Matter of Sp 141 E 33 LLC v New York State Div. of Hous. & Community Renewal
Annotate this CaseDecided on December 23, 2010
Supreme Court, New York County
In the Matter of the Application of SP 141 E 33 LLC, Petitioner,
against
New York State Division of Housing and Community Renewal, 141 East 33rd Street Tenants' Association & Nancy Birnbaum, Respondents.
111227/10
Phillip L. Billet, Esquire (counsel for petitioner)
Belkin Burden Wenig & Goldman
270 Madison Ave
New York NY 10016
Sandra A. Joseph, of counsel (counsel for respondent DHCR)
DHCR
25 Beaver St 7th Fl
New York NY 10004
Seth A. Miller, Esquire (counsel for respondents 141 E 33rd Street Tenants' Association and Nancy Birnbaum)
Collins, Dobkin & Miller, LLP
277 Broadway 14th Fl
New York NY 10007-20001
Anil C. Singh, J.
Petitioner moves pursuant to Article 78 of the CPLR to annul an order issued by respondent New York State Division of Housing and Community and Renewal ("DHCR") on June 24, 2010, vacating a previously issued MCI order that had granted petitioner a rent increase for rent-stabilized apartments. Respondents DHCR, 141 East 33rd Street Tenants' Association and Nancy Birnbaum oppose the petition.
In 1998, petitioner's predecessor-in-interest undertook pointing work on portions of the building at a cost of $15,000.00. In March 1999, the predecessor filed an "Owners Application for Rent Increase Based on Major Capital Improvements (MCI)." In connection with this application, the prior owner's general contractor, Chris Proev, submitted a statement dated July [*2]31, 1998, where he stated, "I have examined all exposed facades of the premises. The pointing and waterproofing work performed was done in all necessary areas. Approximately 1,500 square feet of areas was pointed and waterproofed." (Sic.) On June 11, 1999, DHCR granted petitioner's predecessor-in-interest a rent increase of forty-seven cents per room in each rent-stabilized apartment.
In 2005, the prior owner undertook additional pointing work. In its April 11, 2006 MCI application, the prior owner stated that 18,532 square feet of pointing and waterproofing work was performed on the building. The contractor provided a written statement dated January 23, 2006, stating that "[a]ll exposed facades of the cited premises were examined prior to commencement of work. The described pointing was performed on all necessary areas."
On February 27, 2009, DHCR's Rent Administrator granted the MCI application to the extent of authorizing the petitioner to a rent increase of $28.86 per room in each rent-stabilized apartment.
Thereafter, on March 31, 2009, the Tenant's Association and Birnbaum filed a petition for administrative review ("PAR") arguing that the MCI rent increase was improper in that the owner had failed to request a waiver of the useful life requirement of Rent Stabilization Code Section 2522.4.
The PAR was granted on June 24, 2010, and DHCR revoked the MCI rent increase. DHCR's Deputy Commissioner held that the owner had been granted an MCI rent increase in 1999 for pointing and waterproofing completed in 1998. The pointing and waterproofing for which the earlier MCI had not been granted "had not outlived its useful life at the time the work described in the instant Application was begun on March 1, 2003." The issuance of the 1999 MCI increase "presumes that all required documentation had been received from the owner during the administrative processing of that Application, including a statement that the work was sufficiently comprehensive so as to preclude the need for additional pointing to be performed with the fifteen-year useful life period." Nor had the owner submitted a request to waive the useful life requirement.
Petitioner contends that the work performed in 1998 had no impact on its entitlement to an MCI rent increase for the 2005 pointing and waterproofing. The 1998 work was performed on a different area of the building. Pursuant to Section 2522.4(a)(2)(i)(d) of the Rent Stabilization Code, if the specific item being replaced has outlived its useful life, an MCI increase is warranted for the replacement of the item. Therefore, the owner is entitled to an MCI increase for the 2005 work performed on a different portion of the facade which had outlived its useful life.
Furthermore, petitioner argues that in granting the PAR, DHCR failed to take into account the equities involved. The purpose of the MCI provisions is to encourage major capital improvements and to give owners a reasonable return on their investment in their buildings.
Petitioner's argument that only the item being replaced must meet the requirement of useful life schedule ignores the statutory basis for a MCI increase. In order to obtain a MCI increase, the owner must perform work on the entire building that "inures directly or indirectly to the benefit of all tenants, and which includes the same work performed in all similar components of the building." (Rent Stabilization Code Section 2522.4[a][2][i][c]). Since the work benefits the entire building, all tenants receive a MCI increase.
Where pointing and waterproofing work is performed on only a portion of the building, [*3]an owner is entitled to a MCI increase, provided the owner establishes that all exposed areas of the building have been inspected, that work was done as necessary, and that further pointing and waterproofing is not necessary within the useful life of the work (West Village Associates v. New York State Division of Housing and Community Renewal, 277 AD2d 11 [1st Dept. 2000]). Additional work done by the owner prior to expiration of the useful life of work does not qualify for a MCI increase (Equity Properties v. Division of Housing & Community Renewal, 288 AD2d 117 [1st Dept. 2002]).
The Rent Stabilization Code's useful life requirement is not inflexible. An owner may make an application to waive the useful life requirement pursuant to Rent Stabilization Code Section 2522.4[a][2][i][e][1] and based on DHCR's operational bulletins. However, a waiver must be obtained prior to commencement of the work.
In this case, the owner's predecessor-in-interest failed to request a waiver. The useful life waiver requirement is not a mere ministerial act that can be overlooked. It is a requirement of the Rent Stabilization Code and express written policy of DHCR. The Appellate Division in Equity Properties v. Division of Housing & Community Renewal, supra, found that there was a rational basis for DHCR's useful life policy.
It is important to note in this case that while the pointing and waterproofing performed in 1998 consisted of only a small portion of the facade, the contractor expressly stated that all exposed areas of the facade had been examined and that pointing and waterproofing work had been performed on all necessary areas. In other words, no additional work was needed to be performed during the fifteen-year useful life of pointing and waterproofing performed on the building. It was on this basis that the owner's predecessor was granted a building-wide MCI rent increase for work performed on a small portion of the facade.
DHCR's order revoking the MCI granted by the Rent Administrator based on the owner's failure to request a waiver prior to commencement of the work has a rational basis and was neither arbitrary nor capricious.
Nor was DHCR's final order inequitable. First, the policy is rationally based. Second, had the owner's predecessor requested an application for a waiver, DHCR would have had an opportunity to decide whether the request to perform additional pointing and waterproofing was necessary and proper.
For these reasons, the petition is dismissed with prejudice.
The foregoing constitutes the decision and order and judgment of the court.
Date:December 23, 2010______________________________
New York, New YorkAnil C. Singh
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