MCI Increase: Oil to Gas Conversion

[hsinorc]

Manhattan, pre-war walkup, I am a rent-stabilized 1-BR on a 2-year renewal, but most units in the building are fair market leases.

New owners converted oil#2 burner to gas, and applied for MCI increase. I opposed on 3 grounds, two as to law, one as to fact:

1. The conversion was not for tenant's benefit: no change in service to me, I still get the same heat/hot water, delivered via the same pipes/radiators. The only benefit is the cost saving to the LL. They are saving money, and I am supposed to pay more. As a matter of law, the MCI did not 'directly or indirectly benefit all tenants,' as required by fact sheet #24, and the increase should have been denied;

2. Life-expectancy of this (2001) 12-year-old oil burner was 20 years according to the 'useful life schedule' set forth in Fact Sheet #33, which also requires that LL apply for a waiver of this 'useful life' provision before the work commences. LL did not apply for a waiver, nor was one granted. And, #2 oil is in compliance with NYC regs through 2030, and certainly within the useful life of the oil burner (which would have been 2021). As a matter of law, the MCI increase should have been denied;

3. The PW1 application specified a job cost of $18,000, and was submitted by a named individual and company. The paperwork submitted in support of the MCI Increase claimed $50,000 costs, and showed checks and receipts paid to a different company. Based on these facts, there is a question as to the costs and payments, and the increase, should be adjusted in accord with the facts.

In his Order Granting MCI Increase, the Rent Administrator listed my objections, but granted the increase without comment as to them, and without any explanation why they lacked merit in his view.

I am prepared to file a Petition for Administrative Review, but would like to know whether I am spinning my wheels. Do my arguments lack merit? Are these oil-to-gas conversions 'rubber-stamped' as a matter of policy? Are the 'useful-life' and 'useful-life waiver' provisions not enforced? And is there no raising of eyebrows when the numbers don't add up, as they do not in this case?

Thank-you.

h.

[SlopeGuy]

Firstly, congratulations to you for at least mounting a credible challenge to your LL's horrible MCI. I'll leave the technical aspects of your question to TenantNet, however I would advise you to make sure you post your PAR well within the response time allotted because they will be sure to claim it didn't arrive on time if you wait too long.

I had my large volume challenge PAR thrown out because DHCR claimed it arrived one day beyond the response time window. Meanwhile it took them two YEARS to rule in the LL's favor after my initial challenge. IMO, DHCR is a broken, pro-LL organization which is also totally dysfunctional.

I would re-state my case as you've outlined it and be sure to include printouts of the exact regulations you're citing. I would also specifically request a statement which explains why they've ruled in your LL's favor. Also if you can get any of your fellow RS tenants to sign the official signature page in solidarity with your PAR that would bolster your case.

MCI's are one of the worst but effective tools in RS LL's arsenal against RS tenants, for the sole purpose of passing along onerous rent increases on top of whatever the RGB gives them. LL's exploit MCI's ruthlessly (often fraudulently) and get a permanent rent increase reward.

[hsinorc]

Thank-you. Yes, I sent my first response Certified, RRR. Will do so this time, as well.
h.

[TenantNet]

On your opposition arguments...

1. That it does not benefit you, well that doesn't matter. DHCR will ignore tis argument.

2. Life expectancy. This is serious. You need to find out from DHCR if any waiver was granted. OTOH, it was either NYC or NYS that are requiring all residential buildings to convert to #2 oil. Are you saying that the 2001 boiler was #2 oil or a different grade? I would concentrate on this but you should do further investigation as to what NYS/NYC are requiring.

3. The PW1 (the DOB application form) cites $18,000 job cost. DHCR will ignore this, but you should continue to investigate this as potential fraud. Contractors very often low-ball costs in order to pay less fees to DOB.

Understand the system is corrupt as is DOB and DHCR.

You should indeed file a PAR. My comments above are my opinion, but others might have differing opinions.

After a PAR, you could bring an Article 78 in Supreme Court. That's more complicated and the judges are often as corrupt as DHCR. If you want to go further, I would suggest getting a legal consultation from a tenant law firm.

