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

          -------------------------------------X  ADMINISTRATIVE REVIEW
          APPEALS OF                              GK410063RT
                    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

          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 

          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 

          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.


          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 

          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:  

          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.


          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 

          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.


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  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.


                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner

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