DHCR Decisions
EA 410297 RO;
EA 410224 RT
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. 6088
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NOS.: EA 410297-RO
EA 410224-RT
A. RUTH AND SONS, OWNER,
AND
MARC NEAL SIMON, TENANT, DISTRICT RENT OFFICE
DOCKET NO.: CK 410050-R
PETITIONERS
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ORDER AND OPINION DENYING OWNER'S AND TENANT'S PETITIONS
FOR ADMINISTRATIVE REVIEW
AND
AFFIRMING ADMINISTRATOR'S ORDER
On January 31, 1990, the above-named petitioner-owner filed a
Petition for Administrative Review against an order issued on
December 28, 1989, by the Rent Administrator concerning the housing
accommodations known as 50 East 96th Street, New York, New York,
Apartment No. 5D, wherein the Rent Administrator determined the
fair market rent pursuant to the special fair market rent
guidelines promulgated by the New York City Rent Guidelines Board
for use in calculating fair market rent appeals.
On January 31, 1990, the above-named petitioner-tenant filed his
own petition of the same order.
Subsequent thereto, the petitioner-tenant filed a petition in the
Supreme Court pursuant to Article 78 of the Civil Practice Law and
Rules in the nature of mandamus requesting that the "deemed denial"
of the petitioner's administrative appeal be annulled. By order of
Justice Ciparick dated May 8, 1992 the tenant's petition was
granted to the extent of directing the Division of Housing and
Community Renewal (DHCR) to determine the tenant's administrative
appeal.
The Administrative Appeal is being determined pursuant to the
provisions of Section 2521.1 of the Rent Stabilization Code.
The issue herein is whether the Rent Administrator's order was
warranted.
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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 appeals.
This proceeding was originally commenced by the filing on October
11, 1988 of a rent overcharge complaint by the tenant who stated in
substance that he believed his rent was excessive.
The tenant assumed occupancy of the apartment pursuant to a two
year lease commencing May 15, 1988 at a rent of $2,349.00 per
month. The complaint further stated that the owner refused to
divulge the rental history of the apartment.
The owner responded on November 23, 1988 that the apartment had
been decontrolled in November, 1987 with the departure of the rent
controlled tenant, who had paid $544.82 per month.
The owner had rented the apartment on December 12, 1987 for
$2,349.68 per month and filed a report of statutory decontrol
(hereafter R-42). The owner then stated that the apartment was
vacant again as of April 1, 1988, but was rented to the
complainant on May 15, 1988.
In an amendment to the complaint dated July 31, 1989, along with
several other submissions, the tenant requested treble damages for
the owner's willful overcharges, which originated with the owner's
attempts to circumvent the Rent Stabilization Laws by establishing
an "illegal" initial fair market rent.
The owner was served with the amended complaint and was requested
to submit a rental history as well as documentation pertaining to
the tenant's challenge of the initial stabilized rent, including
proof of service of the DC-2 notice, the RR-1 initial registration,
a copy of the Schedule A form, which would include the owner's
selection of the rents of comparable apartments, if desired, and
any other relevant information, including the cost of apartment
improvements.
In its answer, dated November 29, 1989 the owner submitted
documentation of allegedly comparable rents in apartments 2D, 3D,
4D and 6D in the subject building, which are in the same line as
the subject apartment, as well as the breakdown of the costs of new
equipment and improvements to the apartment, including paid
receipts and checks totalling $10,701.04.
In an order issued on December 28, 1989, under Docket Number
CK 410050-R, the Rent Administrator adjusted the initial legal
stabilized rent to $1,047.85 per month, and determined that the
tenant had paid a total of $23,129.33 in excess rent and security.
The initial legal regulated rent was determined without using the
EA 410297 RO;
EA 410224 RT
owner's list of comparable apartments in Schedule A because they
did not meet the criteria established under Section 2522.3(e)(1).
In its petition, dated July 30, 1990, the owner contends that it
had satisfactorily responded to the tenant's first complaint of
November, 1988 and, upon seeing that there was no overcharge, the
Administrator should have immediately dismissed the complaint.
This was because the initial stabilized tenant, Dr. Hoody, had not
challenged the initial rent, which became the lawful rent for any
calculation of overcharges, as provided under Section 2521.2(a) of
the Rent Stabilization Code. The owner maintains that the
submitted copy of the R-42 and the initial tenant's lease were
sufficient proof of this. Furthermore, since the complainant's
rent was actually lower than the initial stabilized rent, there was
no overcharge and the complaint should have been dismissed.
