AI 410316 RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                              JAMAICA, NEW YORK   11433

                                    APPEAL OF     DOCKET NO.: AI 410316 RO

                 HESLIN IMPROVEMENTS INC.,        DRO DOCKET NO.: L-3111639-R/

                                  PETITIONER      TENANT:  JOHN DI GIACOMO


          The above-named petitioner-owner timely filed a Petition for 
          Administrative Review against an order issued on August 22, 1986, 
          by the Rent Administrator, at 10 Columbus Circle, New York, New 
          York concerning housing accommodations known as 160 First Avenue, 
          Apartment 4A, New York, New York wherein the Rent Administrator 
          established the stabilized rent and directed the owner to refund 
          $44,368.88 inclusive of treble damages.

          The Commissioner notes that this proceeding was initiated prior to 
          April 1, 1984.  Sections 2526.1(a)(4) and 2521.1(d) of the Rent 
          Stabilization Code effective May 1, 1987 governing rent overcharge 
          and fair market proceedings provide that determination of these 
          matters be based upon the law or code provisions in effect on March 
          31, 1984.  Therefore, unless otherwise indicated reference to 
          sections of the Rent Stabilization Code (Code) contained herein are 
          to the Code in effect on April 30, 1987.

          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 appeal.

          This proceeding was originally commenced on March 29, 1984 by the 
          filing of a complaint of rent overcharge.

          The owner was served with a copy of the tenant's complaint and was 
          requested to submit complete copies of all leases or rent records 
          pursuant to Section 42A of the Code.  The owner was advised that 
          its failure to provide the requested records would be considered a 

          AI 410316 RO

          Although the owner requested an extension of time in which to 
          answer, there is no evidence of a response in the record.

          In its appeal, the owner contends that since it had submitted an 
          answer to the complaint, the Administrator erred in applying 
          Section 42A default procedures.  The owner submits a copy of the 
          answer as well as a certified mail receipt, date stamped June 26, 
          1986, showing the addressee as the Division of Housing and 
          Community Renewal (DHCR) as proof of the prior submissions.  In the 
          answer, incorporated herein as the basis of the appeal, the owner 
          asserts that it purchased the subject building in June 1979 at 
          which time the subject apartment did not exist in its present form.  
          Some time subsequent to July 1982, the owner alleges that it 
          created two-three room units, one of which is the subject 
          apartment, by bisecting a six room apartment.  By reason of this 
          creation, the owner contends that it was entitled to a first rent 
          and thus was not required to submit a rental history.  In support 
          of the allegation, the owner submits a contractor's contract, 
          setting forth the estimated cost of the work to be done, and an 
          invoice for new appliances.

          The owner posits as alternative that:

               1)   pursuant to the decision by the Appellate 
                    Division, Second Department in JRD Management 
                    Corp. v. Eimicke, 539 N.Y.S. 2nd 610, it was 
                    not required to retain more than four years of 
                    rental records, and,

               2)   that even if the apartment were to be found 
                    ineligible for a first rent and that the 
                    holding in JRD was inapplicable, the rent 
                    should be set at the lowest apartment rent in 
                    the same line not the lowest in the building.

          Finally, the owner contends that treble damages should not be 
          imposed because the owner had made significant improvements and 
          reasonably believed that it was entitled to charge market rent.  
          Moreover, given the conflict between the Appellate Departments on 
          record- retention requirements, an owner should not be assessed 
          treble damages for non-compliance with a requirement one court has 
          found is not applicable.

          The tenant contends that since the owner failed to comply with the 
          required formalities to change the number of apartments, the 
          subject apartment is illegal.  The tenant states that a search of 
          the records at the Building Department and at Housing Preservation 
          and Development did not produce the documents requisite for a legal 
          alteration, an Alteration Application and Certificate of Occupancy.  
          The tenant submits copies of various records on file including a 
          diagram of the subject building.

          AI 410316 RO

          The Commissioner is of the opinion that this petition should be 

          After careful consideration of all the evidence, the Commissioner 
          finds that the owner has submitted insufficient proof of the 
          alleged alteration to justify a first rent.  The owner did not 
          submit any floor plans of before and after, or cancelled checks.  
          Moreover, the tenant's submission shows that in the 1930's the 
          subject building contained twenty-two apartments.  On the first 
          floor, there were two stores and two apartments.  On floors two 
          through six, each floor contained four apartments, two four-room 
          units and two three-room units.  DHCR rent registration records 
          show that the subject premises contained twenty two units as of the 
          latest registration - April 1, 1991.  The Commissioner notes also 
          that the contractor listed on the renovation contract is located at 
          the same address as the owner and that the contractor's name "Symar 
          Contractors Inc. could be an amalgam of the owner's names, Seymour 
          and Martin.

          Section 42A of the former Rent Stabilization Code requires that an 
          owner retain complete records for each stabilized apartment in 
          effect from June 30, 1974 (or the date the apartment became subject 
          to rent stabilization, if later) to date and to produce such 
          records to the DHCR upon demand.

          Section 26-516 of Rent Stabilization Law, effective April 1, 1984, 
          limited an owner's obligation to provide rent records by providing 
          that an owner may not be required to maintain or produce rent 
          records for more than 4 years prior to the most recent 
          registration, and concomitantly, established a 4 year limitation on 
          the calculation of rent overcharges.

