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

          -------------------------------------X  ADMINISTRATIVE REVIEW
          APPEALS OF                              HB410204RT,    HC410224RT,
                    LIFE INSURANCE CO. (OWNER)    
                    AND VARIOUS TENANTS OF        
                    2 PETER COOPER ROAD,     
                    431 E. 20TH ST., 350, 360 
                    AND 370 1ST AVENUE 
                    New York, New York,
                                                   RENT ADMINISTRATOR'S
                                                   DOCKET NO.:    EC410234OM


          On various dates, the above-named petitioners timely filed 
          petitions for administrative review (PARs) against an order issued 
          on February 12, 1993 by a Rent Administrator (Gertz Plaza) 
          concerning the housing accommodations known as 431 East 20th 
          Street, 350, 360, 370 1st Avenue and 2 Peter Cooper Road, New York, 
          New York, 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).

          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 27, 1990 by initially 
          filing an application for a rent increase based on the installation 
          of the following items at a total claimed cost of $209,230.00:  two 
          instantaneous steam heaters (a/k/a hot water heaters), and asbestos 
          removal and the painting of Control Room # 3 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 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 the cost of the asbestos 
          removal and the hot water heater should be listed separately; 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 temperature and quality of the hot water are 
          inadequate at times; that a lease provision states that the owner 
          will make repairs and improvements at his expense; and that the 
          owner receives a tax expense deduction for the work.

          On February 12, 1993, the Rent Administrator issued the order here 
          under review, granting the owner's application and authorizing an 
          increase based upon total approved costs of $209,230.00 upon 
          finding that the two instantaneous steam heaters and the asbestos 
          removal work and the painting work in the control room qualified as 
          MCIs based upon the supporting documentation submitted by the 

          In its petition the owner contends, in substance, that the Rent 
          Administrator incorrectly listed the effective date of the MCI 
          increase as August 1, 1990; that the current effective date is in 
          violation of the Rent Stabilization Law and Code and is over four 
          months from the date that the owner filed its application, March 
          27, 1990; and that the effective date should be April 1, 1990.

          In response to the owner's petition, various tenants stated their 
          opposition to the MCI increase granted the owner and contend, in 
          substance, that the installation of the hot water heater, asbestos 
          removal and painting are ordinary maintenance and the 
          responsibility of the owner; that a change in the effective date 
          would be burdensome to the tenants; that painting does not benefit 
          the tenants in that the control room is inaccessible to the 
          tenants; that the cost of painting is too high; that the rent 
          increase should not be permanent; and that only the hot water (not 
          cold water) is discolored and has brown particles. 

The owner responds to the tenants' answers by stating, in 
substance, that the owner should not be deprived of an increase by 
reason of the delay in processing; that the current effective date 
unjustly enriches the tenants and is contrary to the purpose of the 
temporary retroactive increase; that the sole reason for the 
delayed effective date was the "extraordinary delay by DHCR in 
docketing, processing and serving the MCI application to the 
tenants"; and that the delay has caused irreparable harm to the 

In the petition filed by the tenant, the tenant objects to the MCI 
rent increase stating, in substance, that there was no mention of 
ongoing work when she transferred from Stuyvesant Town to Peter 
Cooper Town in October 1988. 

The owner responds to the tenant's petition by stating, in 
substance, that the installation  of hot water heaters qualify as 
an MCI and that asbestos removal was necessary work performed in 
conjunction with the installation of the hot water heaters.

The Stuyvesant Town Tenants Association (Tenant Association) claims 
in their petition, in substance, that the DHCR failed to review 
both the Tenant Association's comments on the application dated 
September 18, 1990 and the tenant survey outlining hot water 

          complaints; that the owner had notice of hot water complaints; that 
          brown hot water emanates from the hot water heater; and that the 
          installations violate the Multiple Dwelling Law and Federal Clean 
          Water Standard.  The Tenant Association also submitted an Engineer 
          Report which addressed the brown hot water complaints at one of the 
          buildings in the Stuyvesant Town and Peter Cooper Complex.

