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.:  7384
          IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
          APPEALS OF                             DOCKET NOS.:  HA 430013-RO
                 DAVID FRANKEL REALTY, INC.   :                HA 430116-RT
                 c/o ROSENBERG & ESTIS, P.C.                   HA 430253-RT
                                              :
                                      (OWNER)    RENT ADMINISTRATOR'S     
                          AND                 :  DOCKET NO.:  FE 430038-OM
                                               
                 ARMAND ROMAN AND             :  
                 THE TENANTS' ASSOCIATION of  
                 400 East 58th Street         :
                 New York, New York             
                 c/o Finkelstein, Borah,      :
                 Schwartz, Altschuler &       
                 Goldstein, P.C.              :
                                               
                                    (TENANTS) : 
          ------------------------------------X

          ORDER AND OPINION REMANDING PROCEEDING FOR ADMINISTRATIVE REVIEW

          On various dates, the above named petitioner-owner and petitioner 
          tenants timely filed and re-filed petitions for administrative 
          review (PAR) against an order issued on December 10, 1992, by a 
          Rent Administrator concerning the housing accommodations known as 
          400 East 58th Street, New York, New York, wherein the Rent 
          Administrator  granted in part the owner's application for a rent 
          increase.

          Subsequent thereto, the petitioner-owner filed a petition in the 
          Supreme Court pursuant to Article 78 of the Civil Practice Law and 
          Rules requesting that the Court direct the Division to 
          expeditiously determine the petitioner's administrative appeal.  
          The Court granted the relief requested.

          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 May 10, 1991, by filing an 
          application for a rent increase based on the total claimed cost of 
          $1,042,052.00 for the following items:  professional consultant 
          engineering fee; wall/roof; steel beam replaced; engineering 
          consultant fee; window replacement #1; window replacement #2; and 
          steel door.














          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          The tenants objected to the owner's application stating, in 
          substance, the following:  that many windows on the north side of 
          the building were replaced in 1978 and 1981 for which the owner was 
          granted a rent increase and the useful life of those windows had 
          not been exhausted (a list of tenants whose windows were previously 
          replaced was submitted); that no explanation is given as to the use 
          of two different window companies; that the window installation is 
          time barred having been completed prior to the owner's stated 
          completion date of May 2, 1989 on its application and the required 
          completion date on the contract of May 1, 1989 as evidenced by a 
          check for the (Ecker) windows that was paid on February 13, 1989; 
          that a discrepancy exists between the original Advance window 
          contract, listing 939 windows and the final billing statement 
          listing 859 windows; that a discrepancy exists between the 
          contracted price ($213,153.00) for the windows and the amount paid 
          ($199,717.50); that no explanation is given regarding the alleged 
          cost ($3,604.00) of lobby windows, when there are no windows in the 
          lobby and only one window on the first floor; that a discrepancy in 
          the cost per window is unexplained; that the replacement windows 
          are of inferior quality and numerous defects were not corrected by 
          the owner; that not all windows were replaced, specifically in the 
          "A", "F" and "G" apartment lines and in the public hallways and 
          stairwells; that the roofing and exterior work (waterproofing and 
          pointing) are presented as one total cost but are actually separate 
          installations; that the waterproofing/pointing was completed prior 
          to March 17, 1989 according to the related invoices and checks and 
          is therefore time barred; that the roofing and exterior work 
          performed is unworkmanlike as the preexisting leaks and dampness 
          persist on the 17th floor apartments and various other apartments, 
          despite the work performed; that structural damage occurring during 
          new construction at the adjacent building resulted in insurance 
          payment to the owners of the subject building which the tenants 
          believe is related to the steel beam replacement in the instant 
          MCI; that the professional consultants cost is not a valid MCI and 
          is time barred having been incurred in 1988; that the waterproofing 
          consultant's cost of $8,200.00 was for window consultation and 
          should be disallowed; and that the replacement of one steel beam is 
          more of a structural reinforcement, since all structural beams were 
          not replaced.  A list of tenants with leak and window problems was 
          submitted.

          A physical inspection of the subject premises took place on 
          October 2, and October 15, 1992 wherein the inspector found windows 
          had not been replaced in apartments in the "A", "F" and "G" lines 
          and window defects existed.  A reinspection was conducted on 
          November 24, 1992, and leaks were found in apartments PH-A, and 
          17-A, 17-F and 17-G.



