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

      ------------------------------------X  S.J.R. NO.:  7175
      APPEALS OF                             DOCKET NOS.: HA430041RO
      DAVID FRANKEL REALTY, INC.          :               HA430091RT
      AND VARIOUS TENANTS OF                              HA430092RT
      19 EAST 80TH STREET, NEW YORK, NY         
                              PETITIONERS :  RENT ADMINISTRATOR'S 
      ------------------------------------X  DOCKET NO.:  FC430023RK             

                NOS. HA430041RO AND HA4309092RT AND GRANTING IN PART

      The above-named petitioner-owner and petitioner-tenants timely filed 
      administrative appeals against an order issued on December 18, 1992 by the 
      Rent Administrator (92-31 Union Hall Street, Jamaica, New York) concerning 
      the housing accommodations known as 19 East 80th Street, New York, New 
      York, various apartments.

      Subsequent thereto, the owner filed a petition in the Supreme Court 
      pursuant to Article 78 of the Civil Practice Law and Rules seeking an order 
      of mandamus.  This resulted in a court ordered stipulation remitting the 
      proceeding for a determination of the administrative appeals herein.

      On May 8, 1987 the owner filed an application for a major capital 
      improvement (MCI) rent increase based on an elevator upgrading, including 
      a new controller and selector, which commenced January 22, 1987 and was 
      completed March 21, 1987 at a claimed cost of $25,550.00.  The owner 
      subsequently withdrew this application and the proceeding was terminated.  
      (Docket No. BE430151OM, issued April 18, 1988).

      The owner filed another application for an MCI rent increase on January 31, 
      1989 based on the above mentioned elevator upgrading and on additional 
      elevator work on both the passenger and service elevators which included 
      refurbishing the cab; relining brake shoes; repairing the generator; 
      installing a new ball thrust bearing; motor room service; providing 
      specially constructed traveling cables; cleaning (shaftway, car top); 
      conducting a 5 year test; and installing an automatic door operator and 
      power supply, push button station, cover plates and push buttons, direction 
      latern, and digital indicator.  The owner's claimed cost for this work was 
      $72,948.00.  This work commenced August 17, 1988 and was completed December 
      19, 1988.

      In an order (Docket No. DA430169OM) issued May 18, 1990, the Administrator 
      denied the owner's application based upon a determination that the work was 
      performed in a piecemeal fashion and that there was an order in effect 
      (Docket No. LOO2406B) finding that services had been reduced building-wide 
      and directing the owner to restore services.


          ADMIN. REVIEW DOCKET NO.: HA430041RT, et al. (SJR 7175)

      The proceeding was subsequently reopened for reconsideration.  In the order 
      appealed herein, the Administrator determined that the owner was entitled 
      to an MCI rent increase for the elevator upgrading (new controller and 
      selector and related work), but disallowed a rent increase for the cab 
      renovations and other repairs because said work was performed 15 months 
      after the elevator upgrading.  The Administrator noted that an order of 
      service restoration had been issued on May 15, 1992 under Docket No. 
      EL430212OR and determined that the effective date of the rent increase did 
      not have to be adjusted because the original order (L002406B), finding a 
      decrease in services of a building-wide nature, did not provide for a rent 

      In its petition the owner contends, in substance, that the Administrator 
      improperly allocated a portion of the MCI cost to the professional space in 
      the building because there is no evidence that said space benefits, either 
      directly or indirectly, from the installation; and, in the alternative, 
      that the Administrator improperly utilized the rents of the professional 
      apartments, as opposed to the corresponding room counts, to apportion the 
      cost of the improvements.

      The owner further contends, in substance, that the additional elevator work 
      indicated above qualifies for an MCI rent increase because it was performed 
      as part of an overall plan to modernize the elevators, in connection with 
      and directly related to a qualifying MCI, and within a reasonable time 

      In response the tenants contend that the Administrator erred in granting 
      any rent increase and, in the alternative, that the Administrator's 
      computations were correct.

