision of the court remanding this proceeding 
          to the Division for further consideration.

          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 March 28, 1990 by initially 
          filing an application for a rent increase based on the installation 
          of the following items at a total claimed cost of $190,880.00: two 
          instantaneous steam heaters (A/K/A hot water heaters), and asbestos 
          removal (including the retro-fitting of an existing hot water tank, 
          asbestos consultation services) and the painting of the  floor of 
          Control Room # 17 and the color coding of conduit pipes and 
          electrical wiring.

ADMIN. REVIEW DOCKET NOS. GF430083RO










          Various tenants objected to the owner's application alleging, in 
          substance, that the installations are the responsibility of the 
          owner; that the provision of hot water should be part of the base 
          rent; that the asbestos removal, painting and the replacement  of 
          a 40 year old hot water heater is maintenance; that the owner 
          delayed filing the application; that the removal of asbestos is 
          required by law and the responsibility of the owner; that the rent 
          increase should not be permanent; and that the installation of the 
          hot water heater was not an improvement.

          On May 12, 1992, the Rent Administrator issued the order here under 
          review granting, in part, the owner's application and authorizing 
          an increase based upon total approved costs of $186,100.00 upon 
          finding that the two instantaneous steam heaters and the associated 
          asbestos removal work qualified as MCIs costs based upon the 
          supporting documentation submitted by the owner.  Disallowed by the 
          Administrator were the claimed costs of $4780.00 for asbestos 
          consultation services and $18,950.00 for painting of the floor of 
          Control Room # 17 floor and the color coding of conduit pipes and 
          electrical wiring.

          In its petition the owner contends, in substance, that the painting 
          is inextricably intertwined with the installation of the hot water 
          heaters; that Section 2522.4 (a) (2) (ii) of the Rent Stabilization 
          Code permits a rent increase for other necessary work performed 
          with and directly related to the MCI; that the painting pertains to 
          "requisite N.A.P.E. color coding" of the conduit pipes and 
          electrical lines that is required when steam service is provided; 
          that painting of the concrete control room floor with epoxy paint 
          is an additional security measure; that the painting was done 
          contemporaneously with the installation of the hot water heaters; 
          that the denial of the painting work by the Rent Administrator's 
          order was arbitrary and capricious; and that the instant order does 
          not make a finding in fact to reconcile the denial of the painting 
          work with approval of such work in similar applications (Docket 
          Nos. EC410218OM and EC410223OM). 

          The owner's petition further contends that asbestos consultant 
          services is an eligible MCI cost, in that consultant services were 
          necessary to meet the requirements of Section 27-198.1 of the 
          Administrative Code of the City of New York; and that the services 
          included the filing and certification of forms and an asbestos 
          abatement report by a licensed and certified asbestos investigator.

          In response to the owner's petition various tenants contend, in 
          substance, that painting is not a MCI: that painting does not 
          benefit the tenants; that asbestos removal is not depreciable under 
          tax laws; that painting is ordinary maintenance; that color coding 
          is a convenience not a necessity; that asbestos removal benefits 
          employees; that asbestos is the owner's liability; and that a 
          permanent rent increase is unfair.

          The owner responds to the tenants' answers, in substance, that 
          painting is not maintenance in this instance but rather is a  
          safety feature pertaining to the operation and servicing of the 
          control room; that a consultant was needed to prepare required 
          filings; and the fact that tenants do not have access to the 
          control room does not bar the owner from an MCI.
                                          2



          ADMIN. REVIEW DOCKET NOS. GF430083RO

          The Tenant Association answers the owner's petition by stating, in 
          substance, that the owner has not shown that the painting  was 
          connected to the replacement of hot water heaters; that Section 27- 
          198.1 (a) (c) of the Administrative Code of New York City does not 
          mandate the use of an asbestos consultant; and that the asbestos 
          report did not certify work. 

          The owner responds to the Tenant Association's comments by stating, 
          in substance, that the painting is performed contemporaneously with 
          an MCI and are safety features which are "inextricably intertwined" 
          with the MCI: that painting was approved in other MCI applications 
          filed by  the owner regarding similar work; and that Policy 
          Statement 89-9 permits costs associated with asbestos removal.