Secondly, the owner contends that the DHCR has no authority to
convert the tenant's overcharge complaint into a fair market rent
appeal. The owner contends that the DHCR improperly directed the
owner to serve an amended RR-1 on the complainant, thereby allowing
the tenant 90 days to challenge the initial rent, and then
converting the complaint into a fair market rent appeal, even
though the complainant was not qualified under the Rent
Stabilization Law. Furthermore, since the tenant did not
specifically file a fair market rent appeal within 90 days after
June 28, 1989, when the amended RR-1 was served, even this illegal
action is statutorily time-barred. Thirdly, the owner contends
that it had satisfactorily established the cost of extensive
improvements to the apartment which would have allowed a monthly
increase of $274.52, but that the DHCR allowed less than half that
amount, without explanation. Finally, the owner contends that the
Administrator improperly ignored the owner's comparability data for
4 apartments in the same line. The owner also notes that the
tenant has not paid rent for the last 8 months, and a non-payment
action has been commenced.
The tenant's answer, dated April 6, 1990, disputes all of the above
contentions by the owner. Instead of being time-barred from filing
a fair market rent appeal, as posited by the owner, the tenant
states that he has never received either a DC-2 or an initial
registration (RR-1). The tenant contends that as a result his
right to a fair market rent appeal is preserved. The tenant then
proposes that the tenant whom the owner claimed as the initial
stabilized tenant was "illusory", and was invented by the owner to
charge the subject tenant a very high rental while at the same time
denying him an appeal. However, the tenant continues, since the
owner never filed the registration for this non-existent tenant,
the subject tenant retains the right to a fair market rent appeal,
as preserved under Section 2522.3 of the Code. Additionally, the
tenant continues, the DHCR has broad powers to initiate proceedings
under Section 2527.2, and could convert the overcharge complaint
into a related fair market rent appeal, especially since both
EA 410297 RO;
EA 410224 RT
proceedings are challenging the initial stabilized rent. The
tenant also maintains that the DHCR correctly disallowed much of
the cost of improvements, since the work was merely deferred
maintenance. In reference to the non-payment claim, the tenant
states that it has deposited nearly $20,000 in an escrow fund
pending the court's decision.
The tenant submitted his own petition on January 30, 1990. The
tenant first points out an inconsistency in the subject order;
whereas the order states that the initial legal regulated rent is
$1,047.85 for the complainant's lease, which commenced on May 15,
1988, the calculations chart also lists the same rent as the
initial regulated rent but commencing with the prior tenant's lease
(Dr. Hoody) commencing on December 15, 1987. The remainder of the
petition lists numerous instances of the owner's alleged willful
attempts to deceive the tenant about his rights to a fair market
rent appeal and to collect overcharges, with the conclusion that
such conduct transforms the proceeding from a "normal" fair market
rent appeal proceeding to an overcharge proceeding requiring treble
damages. One example cited by the tenant is when the owner
"placed" an "illusory tenant named Dr. Hoody in temporary
possession" of the subject apartment only to make it appear that
the period to file a fair market rent appeal had expired. The
tenant notes that no initial registration (RR-1) was ever served
and explains that this is because the owner could then inflate the
rent 400% without being challenged, and the next tenant, being the
complainant, would have to accept the inflated rent as
"accomplished fact".
It should be noted here that both parties have submitted voluminous
and repetitive "supplements" and/or "answers" to their own and each
other's petitions wherein the various issues are haphazardly
addressed without regard to whether they originated in a petition
or any other document.
The owner submitted an answer to the tenant's petition dated May 3,
1990 wherein the owner disputes the tenant's claim for treble
damages, noting that the Rent Stabilization Code specifically
exempts fair market rent appeals from this penalty under Section
2526.1(g). The owner then categorically denies the tenant's
accusation that the initial stabilized tenant, Dr. Hoody, was
"illusory", and challenges the tenant to present proof of this.
Finally, the owner notes that the tenant has refused to sign a
renewal lease and that under Section 2524.3(f) of the Code, the
owner is entitled to remove him from the premises.
The tenant's response, dated June 1, 1990, reaffirms the charge
that Dr. Hoody was an "illusory" tenant, stating that the owner's
failure to bring any action to collect the unfulfilled 21 months
portion of the lease was different from the owner's behavior with
other tenants who moved out before their leases were up, and shows
EA 410297 RO;
EA 410224 RT
the owner's intent to falsely claim him as the first stabilized
tenant in order to circumvent the Rent Stabilization Code. The
tenant also claims it was an illusory tenancy because no initial
registration was ever served. The tenant also reaffirms the claim
for treble damages, basing it on the owner's "systematic denial of
Rent Stabilization rights" to the tenant herein as well as other
tenants in the building.
