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.: 6187
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO UPON REMAND 
                                          :  IC110002RP (BI110250RO)           
          GEORGE CAVIRIS                     
                                             RENT ADMINISTRATOR'S      
                            PETITIONER    :  DOCKET NO.: AA130241OM
      ------------------------------------X                             
            ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
                          DOCKET NO. IC110002RP UPON REMAND

      On September 30, 1987 the above named petitioner-owner filed a Petition for 
      Administrative Review (PAR) against an order issued on September 4, 1987 by 
      the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York, 
      concerning the housing accommodations known as 48-02/04 48th Street, 
      Woodside, New York, various apartments.

      On April 26, 1990 the Commissioner issued an order and opinion denying the 
      petitioner's administrative appeal.

      Subsequent thereto, the owner filed a petition in the Supreme Court 
      pursuant to Article 78 of the Civil Practice Law and Rules requesting that 
      the order of the Commissioner be annulled.  The proceeding was remitted by 
      Court order to the Division for further consideration.

      On November 15, 1991 the Commissioner issued an order and opinion again 
      denying the petitioner's administrative appeal (S.J.R. No. 5045).

      Subsequent thereto, the owner filed another Article 78 petition in the 
      Supreme Court requesting that the order of the Commissioner be annulled.  
      By Court order the Commissioner's order of November 15, 1991 was annulled 
      and the proceeding was remitted to the Division for reconsideration of the 
      issues raised by the petitioner in its Article 78 petition (S.J.R. No. 
      6187).

      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 the administrative appeal.

      This proceeding was commenced by the owner's filing an application for a 
      major capital improvement (MCI) rent increase for the controlled and 
      stabilized apartments in the premises based on the pointing and 
      waterproofing of the subject building, including the replacement of window 
      lintels.  The owner submitted documentary evidence showing that he made 
      expenditures in the amount of $68,000.00 for said work.

      The documentation the owner submitted included a copy of the contract which 
      indicated that the following work was performed:

           - steam clean, brick point and silicone coat front (48th Street)
         and side facing 48th Avenue;







          ADMIN. REVIEW DOCKET NO.: IC110002RP (SJR 6187)

           - replace two rows of defective bricks on 48th Avenue side;     

           - waterproof all remaining walls with two coats of waterproof
         cement with acrylic 60;

           - replace all steel lintels which are defective;

           - waterproof sides of bulkheads facing rear court;

           - repair all defective window sills;

           - replace leader on side alley;

           - replace two steel doors.

      The owner also submitted copies of cancelled checks, a Contractor/Vendor 
      Information form (RA-79 Supplement I), and a statement from the contractor 
      as follows:

           All exposed walls of the building at 48-02 and 04 48 Street 
           Woodside were examined and found to need pointing or 
           waterproofing prior to the commencement of any work on the 
           building.  All areas that were pointed or waterproofed were areas 
           where it was required.  All lentils [sic] were found defective 
           and replaced.

      The owner also submitted a diagram of the work performed which contained an 
      outline of the subject building, the statement "all exposed walls pointed 
      or waterproofed fully" and arrows drawn from said statement to each line of 
      the outline.

      In the herein appealed order, the Rent Administrator determined that the 
      pointing and waterproofing work done by the owner did not constitute an MCI 
      and denied the owner's application.

      In this petition, the owner contends that pointing and waterproofing were 
      done on 100% of the exposed exterior wall area of the building as certified 
      by the contractor, and that all work was necessary.

      Several tenants responded to the petition and indicated either that they 
      could not afford a rent increase, that they had service complaints or that 
      they had vacated the subject premises.

      In his Article 78 petition (S.J.R. No. 6187), the owner explained that the 
      exterior walls of the building facing public streets were pointed and 
      siliconed while the two remaining walls, which faced alleys, were covered 
      with two coats of the same waterproof cement used for pointing.  The owner 
      further stated:

           The only difference between waterproofing and pointing was that 
           since the two waterproofed sides of the building faced alleys, 
           petitioner did not have the same aesthetic need to utilize the 
           more painstaking and expensive waterproofing method of pointing 
           rather than to have the same material applied to the face of the 
           bricks, as well as the spaces between them.  


          ADMIN. REVIEW DOCKET NO.: IC110002RP (SJR 6187)

      The owner also indicated that he "could not afford to point the rest of the 
      less visible areas of the building" and therefore had the contractor apply 
      "waterproof plaster" to these areas.

      After careful reconsideration, the Commissioner is of the opinion that this 
      petition should again be denied.

      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.

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

      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, replastering 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 









          ADMIN. REVIEW DOCKET NO.: IC110002RP (SJR 6187)

           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 as necessary on exposed sides of a building as qualifying for 
      treatment as a major capital improvement.  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 that 
      prolongs or extends the useful life of the structure.

