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   SJR No. 6719
          IN THE MATTER OF THE ADMINISTRATIVE      ADMINISTRATIVE REVIEW
          APPEAL OF                                DOCKET Nos.:  HF230007RP,
                    GERRITSEN AVENUE ASSOCIATES                  (FI230115RO)
               
                                                   RENT ADMINISTRATOR'S
                                                   DOCKET NO.:  DI230239OM

                                   PETITIONER          
          -------------------------------------X
                                                
          ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW AFTER 
          RECONSIDERATION PURSUANT TO COURT ORDER

          On October 9, 1992 the Commissioner issued an order and opinion 
          denying the owner's petition for administrative review (PAR).  
          Among other things, said order denied a major capital improvement 
          (MCI) rent increase for pointing and waterproofing at the premises 
          predicated upon the owner's failure to submit requisite evidence 
          previously requested by the Rent Administrator.

          Thereafter the owner commenced a proceeding in the Supreme Court 
          pursuant to Article 78 of the Civil Practice Law and Rules, 
          requesting that the Commissioner's order be annulled.  This 
          resulted in a "so ordered" stipulation remitting this proceeding to 
          the Division for reconsideration only as to that part of the 
          owner's PAR seeking a major capital improvement (MCI) rent increase 
          for the pointing and waterproofing work at the premises based on 
          the owner's assertion that it had not received an adequate notice 
          requesting the submission of requisite evidence despite indications 
          in the record to the contrary.

          The owner of the subject premises (located at 2265 Gerritsen 
          Avenue, Brooklyn, New York, various apartments) initiated the 
          proceeding below by filing on September 29, 1989, an application 
          for an MCI rent increase for the stabilized apartments in the 
          premises based on pointing and waterproofing at the premises, as 
          well as for other installations which are not the subject of this 
          proceeding.  The documentation which the owner submitted in support 
          of the pointing and waterproofing work, included copies of the 
          proposal, Contractor/Vendor Information Form (RA-79-Supplement I), 
          cancelled checks and a paper with the drawing of an irregular 
          outline of the building purporting to indicate sides of the 
          building where claimed work was performed.  Said diagram and 
          accompanying statement is signed by the agent for the owner.









          ADMIN. REVIEW DOCKET NOS. HF-230007-RP (FI-230115-RO)

          The owner was subsequently directed to submit, among other things, 
          the requisite contractor's statement as specified in form RA-79 
          Supplement I (Supra) and a copy of an executed contract for the 
          pointing and waterproofing work.  The owner did not submit the 
          requested documentation although afforded the opportunity to do so.  

          The Administrator's order, issued on August 20, 1991, approved an 
          MCI rent increase for various installations, but disallowed 
          expenditures made for the pointing and waterproofing based on the 
          owner's failure to submit a copy of the executed contract therefor. 

          In its petition, the owner contends, in substance, that there was 
          no rational basis for denying a rent increase for the pointing and 
          waterproofing.  The owner also submitted with its petition a copy 
          of the executed contract for said work. 

          One tenant submitted a response to the owner's petition raising 
          complaints regarding installations which are not relevant to this 
          proceeding.

          As directed by the above mentioned "so ordered" stipulation, the 
          owner was provided an opportunity to respond to a notice to submit 
          additional information and evidence.  Said notice, dated July 14, 
          1993, requested that the owner submit, among other things, the 
          requisite affidavit from the contractor regarding the examination 
          of the premises and the resulting work performed and a detailed 
          diagram of said work.  On August 13, 1993, the owner submitted a 
          response to the notice which included the documentation discussed 
          hereafter.

          After careful reconsideration of the evidence in the record, the 
          Commissioner is of the opinion that this petition should again 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.

          It is the established position of the Division that comprehensive 
          pointing and waterproofing as necessary on exposed sides of the 
          building constitutes a major capital improvement for which a rent 
          increase adjustment may be warranted.  (SJR No. 4597, 
          Administrative Review Docket No. DB430282RT.)




                                          2
          ADMIN. REVIEW DOCKET NOS. HF-230007-RP (FI-230115-RO)

          As interpreted by the Internal Revenue Service, the relevant 
          sections of the Internal Revenue Code and accompanying regulations, 
          as applied to the matter at issue, provide as follows:




               Payments for the purpose of keeping the property in 
               ordinary efficient operating condition, such as 
               replacement of short lived parts, and that do not add to 
               its value or appreciably prolong its life are in the 
               nature of incidental repairs.  Subject to specific facts 
               and circumstances, examples of such repairs and 
               maintenance could include repainting, mending leaks, 
               patching a roof, re-plastering,  etc.  Tuck pointing of 
               limited, specific areas of a brick wall showing 
               weathering damage would generally not prolong the life of 
               the property, nor materially add to its value, and would 
               be currently deductible.