          In the petitions filed by various tenants, the tenants contend, in 
          substance, that the tenants did not have the opportunity to comment 
          before the work began; that the rent pays for repairs; that the hot 
          water heaters and asbestos removal are not MCIs; and that the rent 
          increase should not be permanent.

          Additionally, the tenant in 12B alleges that the steam pipe in his 
          apartment generates noise and vibrations and the tenant in 2G 
          alleges that the water has brown particles and that the noise from 
          the control room is disturbing. 

          The owner responds to the tenants' petitions by stating, in 
          substance, that the installation  of hot water heaters qualifies as 
          an MCI and that asbestos removal was necessary work performed in 
          conjunction with the installation of the hot water heaters.

          Additionally, the owner claims that the petition of the tenant in 
          apartment 2D is late. 

          The tenant of apartment 12B responds to the owner's answer by 
          stating, in substance, that the vibration and banging noises caused 
          by the hot water heaters is a reduction of services.

          The Stuyvesant Town Tenants Association (Tenant Association) 
          claims, in substance, that the DHCR failed to review both the 
          Tenant Association's comments on the application dated September 
          18, 1990 and the tenant survey outlining hot water complaints; that 
          the owner had notice of hot water complaints; that the brown hot 
          water comes  from the hot water heater; and that the installations 
          violate the Multiple Dwelling Law and Federal Clean Water 
          Standards.  The Tenant Association also submitted an Engineer 
          Report which addressed the brown hot water complaints at one of the 
          buildings in the Stuyvesant Town and Peter Cooper Complex.




                                          3
          ADMIN. REVIEW DOCKET NOS. GF430083RO

          In their comments on the owner's application, the Tenant 
          Association claimed, in substance, that asbestos removal is the 
          responsibility of the owner in as much as the owner is required by 
          the New York City Department of Environmental Protection (NYC DEP) 









          to remove asbestos; that it is alleged that tenants and workers 
          have been exposed to asbestos since 1971 and therefore it would 
          violate the MCI statutory scheme to allow the cost of removal under 
          the pretext of hot water heater installation; that the replacement 
          of the hot water heaters is deferred maintenance induced by past 
          tenant complaints; that many tenants complain that the new system's 
          water is unsuitable; that the lack of consistent hot water violates 
          New York State law; that painting of the control room is 
          maintenance; that the owner's application is defective in that 
          there is a discrepancy between the cost of the work on his MCI 
          application and on the Building Department application; that one 
          hot water heater was not replaced but was converted into a pre- 
          heater tank; and that there is a discrepancy in the time period the 
          asbestos consultant services were rendered in the application and 
          in the manager of operations' affidavit.  The Tenant Association 
          requested an inspection to determine whether the subject work 
          qualified as MCIs.

          The owner responds to the Tenant Association's petition by 
          contending, in substance, that the Tenant Association must 
          substantiate its scope of representation; that DHCR did consider 
          the Tenant Association's comments; that the tenant survey is not 
          relevant; that the source of the brown water is the New York City 
          water supply; and that an expert's report concludes that the water 
          is safe and potable. 

          After careful consideration of the entire record, the Commissioner 
          is of the opinion that the owner's petition (Docket No. GF430083RO) 
          and the Tenant Association's petition (Docket No. GF430229RT) 
          should be granted in part, and that the tenants' petitions (Docket 
          Nos. GE410278RT, GE410338RT, GE410350RT, GF410197RT, GF410286RT and 
          GF410562RT) should be denied.

          Rent increases for major capital improvements are authorized by 
          Section 2522.4 of the Rent Stabilization Code for rent stabilized 
          apartments.  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 contention raised in the owner's petition that painting 
          of the control room is extricably intertwined with the installation 
          of the hot water heaters, the Commissioner notes that painting may 
          be included in the computation of the MCI increase if it qualifies 
          under Section 2522.4 (a) (2) (ii) of the Rent Regulations.  It must 
          be necessary work performed in conjunction with and directly 
          related to a MCI and must be completed within a reasonable time 
          after completion of the MCI to which it relates. Such other 
          necessary work must improve, restore, or preserve the quality of 
          the structure and be completed subsequent to or contemporaneously 
          with  the completion of the MCI work.

