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.
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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.
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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 ö 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
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