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. 7079
          IN THE MATTER OF THE ADMINISTRATIVE     ADMINISTRATIVE REVIEW
          APPEALS OF                              DOCKET Nos.:   GG430078RO,
                    METROPOLITAN                  GG410143RT,    GG410193RT,
                    LIFE INSURANCE CO. (OWNER)    GG410213RT,    GG410214RT,
                                                  GG410215RT,    GG410221RT,
                    AND VARIOUS TENANTS OF        GG410251RT,    GH430007RT
                    6, 7, 8 PETER COOPER ROAD,    
                    531, 541 AND 601 E. 20TH ST.,
                    New York, New York,
                                                   RENT ADMINISTRATOR'S
                                                   DOCKET NO.:    EC410239OM

                                   PETITIONERS   
          -------------------------------------X
                                                
          ORDER AND OPINION GRANTING OWNER'S PETITION IN PART (DOCKET NO. 
          GG430078RO), GRANTING IN PART TENANT ASSOCIATION'S PETITION (DOCKET 
          NO. GH430007RT) AND DENYING TENANTS' PETITIONS (DOCKET NOS. 
          GG410143RT, GG410193RT, GG410213RT, GG410214RT, GG410215RT, 
          GG410221RT AND GG410251RT) FOR ADMINISTRATIVE REVIEW

          On various dates, the above-named petitioners timely filed 
          petitions for administrative review (PARs) against an order issued 
          on June 30, 1992 by a Rent Administrator (Gertz Plaza) concerning 
          the housing accommodations known as 531, 541, and 601 East 20th 
          Street and 6, 7, and 8 Peter Cooper Road, New York, New York, 
          wherein the Rent Administrator granted, in part, the owner's 
          application for a rent increase based on the installation of a 
          major capital improvement (MCI).

          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.













          ADMIN. REVIEW DOCKET NOS. GG430078RO ET AL

          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 $209,110.00: two 
          instantaneous steam heaters (a/k/a hot water heaters), and asbestos 
          removal, (including the retro-fitting of an existing hot water 
          heater into a pre heater tank, asbestos consultation services) and 
          the painting of the  floor of Control Room # 11 and the color 
          coding of conduit pipes and electrical wiring.

          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 are maintenance; that the owner is 
          required by law to remove asbestos; that painting of the control 
          room and asbestos removal solely benefits the owner and the 
          employees; that the rent increase should not be permanent; that the 
          costs of the installations are questionable; that the installation 
          of the hot water heater was not an improvement; that the 
          temperature and quality of the hot water are inadequate at times; 
          and that a lease provision states that the owner will make repairs 
          and improvements at his expense

          On June 30, 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 
          $190,160.00 upon finding that the two instantaneous steam heaters 
          and the associated asbestos removal work qualified as MCI costs 
          based upon the supporting documentation submitted by the owner. 
          Disallowed by the Administrator were the claimed costs of 
          $18,950.00 for painting Control Room # 11 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). 



                                          2



          ADMIN. REVIEW DOCKET NOS. GG430078RO ET AL

          In response to the owner's petition various tenants contend, in 
          substance, that painting is not a MCI and is not other work related 
          to a MCI; that painting does not benefit the tenants in that the 
          control room is inaccessible to the tenants; that  the painting was 
          done independently of the installation of the hot water heaters and 
          at the convenience of the owner; painting is ordinary maintenance; 
          that color coding is a convenience not a necessity; that the 
          painting of the control room benefits the owner and his employees; 
          that a permanent rent increase for painting is unfair; that 
          $18,950.00 is a inordinately high figure; and that the basement 
          area is painted continuously.

          The owner responds to the tenants' answers by stating, in 
          substance, that the Rent Stabilization Code permits other work 
          performed contemporaneously to an MCI; the painting is not 
          maintenance in this instance but is a safety feature pertaining to 
          the operation and servicing of the control room; that the fact that 
          the tenants do not have access to the control room does not bar the 
          owner from an MCI; and that replacement of worn out equipment is 
          the purpose of the MCI program.

          In the petitions filed by various tenants, the tenants contend, in 
          substance, that the hot water heaters and asbestos removal are not 
          MCIs but rather are repairs and basic maintenance; that asbestos 
          removal is not depreciable under the Internal Revenue Code; that 
          the rent increase should not be permanent; that provision of hot 
          water is included in the rent; that the rent increase is too high; 
          that the water temperature at times is warm not hot; and that the 
          hot water is frequently brown and filled with brown particles. 

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

          The tenant in apartment 2D responds to the owner's answer by 
          stating, in substance, that asbestos removal is a reimbursable tax 
          expense for the owner and that the rent already includes the 
          provision of hot water.

          The Stuyvesant Town Tenants Association (Tenant Association) claims 
          in their petition, 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 
          brown hot water emanates from the hot water heater; and that the 
          installations violate the Multiple Dwelling Law and Federal Clean 
          Water Standard.  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. GG430078RO ET AL

          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 preheat 
          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. GG430078RO) 
          should be granted in part, that the Tenant Association's petition 
          (Docket No. GH430007RT) should be granted in part, and that the 
          tenants' petitions (Docket Nos. GG410143RT, GG410193RT, GG410213RT, 
          GG410214RT, GG410215RT, GG410221RT, GG410251RT) 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 limited 
          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. GG430078RO ET AL

          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) and was directly related to and performed 






          contemporaneously with the installation of the instantaneous steam 
          heaters in Control Room 11.  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 11 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 tenants' petitions, the tenants contend that the 
          installation of hot water heaters is a repair and maintenance not 
          an MCI.  The Commissioner notes that the installation of the 
          instantaneous steam heaters meet 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.  

          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 when the water with the presence of 
          chlorine is heated the iron and manganese oxidize and create 
          precipitates; that the presence of copper and zinc may be 
          attributed to 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 copper 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's report further states, in substance, that 
          a long term solution is for New York City to consider chemical 
          addition to the water supply to reduce the corrosivity of the soft 
          water.

                                          5








          ADMIN. REVIEW DOCKET NOS. GG430078RO ET AL

          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 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 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 11 in 
          addition to the repair of an existing hot water heater (supra) and 
          therefore an inspection is not necessary.

          As for the Tenant Association's and 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.


                                          6
          ADMIN. REVIEW DOCKET NOS. GG430078RO ET AL

          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 and 
          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 the painting of 
          the ceiling and walls of Controll Room 11, and the conversion of a 
          hot water heater into a pre heater tank are disqualified as MCI 
          costs.  Therefore, the owner is entitled to a rent increase of 
          $1.24 (rather than $1.20) per room per month, effective August 1, 
          1990, calculated as per the following:

          1.   Total approved MCI cost                 $197,135.00
               (instantaneous steam heaters, 
               asbestos removal and 
               specialized painting)

          2.   Commercial/Professional tenants share   $ 10,546.72

          3.   Net approved MCI cost                   $186,588.28

          4.   Amortization by 60 months               $  3,109.80
               (Line 3  60)

          5.   Total number of Rent Stabilized rooms      2,508

          6.   Rent increase per room per month        $      1.24

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.

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. GG430078RO) be, and 
the same hereby is granted in part; that the Tenant Association's 
petition (Docket No. GH430007RT) be, and the same hereby is, 
granted in part; that the tenants' petitions (Docket Nos. 
GG410143RT, GG410193RT, GG410213RT, GG410214RT, GG410215RT, 
GG410221RT, GG410251RT) 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.

ISSUED:



                                             ____________________
                                               Joseph A. D'Agosta
                                              Deputy Commissioner
                                7






    

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