Matter of Germosen v. New York State Division of Housing and Community Renewal

New York Law JournalNovember 28, 2001

SUPREME COURT

Ia Part 37

Justice McCooe

This Article 78 proceeding was commenced challenging an order issued by the Deputy Commissioner of the DHCR which reversed a decision by the Rent Administrator who found that the owner overcharged the complaining tenant and awarded treble damages for a total award of $9,751.12. For the foregoing reasons, the tenant's petition is dismissed since the DHCR's determination had a rational basis in the record and was not arbitrary or capricious.

On April 3, 1992, Tenant-Germosen filed a rent overcharge complaint because the owner was asking for an MCI increase of $18.48 in addition to her rent of $364.49. Germosen has lived in the premises at 35 Hamilton Place, Apartment 703, New York, since 1976. Owner was notified and responded submitting an answer which included:

1. A copy of the annual apartment registration for 1985;

2. A copy of the renewal lease for August 1, 1987-July 31, 1989 at the rent of $307.94;

3. A copy of the renewal lease for August 1, 1989-July 31, 1991 at the rent of $340.65;

4. A copy of the renewal lease for August 1, 1991-July 31, 1993 at the rent of $364.49;

All leases provided that "the rent provided for in this renewal lease may be increased or decreased pursuant to an order of the Division of Housing and Community Renewal (DHCR) . . . " Owner also submitted Order #ZCD430027OM which identified improvements as brick pointing, elevator cab, inter, doors and windows and approved the net costs of $163,500.00 for major capital improvements for rent stabilized apartments. The order granted a rent increase of $7.47 per room per month on June 1, 1991 and computed the retroactive increase for arrears at $7.47 for thirty months which was stated to be collectible until the full amount of arrears ($224.47) was paid. ($18.47 was collectible from tenant due to the fact that the increase could not exceed 6 per cent).

On December 17, 1996, the DHCR sent Owner a Final Notice to Owner-Imposition of Treble Damages on Overcharge. The proposed findings stated that the evidence indicated an overcharge because:

1. Non-registration of Apt. #703 for 1992 and 1995.

2. Rent exceeded the guideline #22 allowance.

3. Rent exceeded service reduction order #GA530031B allowance.

4. Treble damages are asserted on overcharge.

The notice afforded the owner a final opportunity to show that there was no overcharge and the owner requested and was granted additional time. On October 14, 1997, the Rent Administrator (RA) issued a finding of Rent Overcharge and awarded treble damages.

The Rent Administrator found that the rent paid, the legal regulated rent, and the collectible rent were all $340.65 as of August 1, 1989. The RA found that although MCI Order #ZCD4300270M became collectible on June 1, 1991, the owner waived the right to collect the MCI arrears for failing to bill them on June 1, 1991 and set the collectible rent as $340.65 as of June 1, 1991. As of August 1, 1991, the rent paid, the legal regulated rent, and the collectible rent were $364.49. However, based upon an April 24, 1992 order issued under docket number GA530031B, the rent was frozen at $340.65 as of March 1, 1992. The RA found that the rent remained frozen at $340.65 as a result of the Owner's failure to file an annual registration for 1992 as of March 31, 1992. The RA then found that the Owner overcharged the tenant $23.84 a month for the months of March, April and May 1992.

Additionally, the RA found that the legal regulated rent rose to $375.89 on June 1, 1992 as a result of the MCI arrears, but because the rent was frozen at $340.65 (tenant was paying $365.49), the tenant had been overcharged in the amount of $23.84 from June 1, 1992 until August 1, 1993. The RA found the legal regulated rent increased to $382.97 on August 1, 1993, but since the rent remained frozen at $340.65 (tenant was paying $382.97), the RA determined an overcharge of $43.32 a month from August 1, 1993 until August 1, 1995. As a result of the guideline increase, the RA determined that the Legal Regulated Rent increased to $398.29 as of August 1, 1995. Tenant was paying $418.20, so the RA determined an overcharge of $77.55 from August 1, 1995 until August 1, 1997. The total amount of all overcharges was $3,282.16 and since the Owner failed to establish that the overcharges were not willful, treble damages were awarded the Tenant in the amount of $9,751.12.

The Owner filed a Petition for Administrative Review (PAR) on November 7, 1997, arguing that since it purchased the building at a Judicial Sale on January 10, 1996, they could not be held liable for an overcharge occurring prior to the sale. Owner also attached a copy of the 1992 and 1995 registrations which the Rent Administrator had found were not filed. Tenant argued that the Rent Administrator's decision was correct because she was overcharged.