          In their comments on the owner's application, the Tenant 
          Association claimed, in substance, that asbestos removal is the 
          responsibility of the owner in as much as the owner is required by 
          the New York City Department of Environmental Protection (NYC DEP) 
          to remove asbestos; that it is alleged that tenants and workers 
          have been exposed to asbestos since 1971 and therefore it would 
          violate the MCI statutory scheme to allow the cost of removal under 
          the pretext of hot water heater installation; that the replacement 
          of the hot water heaters is deferred maintenance induced by past 
          tenant complaints; that many tenants complain that the new system's 
          water is unsuitable; that the lack of consistent hot water violates 
          New York State law; that painting of the control room is 
          maintenance; that the owner's application is defective in that 
          there is a discrepancy between the cost of the work on its MCI 
          application and on the Building Department application; that one 
          hot water heater was not replaced but was converted into a preheat 
          tank; and that there is a discrepancy in the time period the 
          asbestos consultant services were rendered in the application and 
          in the manager of operations' affidavit.  The Tenant Association 
          requested an inspection to determine whether the subject work 
          qualified as MCIs.

          The owner responds to the Tenant Association's petition by 
          contending, in substance, that the Tenant Association must 
          substantiate its scope of representation; that DHCR did consider 
          the Tenant Association's comments; that the tenant survey is not 
          relevant; that the source of the brown water is the New York City 
          water supply; and that an expert's report concludes that the water 
          is safe and potable. 

          After careful consideration of the entire record, the Commissioner 
          is of the opinion that the owner's petition (Docket No. HC410022RO) 
          should be denied, that the Tenant Association's petition (Docket 
          No. HC410224RT) should be granted in part, and that the tenants' 
          petitions (Docket No. HB410204RT and HD410116RT) 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.


          ADMIN. REVIEW DOCKET NOS. HC410022RO, HC410224RT, HB410204RT ET AL

          As for the owner-petitioner'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 with respect to stabilized apartments that a 
          rent reduction order is made effective the first rent payment date 
          30 days after an owner is served by DHCR with a copy of the 
          tenants' complaint; and that a rent restoration is effective the 
          first rent payment date 30 days after the tenant is served with a 
          copy of the owner's application. 

          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 
          June 25, 1990, after the application went through a screening 
          process to ascertain whether all requisite documentation had been 
          submitted.  (An incomplete application could result in the 
          rejection thereof).  In this connection the Commissioner has held 
          in a similar case involving a companion application (Docket No. 
          GL410077RO) 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 screening what were in essence multiple filings of 
          applications at the same time involving over 9,000 apartments.  
          Therefore, the Commissioner deems it appropriate, under the facts 
          and circumstances of this case, where service of the application 
          took less than 4 months, to affirm the effective date of the 
          increase at August 1, 1990, the first rent payment date 30 days 
          after notice of the application was served on the tenants. 

          As for the tenant-petitioner's, objection to the MCI rent increase, 
          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, tenant consent to the installation of said heaters, 
          and  associated specialized painting in the control room and 
          asbestos removal is not necessary in this kind of a proceeding.


          ADMIN. REVIEW DOCKET NOS. HC410022RO, HC410224RT, HB410204RT ET AL

          As for the Tenant Association's complaints regarding brown water 
          emanating from the instantaneous steam heaters, the Commissioner 
          upon review of the expert's engineering report submitted with the 
          Tenant Association's petition, finds that the brown water and 
          particles is not related to the workmanship of the installation.  
          The expert's report states, in substance, that the brown water and 
          particles are due to the presence of manganese, iron, copper and 
          zinc; that when the water with the presence of chlorine is heated 
          the iron and manganese oxidize and create precipitates; that the 
          presence of copper and zinc may be attributed to corrosion of the 
          plumbing system; that the precipitates accumulate in mains, pipes 
          and the heat exchanger and slough off into the water periodically; 
          that the brown water and particles can be minimized by periodic 
          flushing of the pipes, scouring of the heat exchanger and copper 
          coils and checking for cracks in the heat exchanger; and that 
          copper and zinc can be controlled by adding chemicals to reduce the 
          corrosive nature of the water.  The expert further states that a 
          long term solution is for New York City to consider chemical 
          addition to the water supply to reduce the corrosivity of the soft 

