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Re: Landlord fraud at DHCR: false registrations, other false docs

Posted by Anna on March 02, 2000 at 17:30:43:

In Reply to: Landlord fraud at DHCR posted by brenda on February 20, 2000 at 13:31:43:

Supreme Court, New York County. The LL had filed false registrations with DHCR: they settled that issue with DHCR by stip. Reading the original documents at 60 Centre Street could help you formulate your complaint to DHCR.


New York Law Journal
December 8, 1999



Justice E. Goodman

QDS:22701851 In this Article 78 proceeding, Petitioner challenges as
arbitrary and capricious the order and opinion of the Rent Administrator of
the New York State Division of Housing and Community Renewal ("DHCR")
which determined that Petitioner-Landlord (hereinafter "Petitioner,"
"Owner," or "Landlord") had substantially overcharged the tenant Buckley
for rent for his apartment in a single room occupancy dwelling ("SRO") in
Manhattan. DHCR imposed treble damages against petitioner.

Both the Rent Stabilization Law ("RSL") and the Rent Stabilization Code
("RSC") establish a system of residential regulation including the amount
an owner may charge for a rent stabilized unit and prohibit overcharges.
RSL 26-512(s), 26-511(c)(2), 26-516(a), RSC 2522.1 and 2525.1. The
DHCR is the sole administrator of the regulatory system. (Omnibus
Housing Act, 1983, NY Laws CH. 403 3, Rent Stabilization Association v.
Higgins, N.Y.2d 156, 165, 169, 608 N.Y.S.2d 930, 630 N.E.2d 626 (1993).
It is well settled that a Court may not disturb an administrative decision
unless the Agency's action was arbitrary, was in violation of lawful
procedures or was made in excess of its jurisdiction. Pell v. Board of
Education, 34 N.Y.2d 222, 356 N.Y.S.2d 833, 313 N.E.2d 321 (1974).

A landlord determined to have wilfully overcharged a protected tenant is
liable to the tenant for treble damages. In this case, prior to the presently
challenged determination, DHCR determined that treble damages were
not warranted at that time. However, it is evident from the Administrative
Record that the District Rent Administrator ("DRA") based its original
findings on the Owner's provision of rent credits to the tenant prior to the
Owner's entering into a stipulation with DHCR that is discussed below.
Based on that stipulation, and the facts discussed below, it was well within
the Commissioner's purview and scope of authority to impose treble
damages following a further examination of the facts before him. RSL

Petitioner argues that he was entitled to rental increases under the Rent
Guidelines Board Hotel Orders 18, 19 and 20 and insists that the
Stipulation entered into between the Owner and the Enforcement Division
of DHCR did not prevent him from imposing rental increases and thus
DHCR has no basis for disallowing rental increases. That argument is
without merit. The Stipulation was entered into while the tenant, Buckley's,
overcharge complaint was pending. It provided that the Landlord would
not be allowed to collect any lawful rent stabilization increases accruing
after the Stipulation was signed and corrected registrations were filed with
the DHCR. The Stipulation was executed on February 20, 1992, but the
registrations were not filed until 1993. The Stipulation provided that:

"Nothing in this agreement is to be interpreted to negatively
affect currently pending tenant overcharge complaints or to
prevent tenant from filing overcharge complaints for the past
overcharges. Any such pending or future complaints will be
determined by DHCR's overcharge unit." [Return: A-1,
Stipulation, p.3, 6.]