                                          2






          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          The owner responded by letter dated  August 21 and September 14, 1992 
          to various requests from the Administrator for additional 
          information.  Included with their response as an exhibit was an 
          affidavit by the president of the company that installed the 
          windows stating that the window installation was not completed 
          until August 1989 when the last window was installed and all punch 
          list items were completed.  The tenants' reply followed on 
          September 30, 1992 reiterating many issues raised in their response 
          to owner's MCI application, additionally noting that the copy of 
          the owner's September 14, 1992 reply served on the tenants was not 
          accompanied by any of the exhibits purportedly attached. 

          On December 10, 1992, the District Rent Administrator issued the 
          order here under review granting a rent increase on an approved 
          total cost of $642,149.00 for the following items:  professional 
          consultant engineering (adjusted to exclude $8,200.00 listed as 
          supervision of window replacement); and exterior walls (adjusted to 
          include parapets, masonry, pointing, lintels and waterproofing).  
          The Administrator disallowed a total cost of $399,903.00 for the 
          following items:  engineering consultant fees; the windows based on 
          an inspection indicating that several apartment windows were not 
          replaced; and the roof surface and roof railing based on a DHCR 
          inspection conducted on November 24, 1992 finding that roof leaks 
          remained in apartments PH-A, 17-G, 17-F and 17-A.  A notation was 
          added to the order advising that installations commenced on or 
          after June 29, 1990 are to be amortized over an 84 months period.

          The petitioner-owner contends in substance in its petition, that 
          the instant order should be modified and the full cost of the 
          installations approved for the following reasons:  that the 
          calculations employed applying commercial rents over room counts 
          were a clear departure from the method specified in Section 
          2522.4(a)(2) of the Rent Stabilization Code and prior decisions by 
          the Office of Rent Control; that the roof surface and roof railing 
          installations "automatically" qualify as an MCI pursuant to 
          Sections 2522.4(a)(2) and Section 2522.4(a) of the Code; that the 
          owner corrected all leak conditions reported in the tenants' 
          submissions of November 13, 1992; that the findings in the DHCR 
          inspection report are erroneous, specifically in that corrected 
          conditions are not noted and the fact that the moisture meter 
          tested zero; that the service reduction complaints filed by the 
          tenants in the upper floors were dismissed by DHCR; that in the 
          alternative DHCR should follow previous precedent by exempting only 
          the four apartments affected by the leaks from the rent increase; 
          that pursuant to Policy Statement 89-6 lot line windows are not 
          required to be replaced and the windows that were not replaced in 
          apartments "A", "F" and "G" were lot line windows;  and that



                                          3












          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          submissions to DHCR dated August 21, 1992 and September 14, 1992 
          set forth the schedule of windows per apartment per line and a 
          breakdown of the number of windows in the building and the number 
          of windows replaced.

          In response to the owner's petition, the Tenants' Association 
          advised its filing of a PAR and requests a consolidation with the 
          owner's PAR.  They also state, in substance, the following:  the 
          method of allocating commercial rents in calculating the MCI rent 
          increase is proper; alleged submissions by owner dated November 12, 
          1992, containing evidence regarding lot line windows were never 
          received by the tenants; that the Administrator based its denial of 
          the window installations on an inspection that found that 
          additional windows other than lot line windows were not replaced; 
          that windows on the north side of the building were replaced 
          between 1978 and 1981 for which rent increases were imposed and the 
          useful life, determined to be 25 years, for those windows had not 
          been exhausted; that the original date of completion for the window 
          installation is listed as May 2, 1989, exceeding the two year 
          limitation for filing an MCI; that the owner's attempt to extend 
          the completion date to August 1989 based on the installation of the 
          windows in one unit is not credible (and does not follow the 
          contractual requirement of an eight week period March 1 to May 2, 
          1992 for the installation); that the windows were installed in a 
          piecemeal basis, eight windows having been installed prior to 
          February 1989, the majority of the windows installed as per 
          contractual requirements between March 1 and May 2, 1989 although 
          invoices from Advance windows indicate an earlier completion date 
          for which a rent increase is time barred; that the roof work was 
          properly disallowed as it did not correct leaks previously 
          experienced particularly by tenants on the 17th floor which have 
          continued unabated as of October 1, 1992 with moisture meter 
          readings in excess of 80%; that the owner claims to have inspected 
          various apartments and performed corrective repairs but fails to 
          submit substantiating evidence. 

          The 76 individual petitions that were consolidated at the request 
          of the Tenants' Association and the one individual petition are all 
          identically worded and state in substance the following:  that 
          waterproofing and roofing cannot be granted or disallowed in part 
          as each installation is performed as one project; that similarly 
          all attendant consultant fees should be disallowed; that the 
          waterproofing (last payment check dated February 2, 1989), the 
          steel beam replacement (completed November 1988) and steel roof 
          door (invoice dated April 17, 1988) were completed more than two 
          years before the MCI application was filed (May 10, 1991).  Letters 
          were submitted by the tenants of Apts. 17-F, 17-C and 12-F 
          regarding the owner's continued failure to repair leak damage.


