Reserve Funds Used for Renovations

Landlord applied for MCI rent hikes based on the installation of a new roof and pointing. The DRA ruled for landlord, and tenant appealed. Tenant had objected before the DRA, claiming that landlord used cooperative reserve funds to pay for the MCI. With her PAR, tenant submitted a copy of the building's financial statement showing that the reserve fund was reduced by $350,000 during the year the work was done. Landlord claimed that this wasn't the sponsor's initial reserve fund and that the MCI was paid for out of operating account funds. Landlord claimed that the sponsor's reserve fund was depleted by prior capital improvement expenses. But documents showed that the sponsor had defaulted on its obligations to the co-op building and that the reserve fund had been used for ordinary maintenance. The DHCR ruled for tenant. Landlord didn't submit any additional information in response to the DHCR's request for further explanation of the actual source or sources of the reserve fund used to pay for part of the MCI. The cost of the MCI on which the increase was based was reduced by $350,000.

Dietrich: DHCR Adm. Rev. Dckt. No. QB130081RT (3/17/04) [7-pg. doc.]