      In their petitions the tenants contend, in substance, that the work 
      performed does not qualify for an MCI rent increase; that the work 
      specified in the invoice for the elevator upgrading does not correspond to 
      that indicated in the proposal; that the owner's lump sum payment for said 
      work does not corresponded to the payment schedule contained in the 
      proposal; that the cost of the improvement is not substantiated or 
      itemized; that work which the owner is required by law to install does not 
      qualify for an MCI rent increase; that the owner has not submitted any 
      documentation evidencing its intent to file for a J-51 tax abatement; that 
      any sales tax the owner may have paid cannot be included in the approved 
      cost; that the room count indicated by the owner in various submissions is 
      inconsistent; that the installation was not made in a workmanlike manner as 
      the elevators constantly malfunction; that the installation should be 
      considered maintenance; and that essential services are not being 

      The tenants further object to the Administrator's failure to adjust the 
      rent increase based on the above mentioned order finding a decrease in 

      In response the owner asserts that the tenants' petitions fail to set forth 
      any basis to reverse the Administrator's order; and that the room count 
      issue was resolved during the proceeding before the Administrator.


          ADMIN. REVIEW DOCKET NO.: HA430041RT, et al. (SJR 7175)

      After careful consideration, the Commissioner is of the opinion that the 
      owner's petition and the tenant petition filed under Administrative Review 
      Docket Nos. HA430041RO and HA430092RT, respectively, should be denied; and 
      the tenants' petition filed under Administrative Review Docket HA430091RT 
      should be granted in part.

      Rent increases for major capital improvements are authorized by Section 
      2202.4 of the Rent and Eviction Regulations for rent controlled apartments 
      and Section 2522.4 of the Rent Stabilization Code for rent stabilized 
      apartments.  Under rent control, an increase is warranted where there has 
      been since July 1, 1970 a major capital improvement required for the 
      operation, preservation, or maintenance of the structure.  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.

      Section 2522.4(a)(2)(ii) of the Rent Stabilization Code and Section  
      2202.4(e) of the Rent and Eviction Regulations permit a rent increase for 
      other work performed in conjunction with a qualifying major capital 
      improvement.  Section 2522.4(a)(2)(ii) of the Code and Operational Bulletin 
      84-4 (November 13, 1984) limit the application of "concurrent improvements" 
      to costs incurred within a reasonable period of time of a qualifying major 
      capital improvement and only if directly related thereto.

      The record discloses that the owner substantiated its application with 
      respect to the elevator upgrading to the extent recognized by the 
      Administrator, including the installation of a new controller and selector, 
      by submitting to the Administrator documentation in support thereof, 
      including copies of the proposal, invoice, contractor's certification and 
      cancelled checks, together with all requisite governmental approvals.

      The owner cites two orders issued by the Commissioner in support of its 
      contention that the additional elevator work qualifies for an MCI rent 
      increase.  In Administrative Review Docket No. CF410014RT, et al., the 
      Commissioner found that the owner was entitled to an MCI rent increase for 
      the refurbishing of elevator cabs which took place two months after the 
      upgrading of the elevator.  In Administrative Review Docket No. DJ430148RO, 
      the Commissioner found that the cab refurbishing and other elevator work 
      were either contracted for while the controller/selector installation was 
      in progress or completed within a period of months sufficiently 
      contemporaneous to the controller/selector installation as to not 
      constitute piecemeal work.

      The record in this proceeding shows that the proposal for the additional 
      elevator work was dated June 9, 1988; that the work therein was not 
      contracted for until August 15, 1988, over one year after the elevator 
      upgrading was completed; and that said work was not completed until months 
      thereafter, despite the owner's acknowledgment during the reconsideration 
      proceeding that it became apparent as early as 1985 that the elevator at 
      the subject building was "rapidly approaching the need for a complete 
      refurbishing", and that the subsequent elevator upgrading "did not cure all 
      of the elevator's woes."