The Commissioner is of the considered opinion that the tenant's
petition should be denied, the owner's petition should be denied
and the Administrator's order should be affirmed.
Pursuant to Sections 2522.3(e) and (f) the Rent Stabilization Code
effective May 1, 1987, for fair market rent appeals filed after
April 1, 1984, comparability will be determined based on the
following:
(e). . .(1) Legal regulated rents, for which the time to
file a Fair Market Rent Appeal has expired and no Fair
Market Rent Appeal is then pending, or the Fair Market
Rent Appeal has been finally determined, charged pursuant
to a lease commencing within a 4 year period prior to, or
a one year period subsequent to, the commencement date of
the initial lease for the housing accommodation involved;
and
(2) At the owner's option, market rents in effect for
other comparable housing accommodations on the date of
the initial lease for the housing accommodation involved
as submitted by the owner
(f) Where the rents of the comparable housing
accommodations being considered are legal regulated
rents, for which the time to file a Fair Market Rent
Appeal has expired, and such rents are charged pursuant
to a lease ending more than 1 year prior to the
commencement date of the initial lease for the subject
housing accommodation, such rents shall be updated by
guidelines increases for 1 year renewal leases,
commencing with the expiration of the initial lease for
the comparable housing accommodations to a date within 12
months prior to the renting of the housing accommodations
involved.
The record contains the owner's submissions of proposed comparable
rent for the "D" line, which is the same as the subject-premises,
and includes copies of the RR-1 initial registrations. The
material was submitted with DHCR's Schedule 1 form, which states
the requirements for their consideration as comparable apartments.
The owner failed, however, to submit proof of service of the
registrations on the tenants, as clearly requested on the form.
EA 410297 RO;
EA 410224 RT
The owner's comparables are therefore unusable, since there is no
proof that the allegedly comparable rent is not still open to
challenge by a fair market rent appeal. In addition, none of the
fair market rents was charged pursuant to a lease commencing within
a 4 year period prior to, or a one year period subsequent to, the
commencement date of the initial lease for the subject-apartment.
Finally, the Commissioner notes that it is a basic requirement of
appropriately designated comparable apartments that they be similar
in size, type and amenities (Accord: ART 09216 Q). The subject
apartment differs from all other apartments in the "D" line in that
it has only 6 rooms, instead of 7 as is documented on the initial
registration statements. Accordingly, the other "D" line
apartments are not acceptable for comparability purposes.
The owner's contention that the tenant was time-barred from filing
a fair market rent appeal is incorrect. Section 2522.3 of the
current Rent Stabilization Code requires that a fair market rent
appeal be filed within ninety (90) days of the certified mailing of
the initial registration. According to DHCR records, the initial
registration of the apartment recorded the April 1, 1989 rent of
the complaining tenant, who claims he was never served with it.
Since the owner presents no documentation to prove service, the
tenant's challenge was not time-barred. Furthermore, although the
owner submits a copy of a 1988 apartment registration listing the
allegedly prior tenant, Steve Hoody, the DHCR has no record of this
registration and the owner cannot prove that the tenant was served
with it either, thereby preserving the current tenant's right to
challenge the initial rent.
The owner's claim that the tenant was time-barred because his
"second" complaint on July 31, 1989 was filed more than 90 days
after he was served with the registration is also without merit
because the initial overcharge complaint filed on October 11, 1988
had effectively challenged the initial rent.
Contrary to the owner's claim, the Commissioner has repeatedly and
consistently held that an eligible tenant cannot be denied a fair
market rent appeal simply because the complaint was filed on an
overcharge complaint form (Accord: ART 08849-L, ARL 02626-L).
Such a ruling is all the more warranted when, as in the present
case, the tenant has been denied his rights to the rent history.
Sections 20C(1) of the former Code and 2522.4(a)(1) of the current
Code provide that where there had been an installation of new
equipment in a stabilized apartment, the monthly stabilization rent
for said unit may be increased by 1/40th the cost of such equipment
provided the tenant then in occupancy has consented thereto in
writing. In addition, the courts have ruled that an increase for
new equipment installed during a vacancy prior to the commencement
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EA 410224 RT
of a new tenancy or upon the commencement of a new tenancy and
reflected in the lease rent, may be collected without the new
tenant's consent to pay such increase. Matter of LeHavre Corp. v.