The Commissioner's decision, reversing the RA's Order read in pertinent part:

First, the Administrator erred in her finding that the collectible rent should be frozen due to an outstanding service reduction order. As a general rule, DHCR is responsible for full knowledge of its own records. Accordingly, the Commissioner must reexamine the service reduction order (GA530031B) which serves as one of the bases for the Administrator's determination. While the order was labeled a "building-wide" case, it was not applicable to all the tenants in the subject building. The proceeding only affected those tenants who were forced to evacuate the premises because of fire. The complaintant-tenant (Apt. 703) was not required to evacuate and not affected by the finding in that case. Therefore, the service reduction order issued under Docket No. GA530031B, should have had no impact on this overcharge case.

Secondly, the Administrator erred by freezing the rents due to the alleged failure to register in 1992 and 1995. The case record contains adequate proof of registration made for both years on or about July 1, 1996. The owner presented copies of these corrective registrations with both years containing identical received date-stamps from DHCR. It is only logical that an owner would correct all registration errors at the same time. The evidence adequately supports the conclusion that the owner submitted such registrations for both 1992 and 1995. Since the apartment registrations were all properly updated in 1996 (before the issuance of the Administrator's order), the original registration failures should not have been considered by the Administrator [See Section 2528.4 of the Rent Stabilization Code].

Finally, the Commissioner notes that the Administrator's calculation chart contains one additional error which results in an incorrect final lawful stabilized rent. Since the collectible date (June 1991) for the MCI increase occurred after the rent renewal offer was already made, the actually [sic] rent increase for the MCI ($18.48) should have been reflected in the new lease term which began to run on August 1, 1991.

The Commissioner found the rent charged, the lawful stabilization rent and the collectible rent should be $382.97 for the lease of August 1, 1991 to July 31, 1993; $402.12 for the lease of August 1, 1993 to July 31, 1995; and $418.20 for the lease of August 1, 1995 to July 31, 1997. The Commissioner found that the rent paid corresponded to the calculations and that no overcharge occurred. Tenant thereafter filed this Article 78 proceeding challenging the Commissioner's order which revoked the RA's finding of an overcharge.

A court's role in an Article 78 proceeding is to determine, upon the facts before the administrative agency, whether the determination had a rational basis in the record or was arbitrary and capricious. See, Pell v. Board of Education, 34 NY2d 222 (1974). "The interpretations of respondent agency of statutes which it administers are entitled to deference if not unreasonable or irrational." Matter of Metropolitan Assocs. Ltd. Partnership v. New York State Div. of Hous. & Community Renewal, 206 AD2D 251, 252 (1st Dept., 1994), citing Matter of Salvati v. Eimicke, 72 NY2d 784, 791(1988). After a review of this record, the DHCR's determination must be upheld.

The Deputy Commissioner determined that the service reduction order issued under docket number GA530031B did not operate to reduce the tenant's rent since it did not apply to her apartment and that an overcharge could not be based upon this order. The tenant's apartment was not included in the twenty-one apartments directed to vacate by the New York City Fire Department and therefore her rent was not frozen.

Additionally, the Owner was entitled to the MCI increase issued under docket number ZCD4300270M which was collectible as of June 1, 1991 but not included in the renewal. The date the MCI increase became collectible was after the renewal lease offer had been made and so the rent increase for the MCI should have been reflected in the lease term which began to run on August 1, 1991. See RSC 2522.5(d).

Finally, the 1992 and 1995 registrations were filed prior to the time the RA issued her order and thus not a basis for freezing the rent. As stated in DBL Realty Corp. v. Zavala, 166 Misc.2d 736 (App. Term, 1st Dept. 1995) [Parness, Miller]:

Pursuant to the Rent Stabilization Law of 1969 (Administrative Code of City of NY 26-517 [e]), if "increases in the legal regulated rent were lawful except for the failure to file a timely registration, the owner, upon the service and filing of a late registration, shall not be found to have collected an overcharge at any time prior to the filing of the late registration" (emphasis added).

See also, NYS Division of Housing and Community Renewal Operation Bulletin 95-3 dated December 18, 1995; 9 NYCRR 2825.4(a) (RSC 2528.4).

Based on the above, there was a rational basis for the Deputy Commissioner's determination that there were no grounds for an overcharge and will be upheld. Ansonia Residents Association, et. al. v. New York State Division of Housing and Community Renewal, 75 NY2d 206 (1989).

The petition is dismissed.

This constitutes the Judgment and Order of the Court.

Date Received: November 27, 2001