As for the PAR, what matters i when you send it to DHCR, not when it arrives. You have 35 days, but I would get it in the mail by 30 days, and better, either deliver it in person or send overnight. And yes, they can take years to make decisions. But the filing of a PAR will stop the retroactive increase pending the PAR decision.

[hsinorc]

Thanks, again, for your response, it's most helpful.

I was thinking that my strongest argument was the useful life argument, and you have confirmed that. The 2001 burner was #2, and that complies with city and state regs through 2030, so there was no need to replace that, and there is no indication anywhere in the file that a waiver was applied for, or granted.

I do think the payment discrepancies are suspicious, but without subpoena power, there is no way to prove it. DHCR obviously accepts the LL's expenditure without question. If I bring an Art. 78, I will ask the judge for discovery, to see the tax returns and bank accounts of the owners and this company. These owners own other properties, and the payments may have been made to this company for work on other properties, etc.

But, do you think that $50,000 is the right ball-park for a conversion like this? That's the one question I have no idea about. If this is a typical cost for this work, then I'm not inclined to belabor it; I'll stick with the useful-life argument, and focus on that.

Thanks again.

h.

[TenantNet]

That the old boiler was #2 is not the point. The point is that the useful life of the old boiler has not expired. Get DHCR's useful life schedule.

But look at the issue closely. A few years back Bloomberg and Quinn passed new legislation requiring all residential boilers in the city convert to No. 2 oil (I think it was #2 but doublecheck that). This requirement should trump the useful life schedule. And if so, then that the 2000 boiler was No. 2, well that should do it.

In short, make both arguments.

AFAIK, you can't do discovery in an A78. It's an appeal, not a new proceeding.

Hard to say what's a reasonable price for a boiler. Depends on the entire scope of work and the size of the building. You can bring in an engineer who can probably answer that.

[hsinorc]

Thank-you for your responses, they have been most helpful. As I prepare my PAR, I am focusing on Useful Life, as follows, and I have a procedural question, after:

USEFUL LIFE:

I have checked, and the Useful Life of the burner (ORA Fact Sheet #33) was 20 years, and the Owner's documents, and the Order itself, state that the burner was burning #2 Oil. In my PAR I am citing the following:

In April of 2011, upon the release of the PlaNYC update, Mayor Bloomberg finalized aNew York City Department of Environmental Protection (DEP) rule (in PDF) that will phase out the use of two highly polluting forms of heating oil-Number 6 oil (No. 6) and Number 4 oil (No. 4). The regulations were designed to balance near-term pollution reduction with minimizing costs for buildings. Details are below:
• Effective immediately, no new boiler or burner installations will be permitted to use No. 6 or No. 4 oil, and instead must use one of the cleanest fuels, such as ultra-low sulfur Number 2 oil (No. 2), biodiesel, natural gas, or steam.
• Beginning July 1, 2012, existing buildings that use No. 6 oil must convert to a cleaner fuel (low-sulfur No. 4 oil or cleaner) before their three-year certificate of operation expires. This will result in a full phaseout of No. 6 oil by mid-2015.
• By 2030 or upon boiler or burner replacement, whichever is sooner, all buildings must convert to one of the cleanest fuels.
• Compliance waivers will be considered through the New York City Department of Environmental Protection.
(Source: http://www.nyc.gov/html/gbee/html/codes/heating.shtml)

That 2001 #2 burner had a useful life until 2021, and was in compliance with NYC Regs (above), burning #2 Oil, until 2030. There was no need to replace it.

Fact Sheet #33 does allow for a 'waiver' of the useful life:

"An owner who wishes to request a waiver of the useful life requirement must apply to the DHCR for such waiver prior to the commencement of the work for which he or she will be seeking a major capital improvement rent increase."

But there is no indication in the documents that a useful life waiver was ever applied for, or granted. Owner's Supplement I to the Application for MCI Increase states "The burner was previously replaced with Boiler sometime in 2001. PLEASE SEE COVER LETTER REQUESTING A WAIVER OF THE USEFUL LIFE SCHEDULE AS WELL AS CERTIFICATION FROM A PROFESSIONAL ENGINEER." This Supplement is dated Oct. 2015, and states that the work was completed in Oct. 2014. However, the file contains no such "letter requesting a waiver of the useful life schedule," nor any indication that a waiver was granted. And, this Supplement is dated one year after the work was completed.