          The Commissioner is of the opinion that the record does not support 
          the finding that the installation in question was performed in an 
          unworkmanlike manner and therefore is not a basis to revoke the MCI 
          increase.  The expert's report indicates that proper maintenance of 
          the system should minimize the water discoloration and this order 
          and opinion is issued without prejudice to the tenants' right to 
          file service complaints, if the facts so warrant.

          As for the Tenant Association's contention that painting of the 
          control room is maintenance, 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 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 3 was 
          directly related to and performed contemporaneously with the 
          installation of the instantaneous steam heaters in Control Room 3.  
          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. HC410022RO, HC410224RT, HB410204RT ET AL

          However, the Commissioner notes that the record indicates that the 
          painting work in Control Room 3 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 of the claimed painting costs ($18,950.00) 
          for the specialized painting and to disallow the remaining fifty 
          percent of the cost for the painting of the Control Room.

          As for the Tenant Association's claim that it was inappropriate to 
          allow the cost for the retro-fitting 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, the Commissioner finds that the 
          work constitutes a repair for which a rent increase is not 

          The Tenant Association further claims that asbestos removal is not 
          an MCI and questions the validity of the asbestos consultant 
          services.  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 consultant fee claimed by the owner for filings and 
          certifications of a licensed and certified asbestos investigator, 
          the Commissioner finds that the consultant fees incurred by the 
          owner in this instant proceeding are substantiated eligible costs 
          related to the asbestos removal.

          As for the Tenant Association's request that the DHCR conduct an 
          inspection of the hot water heaters to determine whether the work 
          was repairs or a new installation, the record confirms that two new 
          instantaneous steam heaters were installed in Control Room 3 in 
          addition to the repair of an existing hot water heater (supra) and 
          therefore an inspection is not necessary.

          As for the Tenant Association's questions regarding the cost of the 
          instantaneous steam heaters, the record discloses that the owner 
          submitted cancelled checks to substantiate the entire cost of the 

          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.

          ADMIN. REVIEW DOCKET NOS. HC410022RO, HC410224RT, HB410204RT ET AL

          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 3 and the conversion of a 
          hot water heater into a pre heater tank are disqualified as MCI 
          costs.  Therefore, the owner is entitled to a rent increase of 
          $1.48 (rather than $1.57) per room per month, effective August 1, 
          1990, calculated as per the following:

          1.   Total approved MCI cost                 $197,255.00
               (instantaneous steam heaters, 
               asbestos removal and specialized painting)

          2.   Commercial/Professional tenants share   $ 13,216.08

          3.   Net approved MCI cost                   $184,038.92

          4.   Amortization by 60 months               $  3,067.31
               (Line 3  60)

          5.   Total number of Rent Stabilized rooms      2,072

          6.   Rent increase per room per month        $      1.48

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. HC410022RO) be, and 
the same hereby is denied; that the Tenant Association's petition 
(Docket No. HC410224RT) be, and the same hereby is, granted in 
part; that the tenants' petitions (Docket Nos. HB410204RT and 
HD410116RT) be, and the same hereby are, denied; that the order of 
the Rent Administrator be, and the same hereby is, modified in the 
manner and to the extent indicated above to delete so much of the 
rent increase as pertained to the painting of the ceiling and walls 
of the control room and the collar and flange on the pre-heater 
tank; and that as so modified said order be, and the same hereby is 
affirmed; and it is further

ORDERED, that the owner refund to tenants any excess rent collected 
as a result of this order.

                                               Joseph A. D'Agosta
                                7            Deputy Commissioner


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