          ADMIN. REVIEW DOCKET NO.: HA430041RT, et al. (SJR 7175)

      The Commissioner is of the opinion that the additional elevator work 
      herein, completed 15 months after the qualifying MCI, i.e., the elevator 
      upgrading, was not performed contemporaneously with or within a reasonable 
      period of time after the completion of the elevator upgrading.  
      Accordingly, the Administrator properly determined that this work 
      constituted repairs for which an MCI rent increase was not warranted. 

      As to the owner's contention that the Administrator improperly allocated a 
      portion of the MCI cost to the professional space in the building, and 
      improperly utilized the rents of the professional units, as opposed to 
      corresponding room counts, to determine said allocation, the Commissioner 
      notes that the Rent Administrator properly determined that the elevator 
      upgrading inured to the benefit of all first floor tenants who have access 
      thereto and, based thereon properly determined the commercial and/or 
      professional tenants' share of the approved cost of the MCI's based upon 
      the percentage of commercial and/or professional rental income to total 
      rental income.  The Division has devised a uniform MCI rent increase 
      application, which was utilized by the owner herein, and has established a 
      uniform procedure for the computation of the allowable MCI rent increase 
      adjustments.  The Rent Administrator properly determined that the 
      commercial and/or professional tenants, to the extent that they benefit 
      from the MCI, should bear a corresponding portion of the cost thereof in 
      accordance with established procedure (Accord: Administrative Review Docket 
      Number CE430107RO).

      With respect to the tenants' contention that the work specified in the 
      invoice and the proposal for the elevator upgrading does not correspond, 
      the Commissioner notes that the work indicated in the proposal numbered C- 
      1065 corresponds to that specified in the invoice.

      Concerning the tenants' contention that the owner's lump sum payment for 
      the elevator upgrading does not correspond to the schedule indicated in the 
      proposal, the Commissioner notes that payment in such manner is not a 
      ground for revocation of the MCI rent increase.

      As to the tenants' contention that the cost of the elevator upgrading was 
      not substantiated or itemized, as noted above, the owner submitted a copy 
      of a cancelled check as documentation.  Also, the proposal submitted by the 
      owner contains a cost breakdown.

      Regarding the tenants' contention that the owner is not entitled to an MCI 
      rent increase for work which it is required by law to install, the 
      Commissioner notes that such a requirement is not a bar to obtaining an MCI 
      rent increase.

      With respect to the tenants' contention that the owner has not submitted 
      documentation of its intent to apply for a J-51 tax abatement, the 
      Commissioner notes that J-51 tax benefits do not preclude an owner's 
      entitlement to a major capital improvement rent increase adjustment 
      therefor.  Though rent stabilized tenants may presently share in the 
      benefits of tax abatement received by an owner pursuant to J-51 of the 
      Administrative Code, this provision does not apply to the rent stabilized 
      tenants in the instant matter as the law is applicable only to improvement 
      work  commenced after June 28, 1988.  In this case the elevator upgrading


          ADMIN. REVIEW DOCKET NO.: HA430041RT, et al. (SJR 7175)

      was commenced prior to said date.  However, tenants of rent controlled 
      apartments may be entitled to share in such tax abatement benefits and 
      should make an application to the DHCR, Owner Individual Unit, for such 
      rent adjustment as may be warranted.

      Concerning the tenants' contention that any sales tax paid by the owner 
      cannot be included in the approved costs, there is no indication in the 
      record that any sales tax was paid or was included in the approved cost of 
      the elevator upgrading.

      As to the allegation of a room count discrepancy, the Commissioner notes 
      that the owner submitted a revised room count during the reconsideration 
      proceeding in response to the Administrator's request for an explanation of 
      the discrepancy.  The owner indicated that apartments 1A, 3A, 10A and 12E 
      contained fewer rooms as defined for MCI purposes.  In accordance with 
      Policy Statement 90-3, in effect at the time the Administrator's order was 
      issued, a room for MCI purposes is defined as follows:

           1)   A windowless kitchen containing at least 59 square feet
           2)   An enclosed area with window containing at least 60 square

           3)   An enclosed area without window containing at least 80      
                square feet.

