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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