                                          4



          ADMIN. REVIEW DOCKET NOS. GF430083RO

          In the instant case, the record indicates that the painting of the 
          control room floor with epoxy paint and the "color code" painting 
          of conduits and electric wiring meet the criteria of Section 2522.4 
          (a) (2) (ii).  The painting of Control Room 17 was directly related 
          to and performed contemporaneously with the installation of the 
          instantaneous steam heaters in Control Room 17.  The specialized 
          painting within the control room aids in the proper operation of 
          the installation and therefore, is of benefit to the tenants.

          However, the Commissioner notes that the record indicates that the 
          painting work in Control Room 17 includes work in addition to the 
          specialized painting described above and claimed by the owner in 
          his petition. The purchase order for the painting also describes 
          prime and paint for the entire Control Room including the ceiling 
          and walls. It is established DHCR policy that  painting is not 
          eligible MCI cost under Section 2522.4 (a) (2) (ii) of the Rent 
          Stabilization Code when it is not directly related to the MCI 
          installation. In the instant proceeding the painting of the control 
          room is not directly related to the installation of the 
          instantaneous steam heaters. Since the purchase order does not 
          break out the cost of the specialized painting from  the rest of 
          the painting  work the Commissioner finds it appropriate to 
          allocate fifty percent of the painting costs for the specialized 
          painting and to disallow the remaining fifty percent of the cost 
          for the painting of the Control Room.

          As for the consultant fee claimed by the owner for filings and 
          certifications of a licensed and certified asbestos investigator, 
          the Commissioner finds that the consultant fees incurred by the 
          owner in this instant proceeding are substantiated eligible costs 
          related to the asbestos removal.

          As for the tenants' petitions, the tenants contend that the 
          installation of hot water heaters is repair and maintenance, not an 
          MCI.  The Commissioner notes that the installation of the 
          instantaneous steam heaters meets the criteria of a major capital 
          improvement as set forth in Section 2522.4 of the Rent 
          Stabilization Code.  Furthermore, there is no requirement that the 
          improvements constitute new items or services not previously 
          present.  











                                          5
          ADMIN. REVIEW DOCKET NOS. GF430083RO

          As for the tenants' and the Tenant Association's complaints 
          regarding brown water emanating from the instantaneous steam 
          heaters, the Commissioner upon review of the expert's engineering 
          report submitted with the Tenant Association's petition, finds that 









          the brown water and particles is not related to the workmanship of 
          the installation.  The expert's report states, in substance, that 
          the brown water and particles are due to the presence of manganese, 
          iron, copper and zinc; that oxidized iron and manganese create 
          precipitates; that the presence of copper and zinc may be 
          attributed to the corrosion of the plumbing system; that the 
          precipitates accumulate in mains, pipes and the heat exchanger and 
          slough off into the water periodically; that the brown water and 
          particles can be minimized by periodic flushing of the pipes, 
          scouring of the heat exchanger and coils and checking for cracks in 
          the heat exchanger; and that copper and zinc can be controlled by 
          adding chemicals to reduce the corrosive nature of the water.  The 
          expert further states that in the long term New York City should 
          consider chemical addition to the water supply to reduce the 
          corrosivity of the soft water.

          The Commissioner is of the opinion that the record does not support 
          the finding that the installation in question was performed in an 
          unworkmanlike manner and therefore is not a basis to revoke the MCI 
          increase.  The expert's report indicates that proper maintenance of 
          the system should minimize the water discoloration and this order 
          and opinion is issued without prejudice to the tenants' right to 
          file service complaints, if the facts so warrant.

          As for the Tenant Association's claim that it was inappropriate to 
          allow the cost for the conversion of an existing hot water heater 
          into a pre-heater tank at a cost of $2,500.00 by the addition of a 
          collar and flange, the Commissioner finds that the work constitutes 
          a repair for which a rent increase is not warranted. 