      The Commissioner notes that waterproofing cannot be substituted for 
      pointing for the purpose of determining whether comprehensive pointing and 
      waterproofing as necessary were performed because pointing involves the 
      physical examination of the mortar between all of the exposed brick and 
      includes a testing of the mortar by scraping out same and replacing 
      removed, missing and/or eroded mortar while waterproofing, as distinguished 
      from pointing for DHCR purposes, is merely the application of a sealing or 
      covering material (such as silicone or, as in this case, waterproof cement) 
      by brush or spray and is therefore less extensive and of a less structural 
      nature than pointing.  Also, waterproofing is more likely to chip and may 
      only last a few years before weathering requires reapplication, whereas 
      pointing lasts a substantially longer period of time.  Therefore, the use 
      of waterproof cement (cement with acrylic 60) as a waterproofing material 
      on the rear two walls does not subsitute for the absence of brick pointing 
      on the rear two walls before the waterproof cement was applied.

      The evidence of record in this proceeding does not establish that 
      comprehensive pointing and waterproofing as necessary were performed at the 
      subject premises.  The owner's statements that the entire building was 
      either pointed or waterproofed, without a description sufficient to 
      indicate the specific areas or locations where each was performed, is not 
      adequate to support a finding that the work was comprehensive.  
      Furthermore, the assertion by the owner that waterproofing was substituted 
      for pointing in certain areas for aesthetic and/or financial reasons 
      confirms that comprehensive "pointing" was not performed as necessary.

      In support of his contention that an MCI rent increase is warranted for the 
      work performed at the subject premises, the owner refers to a DHCR 
      proceeding involving another building he owns (located at 40-39 48th 
      Street, Sunnyside, New York) which was pointed and waterproofed.  In 
      Administrative Review Docket No. BF110006RO issued May 10, 1991, the 
      Commissioner remanded the proceeding to the Administrator to reconsider the 
      owner's original MCI rent increase application in accordance with DHCR 
      policy that pointing and waterproofing, as necessary (rather than pointing 
      of the entire structure) constitutes an MCI.  Upon remand, the 
      Administrator determined that an MCI rent increase was warranted for the 
      work performed (Docket No., FE130020RP, issued July 26, 1991).  In the 
      instant Article 78 proceeding (S.J.R. No. 6187) the owner asserted, in 
      substance, that the pointing and waterproofing work for which he received 


          ADMIN. REVIEW DOCKET NO.: IC110002RP (SJR 6187)

      the rent increase was no more extensive than the work performed at the 
      subject premises and therefore, the denial of an MCI rent increase for the 
      work herein was unwarranted.

      However, the Commissioner notes that the proceeding cited by the owner was 
      remanded to the Administrator to determine whether the work performed 
      qualified for an MCI rent increase in view of the fact that the basis for 
      the original denial therein, i.e., that the pointing and waterproofing was 
      not performed on 100% of the building, was not reflective of Division 
      policy which provides, as previously indicated, that comprehensive pointing 
      and waterproofing, as necessary, qualify as a major capital improvement.

      The Administrator's determination in said remanded proceeding that the work 
      therein qualified as an MCI was predicated on the documentation submitted 
      by the owner which included copies of the contract, cancelled checks, a 
      diagram, and a statement from the contractor as follows:

                     All exposed sides of the building at 40-39 48th 
                Street Sunnyside were examined prior to the start of 
                work.  The front of the building (the 48th Street side)
                needed only spot pointing around the lentals [sic].  
                Also 9 lentals [sic] were found to need replacement on 
                the top floor of the front of the building.  Also the 
                front of the building needed cleaning.

                     All remaining sides needed to be completely 
                waterproofed due to the poor condition of the morter 
                [sic] between the bricks.

                     Also 12 square feet of the parapit [sic] were 
                found defective and in need of replacement.

      It would appear from the foregoing, as evidenced by the documentation 
      submitted by the owner, including the contractor's statement, that spot 
      pointing was performed; that areas where the mortar was in poor condition 
      were waterproofed; that the work therein did not constitute comprehensive 
      pointing and waterproofing, as necessary, and thus the rent increase 
      granted therefor 
      was not warranted.  While the determination therein reflects the law of the 
      case, as no PAR was filed therefrom, the Commissioner need not perpetuate 
      error and is therefore not bound by the Administrator's determination in 
      the proceeding cited by the owner.

      Based on the foregoing the Commissioner finds that the work herein did not 
      constitute comprehensive pointing and waterproofing as necessary and does 
      not qualify for a major capital improvement rent increase.

















          ADMIN. REVIEW DOCKET NO.: IC110002RP (SJR 6187)

      THEREFORE, in accordance with the Rent and Eviction Regulations and the 
      Rent Stabilization Law and Code, it is

      ORDERED, that this petition be, and the same hereby is, denied, and that 
      the order of the Rent Administrator be, and the same hereby is, affirmed.

      ISSUED:








                                                                    
                                           JOSEPH A. D'AGOSTA
                                           Deputy Commissioner

    

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