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 S.J.R. NO.: 7175
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
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
(DA430169OM)
ORDER AND OPINION DENYING ADMINISTRATIVE REVIEW DOCKET
NOS. HA430041RO AND HA4309092RT AND GRANTING IN PART
ADMINISTRATIVE REVIEW DOCKET NO HA430092RT
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
reduction.
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
thereof.
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
maintained.
The tenants further object to the Administrator's failure to adjust the
rent increase based on the above mentioned order finding a decrease in
services.
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
feet.
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.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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