           4)   Bathrooms, walk-in closets, etc. are excluded.

      Any adverse determination stemming from a miscount of rooms which arises 
      after the Administrator's order is issued becomes the responsibility of the 
      owner.  The Commissioner notes that the owner may not charge the tenants 
      based on a greater number of rooms for MCI purposes.  This order is issued 
      without prejudice to the tenants filing complaints with the DHCR based on 
      a rent overcharge, if the facts so warrant.

      Regarding the tenants' contention that the elevator work was not performed 
      in a workmanlike manner; and that it constantly malfunctions, the 
      Commissioner notes that the owner submitted a copy of elevator user permit
      B Form 73 issued by the New York City Department of Buildings for the 
      elevator upgrading work, the governmental agency having jurisdiction 
      therefor.  The petitioners herein, on the other hand, have failed to 
      establish, either in the proceeding below or on appeal, the alleged 
      inadequacy of the work performed or that elevator service was not being 
      maintained.  In this respect it is significant to note that the records of 
      the Division disclose no rent reduction order has been issued against the 
      subject premises based on the owner's failure to maintain services of a 
      building-wide nature nor was any such complaint pending, including a 
      complaint of a decrease in elevator service, at the time the order appealed 
      herein was issued.  This order and opinion is issued without prejudice to 
      the tenants' right to file an appropriate complaint with the Department of 
      Buildings and with the DHCR for a decrease in rent based on any decrease in 
      services, if the facts now so warrant.


          ADMIN. REVIEW DOCKET NO.: HA430041RT, et al. (SJR 7175)

      However, with respect to the tenants' objection to the Administrator's 
      order based on the fact that there had been an outstanding order (Docket 
      No. L002406B) directing the owner to restore services of a building-wide 
      nature, albeit without a rent reduction, it is the established position of 
      the Division that such order shall not bar an owner from obtaining an MCI 
      rent increase provided the owner establishes that the services which gave 
      rise to such finding have been restored.  In this regard the records of the 
      Division disclose that the owner herein was on full notice of the order 
      issued under Docket No L002406B; and that on January 24, 1990, after  a 
      compliance proceeding, the Commissioner issued a final order (Docket No. 
      L002406B) which specifically barred the owner from collecting any rent 
      increase from the subject housing accommodations until the Division finds 
      that the owner has complied with the initial directive to restore services 
      and has complied with said order of the Commissioner.  DHCR records further 
      disclose that on May 15, 1992, the Administrator issued an Order (Docket 
      No. EL430212OR) finding that the owner had fully complied with the 
      Commissioner's order (supra).  Accordingly, the Commissioner finds that the 
      Administrator's order should be modified by changing the effective dates 
      thereof to June  1, 1992, the first rent payment date after the Division 
      found that services were restored and the owner was in compliance with the 
      Commissioner's determination.

      THEREFORE, in accordance with the provisions of the Rent Stabilization Code 
      and the Rent and Eviction Regulations for New York City, it is

      ORDERED, that the petitions for administrative review under Docket Nos. 
      HA430041RO and HA430092RT be, and the same hereby are, denied; that the 
      petition for administrative review under Docket No. HA430091RT be, and the 
      same hereby is, granted in part; that the order of the Administrator be, 
      and the same hereby is, modified by changing the effective dates thereto to 
      June 1, 1992; and that as so modified said order be, and the same hereby 
      is, affirmed; and it is further

      ORDERED, that the owner refund to the tenants of rent controlled apartments 
      any excess rent collected as a result of this order within 30 days from the 
      date of issuance hereof; and it is further 

      ORDERED, that as to tenants of rent stabilized apartments, the owner credit 
      any excess rent collected at the rate of 20% per month commencing on the 
      first rent payment date after the issuance of this order of the 
      Commissioner until all overpayments have been refunded.


                                           JOSEPH A. D'AGOSTA
                                           Deputy Commissioner

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