Gribeta, et. al., N.Y.L.J., January 20, 1971, p. 19, col. 8 (Sup.
Ct., Queens Co., Crisona, J.); Matter of Morton I. Hamberg v. CAB,
N.Y.L.J., November 9, 1972, p. 18, col. 8, (Sup. Ct., N.Y.Co.,
Sarafite, J.).
Although the owner challenges the Administrator's assessment of the
apartment renovations that were eligible for a rent increase, the
record supports the order as it stands. The following work was
improvements for which the owner was entitled to an increase:
lighting fixture, $212.68; kitchen flooring, $876.00; dishwasher,
$302.02; refrigerator, $538.00; stove, $370.16; kitchen cabinets,
$2,508.10; kitchen fixture and dishwasher line, $150.00; various
new electrical fixtures, $400.52. The remaining items, totalling
$5,633.31 out of $10,980.79, were ineligible as normal maintenance
and repair, including painting, plastering and alleged "carpentry"
which could not be so identified from the description on the
invoice. A claim for $200.00 for electrical work was also
disallowed as mere repair work.
Section 2526.1 of the current Rent Stabilization Code provides that
any owner found to have collected an overcharge above the
authorized rent shall be liable for a penalty equal to three times
the amount of such overcharge and may be assessed the reasonable
costs and attorney's fees of the proceeding as well as interest on
any overcharge which occurs after April 1, 1984. This section
applies to willful violations of the Rent Stabilization Law and
Guidelines and does not apply to fair market rent appeals.
Pursuant to Section 26-512(b)(2) of the Rent Stabilization Law, for
apartments which are removed from rent control and become subject
to the Rent Stabilization Law by virtue of a vacancy occurring
after June 30, 1974, the owner is permitted to charge an initial
fair market rent as "agreed to by the landlord and the tenant",
subject to the tenant's right to challenge the initial rent as
exceeding the fair market rent. If the tenant does not challenge
the initial rent, it becomes the legal base rent. If the tenant
challenges the initial rent, a determination may be made that the
tenant's initial rent exceeds the proper fair market rent for the
apartment. In such case, the owner is required to give the tenant
a refund or credit for the amount collected in excess of the fair
market rent. However, such determination that the initial rent
exceeds the fair market rent is considered in the nature of a rent
adjustment rather than a rent overcharge and thus the imposition of
treble damages and attorney's fees is not warranted. It is noted
that rent overcharge proceedings where treble damages may be
imposed generally involve cases where an initial owner willfully
charges rents higher than permitted by the Rent Guidelines Board
upon subsequent renewal leases or refuses to submit a complete
rental history thus leading to the conclusion that rent overcharges
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occurred. In addition, Section 2526.1(g) of the Rent Stabilization
Code provides that "[t]he provisions of this section [Section
2526.1, concerning overcharge penalties and assessment of costs and
attorney's fees] shall not apply to a proceeding pursuant to
Section 2522.3 of this Title (Fair Market Rent Appeal)."
Accordingly, the tenants' petition for treble damages must be
denied as contrary to the specific provisions of the Rent
Stabilization Law and Code.
With regard to the tenant's contention that the Rent
Administrator's order is inconsistent in that it lists the tenant's
rent as $1,047.85 effective May 15, 1988 but lists the fair market
rent as $1,047.85 effective December 15, 1987, it is noted that the
May 15, 1988 date was a typo and that the fair market rent in fact
was established at $1,047.85 effective December 15, 1987. With
regard to the tenant's contention that the prior tenancy was
illusory, it is noted that the tenant had submitted no evidence in
support of this contention and it is hereby denied.
In the event the owner does not take appropriate action to comply
with the order written sixty (60) days from the date of issuance of
this order, the tenant may credit the excess rent collected by the
owner against the next months' rent until fully offset.
THEREFORE, in accordance with the Rent Stabilization Law and Code,
it is
ORDERED, that the tenant's petition be, and the same hereby is,
denied, that the owner's petition be and the same hereby is denied
and that the Administrator's order be, and the same hereby is,
modified to show on page two that the "initial legal regulated rent
is adjusted from $2,349.00 to $1,047.85 effective December 15,
1987" rather than May 15, 1988. In all other respects the Rent
Administrator's order is affirmed.
ISSUED:
EA 410297 RO;
EA 410224 RT
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JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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