          The tenant petitioners and the Tenant Association further claim 
          that asbestos removal is not an MCI and the Tenant Association 
          questions the validity of the asbestos consultant services. 

          DHCR Policy Statement 89-8 states that asbestos removal is only 
          allowed when performed in connection with,  and directly related 
          to, other improvements or replacements which are MCI eligible.  
          Asbestos removal does not qualify as an MCI by itself. In the 
          instant case the asbestos removal was performed in connection with 
          the installation of instantaneous steam heaters,  and is therefore 
          an includable MCI cost.  As for the validity of the asbestos 
          consultant services the Commissioner finds that asbestos consultant 
          costs should be allowed, as noted hereinabove.

          As for the Tenant Association's request that the DHCR conduct an 
          inspection of the hot water heaters to determine whether the work 
          was repairs or a new installation, the record confirms that two new 
          instantaneous steam heaters were installed in Control Room 17 in 
          addition to the repair of an existing hot water heater (supra) and 
          therefore an inspection is not necessary.



                                          6






          ADMIN. REVIEW DOCKET NOS. GF430083RO

          As for the Tenant Association's and the tenants' questions 
          regarding the cost of the instantaneous steam heaters, the record 
          discloses that the owner submitted cancelled checks to substantiate 
          the entire cost of the installation.

          Regarding the contention that the MCI rent increase should not form 
          a permanent part of the rent structure, the Commissioner notes that 
          the permanent nature of the increase has been upheld by the Court 
          of Appeals of the State of New York in the Matter of Ansonia 
          Residents Association v. DHCR.

          As for the tenant-petitioners' in apartment 2D and 12B (Docket Nos. 
          GF410562RT and GF410286RT) complaints regarding vibrations in their 
          apartments from the steam pipes, the Commissioner notes that said 
          complaints do not pertain to the installation of the hot water 
          heater.  However, this order and opinion is issued without 
          prejudice to the tenants' right to file service complaints, if the 
          facts so warrant.

          The Commissioner finds, under the facts and circumstances of this 
          case, that the installation of the instantaneous steam heaters 
          qualifies as a major capital improvement; that asbestos removal, 
          asbestos consultant services and the specialized painting in the 
          control room qualifies as other necessary work connected to the 
          installation of a major capital improvement; and that the painting 
          of the ceiling and walls of Control Room 17 and the conversion of 
          a hot water heater to a pre-heater tank are disqualified as MCI 
          costs. Therefore, the owner is entitled to a rent increase of $1.58 
          (rather than $1.49) per room per month, effective as of September 
          1, 1990, calculated as per the following:

          1.   Total approved MCI cost                 $197,855.00
               (instantaneous steam heaters, 
               asbestos removal and 
               specialized painting)

          2.   Amortization by 60 months               $  3,297.58
               (Line 1  60)

          3.   Total number of Rent Stabilized rooms      2,086

          4.   Rent increase per room per month        $      1.58

          A tenant who took occupancy after the effective date of the 
          increase is not obligated to pay any arrears for a period prior to 
          the date of occupancy.





                                          7












          ADMIN. REVIEW DOCKET NOS. GF430083RO

          A tenant who has a valid Senior Citizen Rent Increase Exemption 
          Order (SCRIE) is exempted from that portion of the increase which 
          would cause the rent to exceed one-third of the tenant's household 
          monthly disposable income.  A tenant who may be entitled to this 
          benefit may contact the New York City Department of the Aging.

          THEREFORE, in accordance with the Rent Stabilization Law and Code, 
          it is

          ORDERED, that the owner's petition (Docket No. GF430083RO) and the 
          Tenant Association's petition (Docket No. GE430229RT) be, and the 
          same hereby are, granted in part, and that the tenants' petitions 
          (Docket Nos. GE410278RT, GE410338RT, GE410350RT, GF410197RT, 
          GF410286RT and GF410562RT) be, and the same hereby are, denied; and 
          that the rent of the rent stabilized apartments be, and the same 
          hereby are, increased in the  manner and to the extent herein above 
          provided.  The order and determination of the Administrator is 
          hereby affirmed in all other respects.

          ISSUED:



                                                       ____________________
                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner

























                                          8
    

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