It is undisputed that the Petitioner had evaded the statutory requirements
of the Rent Stabilization Code and as such was required to pay a penalty.
The administrative record discloses that not only did the Petitioner fail to
comply with the Division's registration requirements; but, the
Commissioner found that nearly all the registrations in the building were
deliberately false, and the false registrations were supported by falsified
ledgers and altered tax returns. As such, the Commissioner determined
that these fraudulent registrations based upon false information
constituted the functional equivalent of non-registration, and the owner in
such a situation is not entitled to the rent increases normally given an
owner who has made a good faith registrations of at least 80 percent of
the units in the building. As a result of the Owner's intentional and flagrant
violations of the rent regulatory laws, the Owner agreed to correct and
amend these registrations and file them with the DHCR. Pursuant to the
Stipulation entered into between the DHCR and the Owner, Petitioner
conceded that he had not filed properly registered individual units for the
years 1984, 1985, 1986, 1987, 1988, 1989, 1990 and 1991.

As established, it is clear that the DHCR has the authority to determine
whether an owner has collected an overcharge, to direct the refund of an
overcharge and to award interest and/or treble damages. RSL
26-516(a). The subject premises are categorized as a Class B Hotel
comprised of 120 single room occupancy units ("SRO's"), and the Rent
Guidelines Board ("RGB") as established in RSL 26-510 is statutorily
mandated to annually determine guidelines for rent adjustments and
increases. In compliance with the statute, the RGB published its Rent
Guidelines Board Hotel Orders Nos.: #18 (7/1/88 to 6/30/89), #19
(10/1/89 to 9/30/90) and #20 (10/1/90 to 9/30/91), and in footnote 7,
warned owners that:

"If the affected building contains A) 20 more units; and 10
percent or more of the units have been deliberately withheld
from the rental market for a period exceeding 30 days OR B)
20 percent or more of the units are not registered with the
DHCR; then the allowable level of rent adjustment shall be 0

Thus it is clear that the Rent Guidelines Board barred owners from
collecting any rent increases when 20 percent of the units in a Class B
Hotel with twenty or more units were not registered with the Division.

Thus, due to the Owner's egregious and criminal conduct in attempting to
deceive the Agency in offering false instruments for filing and in
accordance with the Rent Stabilization Law 26-517(e), Rent Stabilization
Code 2528.4, and the Rent Guidelines Board Hotel Orders, the
Commissioner froze the rent for the subject unit. However, the Rent
Commissioner noted in his order that increases were allowed beginning in
1993, after the owner began filing registrations that were no longer false.

The Owner now argues that the award of treble damages was
unwarranted in that the overcharges were not wilful, that the Respondent
used the prior Stipulation in a related proceeding to form the basis for the
award of treble damages against him and this action by the Agency
constitutes "civil double jeopardy."

The burden is on the owner to establish that the overcharge is not willful.
Matter of Wai Leung Chang v. New York State Division of Housing and
Community Renewal, 207 A.D.2d 552, 616 N.Y.S.2d 251 (2nd Dept.
1994). Willfulness has been defined as "... intentionally doing an act and
knowing the act is being done" Matter of 430 Realty Corp. v. New York
State Division of Housing and Community Renewal, 196 A.D.2d 725, 602
N.Y.S.2d 9 (1st Dept. 1993), Matter of Gattiboni v. Aponte, (Sup.Ct., NY
Co., May 20, 1991, Stecher, J.) Index No. 28546/1990, aff'd 188 A.D.2d
434, 592 N.Y.S.2d 1 (1st Dept. 1992), Matter of 985 Fifth Avenue, Inc. v.
State Division of Housing and Community Renewal, 171 A.D.2d 572, 567
N.Y.S.2d 657, app. den'd 78 N.Y.2d 861, 576 N.Y.S.2d 219, 582 N.E.2d
602 (1991). Thus, once it is determined that the Petitioner herein had
overcharged the complaining tenant for rent, it was incumbent upon the
Petitioner to establish by preponderance of the evidence that such
overcharges were not willful. In the Matter of Chu v. New York State
Division of Housing and Community Renewal, 231 A.D.2d 567, 647
N.Y.S.2d 285 (2nd Dept. 1996); Matter of Wai Leung Chan v. New York
State Division of Housing and Community Renewal, supra; Matter of
Branch v. State Division of Housing and Community Renewal, 217 A.D.2d
581, 628 N.Y.S.2d 975 (2nd Dept. 1995); Goldstein v. New York State
Division of Housing and Community Renewal, 226 A.D.2d 722, 642
N.Y.S.2d 530 (2nd Dept. 1996); HR Executive v. DHCR, 235 A.D.2d 259,
652 N.Y.S.2d 27 (1st Dept. 1997); Gandler v. Halperin, as Commissioner,
et al., 232 A.D.2d 637, 648 N.Y.S.2d 998 (2nd Dept. 1996).

