Gas Piping Service Costs for New Boiler Disallowed

Landlord applied for MCI rent hikes based on installation of a new boiler. The DRA ruled for landlord in part, denying any increase for costs associated with engineering, installation of bypass equipment, and installation of piping to bring gas service from the street main to the building. Landlord appealed and lost, arguing that these costs were necessary to complete the MCI. The DHCR noted that, although the boiler installation did involve the replacement of an oil-burning boiler with a combination  gas/oil boiler, this wasn't a case where the fuel conversion was done in order to comply with NYC Local Law 43 mandating the discontinued use of numbers 4 and 6 fuel oil. Here, there was no change in the No. 2 grade of oil being used. The fuel source conversion in this case therefore apparently was done at landlord's discretion as a cost-saving measure. This didn't benefit tenants, so the work didn't qualify as an MCI. The engineering costs also were properly disallowed in this case because the contractor had prepared and submitted documents for obtaining DOB approval and signoff, with assistance from the engineer. And under DHCR Policy Statement 2017-1, any professional's or contractor's costs associated with obtaining required municipal approvals and signoffs isn't an MCI-eligible expense.

Alini Enterprises Inc.: DHCR Adm. Rev. Docket No. HO610019RO (10/26/22)[2-pg. document]