          It has been the DHCR's policy that overcharge complaints filed 
          prior to April 1, 1984 are to be processed pursuant to the law or 
          Code in effect on March 31, 1984.  (See Section 2526.1(a)(4) of the 
          current Rent Stabilization Code.)  The DHCR has therefore applied 
          Section 42A of the former Code to overcharge complaints filed prior 
          to April 1, 1984, requiring complete rent records in these cases.  
          In following this policy, the DHCR has sought to be consistent with 
          the legislative intent of the Omnibus Housing Act (Chapter 403, 
          Laws of 1983), as implemented by the New York City Conciliation and 
          Appeals Board (CAB), the predecessor agency to the DHCR, to 
          determine rent overcharge complaints filed with the CAB prior to 
          April 1, 1984 by applying the law in effect at the time such 
          complaints were filed so as not to deprive such tenants of their 
          right to have the lawful stabilized rent determined from the June 
          30, 1974 base date and so as not to deprive tenants whose 
          overcharge claims accrued more than 4 years prior to April 1, 1984 
          of their right to recover such overcharges.  In such cases, if the 
          owner failed to produce the required rent records, the lawful 
          stabilized rent would be determined pursuant to the default 
          procedure approved by the Court of Appeals in 61 Jane Street 

          AI 410316 RO

          Associates v. CAB, 65 N.Y.2d 898, 493 N.Y.S.2d 455 (1985).

          However, it has recently been held in the case of J.R.D. Mgt. v. 
          Eimicke, 148 A.D.2d 610, 539 N.Y.S.2d 667 (App. Div. 2d Dep't 
          1989), motion for leave to reargue or for leave to appeal to the 
          Court of Appeals denied (App. Div. 2d Dep't, N.Y.L.J., June 28, 
          1989, p.25, col. 1), motion for leave to appeal to the Court of 
          Appeals denied (Court of Appeals, N.Y.L.J., Nov. 24, 1989, p. 24, 
          col. 4), motion for leave to reargue denied (Court of Appeals, 
          N.Y.L.J., Feb 15, 1990, p. 25, col. 1), that the law in effect at 
          the time of the determination of the administrative complaint 
          rather than the law in effect at the time of the filing of the 
          complaint must be applied and that the DHCR could not require an 
          owner to produce more than 4 years of rent records.

          Since the issuance of the decision in JRD, the Appellate Division, 
          First Department, in the case of Lavanant v. DHCR, 148 A.D. 2d 185, 
          544 N.Y.S.2d 331 (App. Div. 1st Dep't 1989), has issued a decision 
          in direct conflict with the holding in JRD.  The Lavanant court 
          expressly rejected the JRD ruling, finding that the DHCR may 
          properly require an owner to submit complete rent records, rather 
          than records for just four years, and that such requirement is both 
          rational and supported by the law and legislative history of the 
          Omnibus Housing Act.

          Since the subject property is located in the First Department, the 
          decision by the Lavanant court governs.  The owner herein was 
          correctly required to submit a complete rental history from the 
          base date.

          With regard to the owner's contention that the Administrator should 
          have used the lowest rent in the same line instead of the lowest 
          rent of an apartment with the same room count in the building, it 
          is noted that the standard of considering apartments in the same 
          line as the apartment at issue was developed by the former 
          Conciliation and Appeals Board (CAB) as a way of achieving a rough 
          comparability.  With the onset of registration requirements, since 
          1985 the DHCR has been using the lowest rent of an apartment with 
          the same room count in the building.  Using registration records 
          and the standard of the lowest rent for a comparably sized 
          apartment throughout the building promotes the enforcement of the 
          Rent Stabilization Law and permits faster resolution of a tenant's 
          complaint by avoiding problems associated with the previous 

               1)   the possibility that the selected apartment 
                    itself has a illegal rent;

               2)   a line of apartments may not exist or maybe 
                    difficult to ascertain.

          The Code imposes a penalty of treble damages for all willful 

          AI 410316 RO

          overcharges collected on and after April 1, 1984 unless an owner 
          proves by a preponderance of the evidence that the overcharge was 
          not willful.  Because the owner has failed to meet its burden, 
          treble damages were warranted.

          Accordingly, the Commissioner finds that the Administrator properly 
          set the lawful stabilization rent at $209.61 for April 16, 1986 
          through June 23, 1986 and directed a refund of $44,368.88.

          Because this determination concerns lawful rents only through June 
          25, 1986 the owner is cautioned to adjust subsequent rents to an 
          amount no greater than that determined by the Rent Administrator's 
          order plus any lawful increase, and to register any adjusted rents 
          with this order and opinion being given as the explanation for the 

          This order may, upon the expiration of the period in which the 
          owner may institute a proceeding pursuant to Article Seventy-Eight 
          of the Civil Practice Law and Rules, be filed and enforced by the 
          tenant in the same manner as a judgment or not in excess of twenty 
          percent thereof per month may be offset against any rent thereafter 
          due the owner.

          THEREFORE, in accordance with the Rent Stabilization Law and Code, 
          it is

          ORDERED, that this petition be, and the same hereby is, denied, and 
          that the Rent Administrator's order be, and the same hereby is, 


                                                  JOSEPH A. D'AGOSTA
                                                  Acting Deputy Commissioner


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