               However, if replacement, repair or renovation acts to 
               retard deterioration and prolong the life of a property, 
               then such expense should be capitalized and depreciated.  
               This is because there is a resulting increase in value, 
               extension of useful life or improvement in useability of 
               the property, factors that tend to indicate a capital 
               expenditure.  Examples of such expenditures would include 
               a new or resurfaced roof, complete waterproofing of brick 
               walls or roof (rather than repair of specific leaks), 
               added structural support, etc.

               The complete pointing and waterproofing of a multiple 
               unit dwelling is in the nature of a permanent improvement 
               or betterment, and thus would appear to be capital in 
               nature and depreciable subject to specific facts and 
               circumstances.  Repair of specific leaks and limited tuck 
               pointing of specific trouble spots, if not part of some 
               larger, overall plan of renovation, rehabilitation or 
               improvement of the property, would likely constitute 
               incidental repairs and be a currently deductible expense.

          The above-stated interpretation by the Internal Revenue Service 
          fully supports the Division's policy to consider comprehensive 
          pointing and waterproofing on exposed sides of a building as 
          qualifying for treatment as major capital improvements.  The work 
          performed, for example, must be greater than mere spot patching to 
          repair current leaks or trouble spots so as to be in the nature of 
          an improvement or betterment of the structure.

          Regarding the owner's contention, in substance, that the 
          Administrator's denial of a rent increase for the 
          pointing/waterproofing was not warranted, the Commissioner notes 
          that the owner was required to submit a diagram of the subject 
          building indicating the areas where the pointing/waterproofing was 
          performed and a statement from the contractor to the effect that 
          the building had been examined prior to the work, and that based 
          upon such examination, the work performed was all the work required 
          [so as to render the building free from exterior water seepage for 
          a reasonable period of time], as clearly required in the MCI 
          application.
                                          3
          ADMIN. REVIEW DOCKET NOS. HF-230007-RP (FI-230115-RO)

          A review of the record reveals that the owner did not submit the 
          requisite contractor's statement in the proceeding before the 
          Administator or in response to the July 14, 1993 notice, but rather 
          submitted a statement from the contractor advising "that all 






          pointing and waterproofing work was performed on all sections of 
          each exterior wall as specified and required in our contract."  
          This statement does not indicate that the building was inspected 
          prior to the work, and that the work was done as necessary based on 
          said inspection.

          The owner also submitted a statement from an architect, described 
          by the owner as "the supervising engineer responsible for the 
          various building improvements including the waterproofing", and 
          apparently part of the engineering consulting firm retained by the 
          owner "to advise what work was necessary and to insure that the 
          contractors properly completed the improvements", which statement 
          indicated "Pointing and waterproofing were done in different areas.  
          Based on inspection of the building, in my judgement all necessary 
          pointing and waterproofing on all sections of exterior walls where 
          such work was required has been done."  It is noted that this 
          statement, without letterhead or other identification, was 
          previously submitted during the proceeding before the Rent 
          Administrator in response to the directive to submit the required 
          contractor's statement.  The Commissioner finds that this 
          submission is not sufficient to satisfy the requirement for the 
          contractor's statement, in the view of the fact that the work was 
          actually performed by a separate contractor.

          As to the request for the owner to submit a detailed diagram 
          indicating the location and extent of the work performed, the 
          record reveals that the owner submitted two box outlines of the 
          building, neither of which is detailed enough to indicate the 
          extent to which the exposed sides of the subject premises were 
          pointed and/or waterproofed.  The owner has failed to establish 
          that the pointing and waterproofing work performed at the subject 
          premises was comprehensive enough to qualify for treatment as a 
          major capital improvement.

          Based on the foregoing, the Commissioner finds that the owner is 
          not entitled to any MCI rent increase for the claimed pointing and 
          waterproofing work at the subject premises.

          THEREFORE, in accordance with the provisions of the Rent 
          Stabilization Law and Code, it is

          ORDERED, that this administrative appeal be, and the same hereby 
          is, denied after reconsideration pursuant to Court order, and that 
          the order of the Rent Administrator be, and the same hereby is, 
          affirmed.

          ISSUED:



                                                       ____________________
                                                         Joseph A. D'Agosta
                                                        Deputy Commissioner
                                          4
    

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