                                          4






          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          In response to the tenants' petition, the owner states in substance 
          the following:  the PAR submitted by tenant McNicholl on behalf of 
          the Tenants' Association is procedurally defective absent the 
          requisite signatures of tenants signing as petitioners (as 
          indicated to have been attached to the petition) and tenant 
          McNicholl's authorization to act as tenants' representative; that 
          in the alternative the sole petitioner is tenant Carol McNicholl; 
          that tenant McNicholl's petition (Docket No. HA 430253-RT) and 
          tenant Armand Roman's petition (HA 430116-RT) are identically 
          worded and should be consolidated; that the installations qualify 
          under the Rent Stabilization Code as major capital improvements; 
          that the unique design of the building and the complexity of the 
          work required engineering consultants to oversee separately the 
          exterior facade work and the window installations and as such it 
          may qualify as part of the cost of an MCI; that the exterior work, 
          the steel beam and steel roof door are part of the exterior work 
          completed in 1990; that the tenants' reliance on checks and 
          invoices is faulty as many of the dates on the documents could 
          naturally precede the date the actual work was performed; that the 
          tenants incorrectly referred to an April 1989 invoice as the basis 
          for the untimely filing of the steel door when the actual date on 
          the invoice is May 17, 1989 which is within the two year filing 
          period; that although the roofing and exterior work was one 
          project, the cost of each was distinguishable and would not have 
          merited a denial of the cost of the entire project; that the owner 
          has repeatedly attempted to gain access without success to tenant 
          Schoeneman's apartment (17-F) and therefore the November 9, 1992 
          letter should be disregarded; that it should be noted that DHCR 
          under Docket No. FJ 420190-S denied tenant Schoeneman's service 
          complaint for painting and plastering the entire apartment; that  
          tenant Kimura's (Apt. 12-F) (memo dated January 5, 1993) should 
          also be disregarded as DHCR under Docket No. FJ 410392-S also 
          denied that tenant's service complaints; and that tenant Miral's 
          allegations in her letter (dated January 5, 1993) were corrected by 
          the owner.

          On April 8, 1993, the tenants' filed a supplement to their response 
          containing individual comments from five (Apts. 17-A, 17-B, 17-D, 17- 
          E and 17-F) of eight apartments on the 17th floor and a penthouse 
          apartment (PH-A) concerning continual leak damage.  It was noted 
          that tenant Kramer of Apt. 17-B was constructively evicted during 
          the period of July 1991 to June 1992 because of a reoccurrence of 
          leaks.  Her submitted comment indicates that the leaks have 
          reappeared since returning to her apartment.

          After careful consideration of the evidence of record, the 
          Commissioner is of the opinion that the proceeding should be 
          remanded to the Rent Administrator for further consideration of 
          several issues that were not definitively determined below.

                                          5












          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          The owner has objected to the consolidation of 76 separate tenant 
          petitions into one docket number, claiming that the requirements of 
          Section 2529.1(b)(2) regarding petitions filed by representatives 
          have not been satisfied.  The Commissioner finds, however, that 
          subsection (b)(1) of that section authorizes treatment of a PAR 
          filed by two or more owners or tenants as a joint PAR.  The 
          individual PARs herein were duly signed by each tenant and were not 
          representative in nature.

          With regard to the exclusion of a portion of the approved costs 
          attributable to commercial rents, the Commissioner finds that the 
          Administrator correctly used the percentage of income generated by 
          commercial units rather than room count.  Although a room count was 
          used by the Office of Rent Control in apportioning improvements 
          between residential and commercial tenants, the DHCR is not 
          required to use the same methodology.  The Rent Stabilization Code 
          does mandate that the monthly rent adjustment for improvements be 
          calculated by dividing the dollar amount by the number of rooms in 
          the building.  However, since the Code applies only to residential 
          units, the formula does not apply to commercial units and the 
          exclusion of a portion of the improvement cost using income 
          percentage is not prohibited and is in accordance with established 
          procedure.  (Accord:  CB 430083-RO-SJR 3305, CE 430107-RO)

          The owner's contention that a rent increase should be granted for 
          the roof or at least for all units except those where the inspector 
          found leak damage is without merit.  A rent increase for a major 
          capital improvement is warranted only where the installation is 
          completed in a competent and workmanlike manner.  The inspector 
          found leak damage from the roof in several top floor apartments, 
          establishing that the roof is indeed defective.  Although the 
          Division has in the past allowed a rent increase for some 
          improvements even though individual apartments were excluded because 
          certain repairs were found to be required, the result is appropriate 
          only where the defects in one unit have no effect on the tenants of 
          other units.  A roof, however, inures to the benefit of the entire 
          structure and must be free from leaks and other defects in order to 
          qualify for an MCI rent increase.  (Accord:  DG 630053-RT, et. al.)

