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 ADMINISTRATIVE REVIEW
IN THE MATTER OF THE ADMINISTRATIVE DOCKET Nos.: GL410077RO,
APPEALS OF GK410063RT
METROPOLITAN
LIFE INSURANCE CO. (OWNER)
AND VARIOUS TENANTS OF
18 & 20 STUYVESANT OVAL;
522, 524, 526, 530 &
540 E. 20TH ST.,
New York, New York,
RENT ADMINISTRATOR'S
DOCKET NO.: EC410242OM
PETITIONERS
-------------------------------------X
ORDER AND OPINION GRANTING IN PART OWNER'S PETITION (DOCKET NO.
GL410077RO) AND TENANT'S PETITION (DOCKET NO. GK410063RT) FOR
ADMINISTRATIVE REVIEW
On various dates, the above-named petitioners filed petitions for
administrative review (PARs) against an order issued on October 14,
1992 by a Rent Administrator (Gertz Plaza) concerning the housing
accommodations known as 18 & 20 Stuyvesant Oval and 522, 524, 526,
530 & 540 East 20th Street, 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).
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 $145,435.85: two
instantaneous steam heaters (A/K/A hot water heaters), and asbestos
removal and the painting of Control Room # 15 and the color coding
of conduit pipes and electrical wiring.
ADMIN. REVIEW DOCKET NOS. GL410077RO, GK410063RT
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 cost of
painting the control room should not be passed along to the
tenants; that the cost of the painting is exorbitant; that Con Ed
provides hot water; that there hasn't been asbestos in Stuyvesant
Town since 1971; that the removal of asbestos is required by law
and the responsibility of the owner; that the rent increase should
not be permanent; that the increase is a burden on senior citizens;
that the installation of the hot water heater was not an
improvement; and that the hot water at times is brown and contains
particles.
On October 14, 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
$133,179.85 upon finding that the two instantaneous steam heaters
and the associated asbestos removal work qualified as MCIs based
upon the supporting documentation submitted by the owner.
Disallowed by the Administrator was $12,256.00 for painting of the
of Control Room # 15 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 further contends that the order states an incorrect
effective date for the increase.
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 painting is ordinary maintenance and the
responsibility of the owner; that asbestos is the owner's
liability; and that a permanent rent increase is unfair and a
financial burden to seniors.
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ADMIN. REVIEW DOCKET NOS. GL410077RO, GK410063RT
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; and the fact that tenants do not have access to the
control room does not bar the owner from an MCI; that it is
arbitrary and capricious to disallow painting as part of the MCI
costs since the Rent Administrator approved painting in similar
applications submitted by the owner.
In her petition, the tenant contends, in substance, that the work
described on the Rent Administrator's order are not MCIs.
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. GL410077RO)
and the tenant's petition (Docket No. GK410063RT) should be granted
in part.
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 inextricably 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.
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 specialized painting of Control Room 15 was
directly related to and performed contemporaneously with the
installation of the instantaneous steam heaters in Control Room 15.
The specialized painting within the control room aids in the proper
operation of the installation and therefore, is of benefit to the
tenants.
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ADMIN. REVIEW DOCKET NOS. GL410077RO, GK410063RT
However, the Commissioner notes that the record indicates that the
painting work in Control Room 15 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 an
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.
Concerning the owner's contention with respect to the effective
date of the Administrator's order as it affects stabilized
apartments, the Commissioner notes that prior to the promulgation
of the current Rent Stabilization Code (May 1, 1987) it was the
well recognized position of the Division that an MCI increase was
effective the first rent payment date 30 days after the owner
completed its application by the submission to the DHCR of a
certification of service of same upon the tenants (Accord:
CG430038OR).
By virtue of the current stabilization Code, service of notice of
the application (as well as other documentation) devolved upon the
DHCR. Thus, in conformity with established policy and procedure
the application is deemed complete when notice thereof is given to
the affected parties and such individuals are afforded the
opportunity to respond thereto. In this connection the
Commissioner notes that a rent reduction order is made effective
the first rent payment date 30 days after the owner is served with
a copy of the complaint and that a rent restoration is effective
the first payment date 30 days after the tenants are served by DHCR
with a copy of the owner's restoration application.
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ADMIN. REVIEW DOCKET NOS. GL410077RO, GK410063RT
Turning to the case at hand, the record discloses that the instant
application was initially filed with the DHCR on March 28, 1990,
and that notice of the application was served on the tenants on
July 11, 1990, after the application went through a screening,
duplicating and service process. The Commissioner finds that four
months was not an unreasonable period for the Division to complete
service of notice of the application on the tenants at the time in
question in view of the extent of the work entailed in processing
and servicing by hand what were in essence multiple filings of
applications made at the same time involving over 9,000 apartments.
The Commissioner deems it appropriate, under the facts and
circumstances of this case, to affirm the effective date of the
increase at September 1, 1990, the first rent payment date 30 days
after service of the notice of the application on the tenants.
As for the tenant's petition, 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.
With regard to the asbestos removal work, 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.
The Commissioner, however, finds upon review of the record 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 and $791.85 for
valves. The Commissioner finds that the work constitutes a repair
for which a rent increase is not warranted.
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.
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ADMIN. REVIEW DOCKET NOS. GL410077RO, GK410063RT
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 15 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 $.81
(rather than $.79) per room per month, effective as of September 1,
1990, calculated as per the following:
1. Total approved MCI cost $136,016.00
(instantaneous steam heaters,
asbestos removal and painting)
2 Commercial\Professional Tenants Share $ 5,440.64
3 Net Approved MCI Cost $130,575.36
4. Amortization by 60 months $ 2,176.25
(Line 1 ö 60)
3. Total number of Rent Stabilized rooms 2,696
4. Rent increase per room per month $ .81
A tenant who took occupancy after the effective date of the
increase is not obligated to pay any arrears for the 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. GL410077RO) and the
tenant's petition (Docket No. GK410063RT) be, and the same hereby
are, granted in part; 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, effective September 1,
1990; and that as so modified said order be, and the same hereby is
affirmed; and it is, further
ORDERED, that the tenants pay any arrears in rent resulting from
this order.
ISSUED:
____________________
Joseph A. D'Agosta
Deputy Commissioner
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