AK 110260-RO

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

      APPEAL OF                              DOCKET NO. AK 110260-RO

                                          :  DRO DOCKET NO. Q 3120805-R
           Aris Realty Corp.,
                                             TENANT: Gerard Mullarkey    

                            PETITIONER    : 

                                     IN PART

      On November 19, 1986, the above-named petitioner-owner filed a Petition 
      for Administrative Review against an order issued on October 20, 1986, 
      by the Rent Administrator concerning the housing accommodations known as  
      33-54 83rd Street, Jackson Heights, New York, Apartment No. H-32 wherein 
      the Rent Administrator determined that the owner had overcharged the 

      The Administrative Appeal is being determined pursuant to the provisions 
      of Section 2526.1 of the Rent Stabilization Code.

      The issue herein is whether the Rent Administrator's order was 

      The Commissioner has reviewed all of the evidence in the record and has 
      carefully considered that portion of the record relevant to the issue 
      raised by the administrative appeal.  

      This proceeding was originally commenced by the filing on March 27, 1984  
      of a rent overcharge complaint by the tenant.

      In answer to the tenant's complaint, the owner stated in substance that 
      the apartment had been "completely renovated "prior to the occupancy of 
      the complainant, and included copies of a bill and cancelled check to 
      the contractor.  The owner submitted a rental history dating from July 
      1, 1975.

      In Order Number Q-3120805-R, the Rent Administrator determined that the 
      tenant had been overcharged in the amount of $16,724.57, including 
      excess security and interest on overcharges since April 1, 1984.  The 
      Administrator's calculations showed that overcharges commenced in the 
      one year lease term commencing on December 1, 1978 for a prior tenant 
      and continued in each lease thereafter.  The order did not include any 
      increase for apartment improvements.

      Annexed to the petition is an affidavit from the president of the 
      corporate owner wherein he affirms that there was no overcharge and 
      contends that the Administrator's order was in error.  Specifically, 
      petitioner contends that the order failed to reflect the installation 

          AK 110260-RO

      and cost of the improvements totalling $8,700.00 made in the apartment 
      before the subject tenants' commencement of occupancy, and that the 
      order incorrectly listed the subject tenants' lease rent for the period 
      from October 1,1983 to September 30, 1985 at $975.00 rather that 
      $650.00.  Finally, petitioner contends that the first stabilized tenant, 
      Mr. and Mrs. Zulic, who assumed occupancy on July 1, 1972, were given an 
      artificially low rent because of a special relationship.  The owner 
      includes its own rent calculation chart with the petition.

      By letter filed on April 4, 1988, the tenant confirms the owner's 
      statement that his rent for the period from October 1, 1983 September 
      30, 1985 was $650.00 rather than $975.00.

      After careful consideration, the Commissioner is of the opinion that 
      this petition should be granted in part.
      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) and to produce such records to the DHCR upon 

      Section 26-516 of the 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 to produce rent records for 
      more than four (4) years prior to the most recent registration, and 
      concomitantly, established a four 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 rights 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 four years prior to April 1, 1984 of 
      the 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 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. Mgmt. v. 
      Eimicke, 148 A.D.2d 610. 539 N.Y.S. 2d 667 (App. Div. 2d Dept., 1989). 
      motion for leave to reargue or for leave to appeal to the Court of 
      Appeals denied ( App. Div. 2d Dept., 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 

          AK 110260-RO

      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 four 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 Dept. 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 in the instant case the subject dwelling unit is located in the 
      Second Department, the DHCR is constrained to follow the JRD decision in 
      determining the tenant's overcharge complaint, limiting the requirement 
      for rent records to April 1, 1980.  

      The Commissioner notes that the issues raised in the petition regarding 
      the allegedly reduced rents for petitioner's "relatives" need not be 
      addressed  since they concern events which occurred prior to the base 
      date of April 1, 1980, and thus have no bearing on the lawful rent.  The 
      Commissioner finds, however, that the Administrator failed to consider 
      the owner's documented claim for new equipment that was installed at the 
      time the complainant assumed occupancy.  Although about half of the 
      items do not qualify for an increase because they constitute maintenance 
      and repair, the owner establishes eligibility for an increase for 
      kitchen renovations totalling $3,150.00.  However, the increase will be 
      limited to 1/40th of $2,500.00 ($62.50 per month), since this lesser 
      amount was stated on a rider to the tenant's lease as the amount charged 
      for improvements.

      The owner's own rent chart is also incorrect because it improperly 
      includes a fuel increase, granted under Guidelines 10, in the base rent 
      in calculating the rent for the lease term commencing on May 1, 1980.  
      The original rent, $319.80, is the amount listed on the lease as 
      security; the lease was manually altered to show a rent of $345.65, 
      without an explanatory note.

      Furthermore, the owner is ineligible for the guidelines and vacancy 
      allowance increases in the lease commencing on August 1, 1981 because 
      the prior lease began only three months earlier, on May 1, 1981.  It is 
      the Division policy that a lease rent in effect for three months or less 
      cannot be used to support a rent increase (Accord: AK 410186-RO).

      However, a review of the record confirms the owner's contention that the 
      Administrator incorrectly found the subject tenants' initial rent to be 
      $975.00 rather than $650.00.  The $975.00 figure was actually the 
      tenant's security deposit, not the rent.

      A recalculation of the lawful rent since April 1, 1980 results in a 
      reduction of overcharges to $4,672.96, from $16,724.57, as documented in 
      a rent calculation chart affixed hereto and made a part hereof. 

      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 

          AK 110260-RO

      month may be offset against any rent thereafter due the owner.

      If the owner has already complied with the Rent Administrator's order 
      and there are arrears due to the owner as a result of the instant 
      determination, the tenant is permitted to pay off the arrears in 24 
      equal monthly installments.  Should the tenant vacate after the issuance 
      of this order or have already vacated, said arrears shall be payable 

      THEREFORE, in accordance with the Appellate Division ruling in JRD, it 

      ORDERED, that this petition for administrative review be, and the same 
      hereby is, granted in part, and that the order of the Rent Administrator 
      be, and the same hereby is, modified in accordance with this order and 


                                      JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner


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