In the case at bar, the record clearly shows that the Owner completely
failed to rebut the presumption of wilfulness.

Petitioner misconstrues and misinterprets the purpose of the fine imposed
on him as well as the Agency's requirement that the Owner properly fix the
building's elevators for the benefit of all the tenants as well as the Owner,
who is a resident in the building. As clearly stated in the Stipulation, any
penalties imposed represented his violations of RSC 2525.2 for his
deceptive endeavors and devious tactics by offering false instruments for
filing including but not limited to altered tax returns, false ledger entries
and false registrations all in an effort to circumvent the rent regulatory
laws. The award of treble damages by the Rent Commissioner represents
the Owner's excessive and wilful overcharge of rent as articulated in the

It should be noted that the payment of $30,000 fine is payable to the State
of New York, whereas the treble damage award is payable to the tenant.
Clearly, these are two separate items. Moreover, as petitioner is a
resident of the premises, elevators in good working order and condition
would clearly benefit him as well.

The Owner asserts that the Rent Commissioner's only basis for his award
of treble damages is contained in the 1992 Stipulation where he
acknowledged an overcharge existed and thus agreed that he would
charge only those amounts for the rent stabilized units listed in the 1984
registrations ($300.00 per month for unit 96), plus any lawful increases
accruing after the stipulation was signed and corrected registrations were
filed, thereby. Petitioner is incorrect.

The overcharge was willful and knowing when it occurred, from the
inception of the stabilized tenancy in 1988, which is a violation of rent
regulatory laws and is a separate and distinct act from attempting to file
numerous false instruments with a State Agency, which is quasi-criminal in
nature as well as violative of the RSC and RSL. In fact, the Agency agreed
that if the Owner complied with Stipulation, as partial consideration
therefor, DHCR agreed that it would not refer the matter to the District
Attorney, Attorney General or any other agency, or entity which might
have had an interest in the proceeding. [Return: A-19, Stipulation, p.3,

Petitioner admits that although he did not know the exact amount of the
overcharge, he acknowledged he was indeed overcharging Tenant
Buckley. The fact that he may have stopped billing the subject Tenant for
rent once his fraudulent activity came to light does not negate or rebut the
presumption that he wilfully overcharged the Tenant. This should come as
no surprise to the Owner, who was warned by the DHCR five months
before he executed the Stipulation of his possible exposure to treble
damages. If Petitioner had any concern that he might had been subject to
an additional penalty, it should have been addressed at the time the
Stipulation was being prepared. The Owner's cessation of continued
collection from rent overcharges from the tenant ex post facto is not
evidence of an effort to rectify a simple mistake. In any event, once a
tenant is overcharged, he or she is allowed to recover any overcharges
by deducting it from the rent due the present owner. RSC 2526.1(e).
Moreover, a Tenant is entitled to a cash refund plus interest. The record
is devoid of any offer in cash by the Landlord of the full amount together
with interest despite his contentions to the contrary. The Owner instead
conceded that he did not have the money to repay the Tenant, and at the
Owner's option, ceased billing the Tenant for rent and, two years later,
sent the Tenant an unexplained check in the sum of $3,972.84.

For the above reasons, the cross-motion, is granted and the petition is
dismissed and the Clerk shall enter judgment dismissing the petition.

This constitutes the Decision, Order and Judgment of the Court.

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