          With regard to the windows, the Commissioner finds that additional 
          investigation by the Rent Administrator is required.  The owner 
          asserts that only lot line windows were excluded from the 
          installation and explains that "A", "F" and "G" apartments have lot 
          line windows.  The inspector reported that windows other than on 
          the lot line were not replaced but cited only "A", "F" and "G" 
          apartments as ones in which not all windows were replaced.  The 
          owner has submitted a sample floor plan for the building which



                                          6






          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          seems to support its identification of lot line windows.  The 
          tenants have not alleged that anything but lot line windows were 
          excluded from the installation and the contract as well as the 
          floor plan appear to confirm the owner's statement that only lot 
          line windows were not replaced.  On remand, another physical 
          inspection should take place wherein the inspector should prepare 
          a diagram showing the lot line for the building and should identify 
          exactly which windows were not replaced.  The allowable exclusion 
          for lot line windows (as reflected in Policy Statement 89-6) is 
          based on the premise that such windows are required by applicable 
          building codes to contain "protectives" (i.e. wired glass).  On 
          remand, the owner should be required to establish that the lot line 
          windows in this building have such protectives.

          Further investigation is also needed with regard to the completion 
          date of the window installation to determine whether the 
          application was filed within the required two year limitation 
          specified in the Rent Stabilization Code.  The evidence in the 
          record indicates that the owner stated in the application that the 
          window installation was completed on May 2, 1989 but the 
          application was not filed until May 10, 1991, more than two years 
          later.  The owner later amended the completion date to August 1989 
          and submitted evidence, including an affidavit by the contractor, 
          indicating that the installation was completed on August 16, 1989 
          when the last windows were installed and punch list items were 
          completed.  However, a packing slip dated August 15, 1989 refers to 
          the delivery of only one window.  The cancelled checks establish 
          that all payments were made by May 1989 but a reconciled billing 
          statement dated October 1989 resulted in a refund to the owner.  On 
          remand, the Administrator should ascertain when the window 
          installation was physically completed (and not when all defects 
          were corrected) and the two year limitation should be measured from 
          that date.  (Accord:  EL 630365-RO)

          It is undisputed that some windows were installed between 1978 and 
          1981 and that a rent increase for rent controlled tenants was 
          granted in 1982.  In view of the owner's unilateral removal of the 
          previously installed windows (for which the useful life had clearly 
          not expired), any rent increase ordered by the Rent Administrator 
          for windows should contain an appropriate offset reflective of the 
          cost of such previously installed windows.

          With regard to the tenants' allegation that if the roof is 
          disallowed because of leaks, all other components of the exterior 
          renovation and waterproofing should also be disallowed is without 
          merit.  The roof work is sufficiently separate, distinct, and 
          unrelated to the other work such that evidence of roof leaks does 
          not establish that the other components of the work are also 
          defective.

                                          7












          ADMIN. REVIEW DOCKET NOS.: HA 430013-RO, HA 430116-RT, HA 430253-RT


          The Commissioner also finds that the application for the exterior 
          rehabilitation work was filed within the two year limitation.  The 
          steel beam replacement was an integral part of this work which 
          necessarily had to be done first but would not qualify as an MCI by 
          itself.  (The tenants bare allegation that the cost of the beam 
          replacement was paid for from insurance proceeds is completely 
          without substantiation).  Similarly, the invoice for the steel 
          fireproof door is dated May 17, 1989 (and not April 17, 1989) and 
          is therefore timely.

          Based on the foregoing, the Commissioner deems it appropriate to 
          remand  this proceeding to the Rent Administrator for further 
          processing in accordance with the determination herein.

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

          ORDERED, that these administrative appeals be, and the same hereby 
          are, granted to the extent of remanding this proceeding to the Rent 
          Administrator for further processing in accordance with this order 
          and opinion.

          It is further ordered that the automatic stay of so much of the 
          Rent Administrator's order as directed a retroactive rent increase 
          is hereby continued until a new order is issued on remand.



          ISSUED:





                                                                            
                                                      Joseph A. D'Agosta
                                                      Deputy Commissioner












                                          8
    

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