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. 7061
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEALS OF DOCKET Nos.: GI430001RO,
METROPOLITAN GH410155RT
LIFE INSURANCE CO. (OWNER)
and R. Silverman (TENANT)
RENT ADMINISTRATOR'S
DOCKET NO.: EC410241OM
PETITIONERS
-------------------------------------X
ORDER AND OPINION GRANTING, IN PART, OWNER'S PETITION (DOCKET NO.
GI430001RO) AND DENYING TENANT'S PETITION (DOCKET NO. GH410155RT)
FOR ADMINISTRATIVE REVIEW
The above-named petitioners timely filed petitions for
administrative review (PARs) against an order issued on August 3,
1992 by a Rent Administrator (Gertz Plaza) concerning the housing
accommodations known as 271 Avenue C and 647, 649, 651, 653 and 655
E. 14TH 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 a major capital
improvement (MCI).
Subsequent thereto, the 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 $125,797.76: two
instantaneous steam heaters (a/k/a hot water heaters), asbestos
removal and the painting of the Control Room # 33 and the color
coding of conduit pipes and electrical wiring.
ADMIN. REVIEW DOCKET NOS. GI430001RO ET AL
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 replacement of the hot water heaters were not necessary;
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 hot water is
inadequate at times; that the owner can receive a tax abatement for
the improvements and seniors find the increase a financial
hardship.
On April 23, 1992 the Rent Administrator requested the following
information from the owner: a copy of the specifications;
description of asbestos removal work from Control Room 33; an
explanation as to why it took 13 months to install the hot water
heaters and why asbestos removal started 2 months after the
commencement of the hot water heater installation; and a
clarification as to the cost breakdown of the installation and
asbestos removal.
In its response, the owner stated, in substance, and in pertinent
part, that asbestos had been mistakenly removed from 271 Avenue C
by the contractor in a job authorized by purchase orders in 1986
for six other buildings. The actual installation of the hot water
heaters for 271 Avenue C was done at the later date when the
purchase order for that building was received.
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
$104,500.00 upon finding that the two instantaneous steam heaters
qualified as MCIs based upon the supporting documentation submitted
by the owner. Disallowed by the Administrator were the claimed
costs of $8429.76 for asbestos removal and asbestos consultant
services based on a finding that the owner failed to file the
application within two years from the completion date of such work.
Also, disallowed was $12,868.00 for painting Control Room # 33 and
the color coding of conduit pipes and electrical wiring based on a
finding that such work did not qualify as an MCI.
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 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. GI430001RO ET AL
The owner further claims, in substance, that the Rent Administrator
was incorrect not to give a basis as to why the asbestos removal
and asbestos consultant services were found to be in violation of
the two year limitation.
In response to the owner's petition various tenants contend, in
substance, that painting, asbestos removal and consultant services
are not MCIs and are not other work related to an MCI; that
painting does not benefit the tenants in that the control room is
inaccessible to the tenants; that painting is routine maintenance;
that color coding is a convenience not a necessity; that the
painting of the control room benefits the owner and his employees;
that $12,868.00 for painting is too high; that tenants should not
pay for the owner's contractor's mistake regarding timing of
asbestos removal; that asbestos removal is not an MCI; that a
permanent rent increase for painting is unfair; that tenants
recently received an MCI rent increase for the installation of
windows; and that the increase is a financial hardship to seniors.
The owner responds to the tenants' answers by stating, in
substance, that the Rent Stabilization Code permits other work
performed contemporaneously to an MCI; that 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.
The owner further states, in substance, that asbestos removal is
allowed when interrelated to the MCI; that filings made to
municipal agencies require the retention of a licensed asbestos
consultant; and that the owner submitted all requisite
documentation in support of the asbestos consultant fee and
removal.
In the petition filed by the tenant, the tenant contends, in
substance, that the installation of hot water heaters is not an MCI
but rather a replacement and that the owner receives the tax
benefit of depreciation.
The owner responds to the tenant's petition 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.
After careful consideration of the entire record, the Commissioner
is of the opinion that the owner's petition (Docket No.GI430001RO)
should be granted in part, and that the tenant's petition (Docket
No. GH410155RT) 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.
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ADMIN. REVIEW DOCKET NOS. GI430001RO ET AL
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 an 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.
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 33 was directly related
to and performed contemporaneously with the installation of the
instantaneous steam heaters in Control Room 33. 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 33 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 ($6,434.00) 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.
In regards to the asbestos removal, the Commissioner notes that in
response to a request for information regarding the timing of the
asbestos removal work in relation to the installation of the hot
water heaters, the owner explained that asbestos removal was
mistakenly performed at an earlier date and not contemporaneous to
the installation of the hot water heaters. Since asbestos removal
is not a MCI, the standard to determine whether asbestos removal
was performed as part of an MCI pursuant to Policy Statement 89-8
is whether work was performed within a reasonable time of the MCI.
Upon a review of the record, the Commissioner notes that the
documentation submitted by the owner does not support the owner's
application claimed cost of $8,429.76 for asbestos removal. The
documentation submitted by the owner other than for the hot water
heaters included flanges, collars, and other work related to the
retro-fitting of an existing hot water heater into a pre-heater
tank. The Commissioner has found that such work constitutes repairs
which do not qualify as a MCI cost.
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ADMIN. REVIEW DOCKET NOS. GI430001RO ET AL
Furthermore, there is no description of the work for the asbestos
removal in relation to the installation of the hot water heaters.
A supplement I to the application states that Abretta Boiler and
Welding Company performed asbestos removal, installation of a tank
collar pipe and flange for $3,365.76, (the supplement states the
work as being completed on July 17, 1987), but the asbestos removal
work is not documented and appears to be related to the work
involving the retro-fitting of an existing hot water heater into a
pre-heater tank.
Therefore based upon the examination of the record, the
Commissioner finds that the asbestos removal work was not performed
as part of this MCI application for the installation of hot water
heaters at Control Room 33 and that the other work documented in
the record constitutes repairs and are not MCI costs.
As for the tenant's petition, the tenant contends 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 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.
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 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 ceiling and walls of Control Room 33, the
asbestos removal and consultant services and other the work related
to retro-fitting an existing hot water heater to a pre-heater tank
are disqualified as MCI costs. Therefore, the owner is entitled to
a rent increase of $.88 (rather than $.83) per room per month,
effective as of June 1, 1990 calculated as per the following:
1. Total approved MCI cost $110,934.00
(instantaneous steam heaters
and specialized painting)
2. Commercial/Professional tenants share $ 3,616.45
3. Net approved MCI cost $107,317.55
4. Amortization by 60 months $ 1,788.62
(Line 3 ö 60)
5. Total number of Rent Stabilized rooms 2,037
6. Rent increase per room per month $ .88
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.
5
ADMIN. REVIEW DOCKET NOS. GI430001RO ET AL
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. GI430001RO) be, and
the same hereby is granted in part, that the tenant's petition
(Docket No. GH410155RT) be, and the same hereby is, 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
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