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

          -------------------------------------X  SJR No. 7061
          APPEALS OF                              DOCKET Nos.:   GI430001RO,
                    METROPOLITAN                  GH410155RT
                    LIFE INSURANCE CO. (OWNER)    
                    and R. Silverman (TENANT)

                                                   RENT ADMINISTRATOR'S
                                                   DOCKET NO.:    EC410241OM


          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.


          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 

          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

          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 
          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.

          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.


          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 

          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  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.


          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 


                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner



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