You suggested that I check to see whether a waiver was granted; I sent in a FOIR for the full file, and they sent it to me, and no such a waiver appears, so this still seems my strongest argument.

(Sidebar: I am referencing ORA Fact Sheets in my arguments. Do you advise that I attach these Fact Sheets to my Petition, or should I assume that whomever will be reviewing and deciding this has and knows what the Fact Sheets contain?)


PROCEDURAL QUESTION:

After I requested and received the Owner's documents in support of this MCI Increase, and submitted my Tenant's Response, one of my lesser arguments was that the owner was claiming 26 rooms. A previous MCI Order (1990's) acknowledged 28 rooms. I mentioned that, and cited the Docket Nos. from that case.

After I submitted my Tenant Response, I never heard back from DHCR until I received the Order Granting MCI Increase. Yet the Order states that the Owner had responded to my Response re: room count by claiming the kitchens do not meet the 59 sq. ft. threshold. The Order removed all kitchens from the room count, and reduced the room count to 18.

I was not advised that Owner had responded, nor given any opportunity to address Owner’s claims. Is this proper procedure? The Notice to Tenant of MCI Rent Increase Application states that “If you wish to challenge this room count you must provide substantive evidence in the form of either copies of floor plans or hand drawn diagrams, which include the exact measurements of all walls, noting the location of all windows, doors and archways for each room in the apartment.”

I have no way of knowing whether the Owner submitted those, or simply wrote a note. I do not necessarily want to contest the room count as, having done the math, the increase actually comes to a few dollars less per month this way. However, it is the procedure that I question: am I not supposed to be notified if the Owner responds to my response; am I not entitled to see the Owner's documents in response, and respond if appropriate? Am I required to file a new FOIR to see the Owner's response, and how would I know to file it if I was not notified that the Owner had submitted a response?

Thank, again,

h.

[10ants]

Did the LL need a waiver of the useful life of the oil burner for an oil->gas conversion?

There are various valid reasons to convert to gas irrespective of the useful life argument, e.g:

increase efficiency from a power-vented burner
increase reliability due to not needing service/oil deliveries
eliminate leaking fuel tanks
comply with pollution or energy audits

In general, I was under the impression that the useful life schedule only applies when replacing a 'system' with an 'identical' one. Also, I don't think that DHCR would prevent obtaining an MCI on a system that increases overall energy efficiency.

[hsinorc]

Thank-you, these are effective arguments, and it may be that these are why the MCI Increase was granted. However, the Rent Administrator did not address any of these points, nor any of my arguments; just a blanket order granting the increase (hence my PAR). I would at least like an explanation, and perhaps I will get one after this PAR is heard.

Thanks, again.

h.

[TenantNet]

10 ants, that's incorrect. If a LL put in a boiler in 2012 and a newer, more efficient one in 2016, that does not override the useful life schedule. And I have never heard that any replacement system needs to be identical for useful life to apply. What might be a factor is if the LL obtained a MCI for the 2012 installation.

One thing that I think will override a useful life schedule is the NYC local law pushed through by Bloomberg that all boilers must upgrade to #2 oil.

However I haven't seen cases that determines that.

[hsinorc]

No MCI increase was applied for when the existing #2 burner was installed in 2001.

The existing burner was burning #2 oil, in compliance with NYC DEP regs through 2030 (it's the safest oil according Bloomberg's 2011 regs).

I have posted my PAR, overnight delivery, RRR. The order date was Mar. 23, this will be delivered on Apr. 22, well inside the 35 day limit (not taking any chances).

I raised all the points we discussed, focusing on Useful Life, and added the Line 26 irregularity in the PW1 Application.

The Rent Administrator, in his order, did not address any of my arguments, but just 'rubber-stamped' the Owner's application. I made that point, too.

I'll report back whenever this is adjudicated.

Thanks for your valuable help, it's much appreciated.

All best,

h.