AK 410065 RO, AJ 410353 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
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IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO. AK 410065 RO
AJ 410353 RT
Sara Linder, tenant, : DISTRICT RENT
ADMINISTRATOR'S
and DOCKET NO. L 006095 R
7 East 63rd Street Associates,
owner,
PETITIONER :
------------------------------------X
ORDER AND OPINION AND GRANTING OWNER'S PETITION
FOR ADMINISTRATIVE REVIEW IN PART
AND DENYING TENANT'S PETITION FOR ADMINISTRATIVE REVIEW
On November 3, 1986, the Division of Housing and Community
Renewal (DHCR) received the Petition for Administrative Review
filed by the above-named owner, against an order issued on
September 26, 1986, by the District Rent Administrator concerning
the housing accommodations known as 7 East 63rd Street, New York,
New York, Apartment No. 5R, wherein the Administrator determined
that an overcharged occurred.
By an order issued on May 31, 1989, the Commissioner dismissed
the owner's petition as untimely because the petition was not
filed within 35 days of the issuance date of the Administrator's
order.
Subsequently, the Commissioner agreed to reconsider the issue of
timeliness. The owner had used a private postage meter which
indicated that the date of mailing its petition for review was
October 31, 1986. The notice sent to the petitioner at the time
the Administrator's order was issued permitted filing by mail.
The notice then in effect gave no indication that a private
postage meter date was insufficient proof of filing.
Accordingly, the owner's petition for review will be deemed as
timely and will be fully considered on its merits.
On October 29, 1986, the above-named tenant filed a petition for
administrative review of the same Administrator's order.
The Commissioner is consolidating these two petitions for
administrative review. This order and opinion shall be
dispositive of both.
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 in the petitions for review.
AK 410065 RO, AJ 410353 RT
This proceeding was commenced on January 2, 1986 by the
petitioner-tenant's filing of a rent overcharge complaint. The
petitioner-tenant stated that she took occupancy of the subject
apartment in June of 1982 via a sublease arrangement at a monthly
rent of $1,500.00. As the result of an action brought by the
owner in Supreme Court, the petitioner-tenant learned that the
prime tenant's rent was $525.80 per month for a lease period
expiring on August 31, 1982. In a court-approved stipulation in
which all the parties were represented by counsel, it was agreed
that a new three-year lease would be entered into. The prime
tenant would continue to e the leaseholder. The petitioner-
tenant would now be an owner-approved subtenant and would pay a
rental of $800.00 per month directly to the owner. Additionally,
it was agreed that the subtenant would not challenge the rent
during the period of the agreement which expired August 31, 1985.
Further, the petitioner-tenant stated that on November 1, 1985 a
new lease took effect. The former prime tenant had given up her
leasehold and the petitioner-tenant was the new prime tenant.
The tenant stated she is a portrait artist who uses a portion of
the subject apartment as a studio as well as a residence. The
lease of November 1, 1985 was labelled an "office lease" and
called for a rental of $1500.00 per month. In one clause, the
lease stated that the subject premises was to be used as an
artist's studio only. In another clause, the lease specifically
granted permission to the tenant to use the subject apartment for
residential purposes. The tenant asserted that she always
occupied the premises as a residence.
Finally, the tenant asserted that all overcharge calculations
should be based on the original prime tenant's monthly rental of
$525.80. The tenant submitted with her complaint a copy of the
court-approved stipulation and the lease effective November 1,
1985. She asserted that the court-approved stipulation was not
binding on her because the agreement was violated by the owner.
In its answer to the complaint, the owner alleged, among other
things, that no overcharge occurred. The basis for this
contention was that the subject unit was for professional use and
therefore, not subject to rent regulation.
Numerous supplemental communications and documentation was
received from both parties to bolster their assertions. The
initial Apartment Registration (RR-1) was submitted by the owner.
A copy of a City of New York Department of Buildings notice of
violation alerting the owner that the subject building was not
zoned for office rentals was submitted by the tenant.
In the order here under review, the Administrator found that the
base rent was the initial registered rent of $800.00 per month.
Accordingly, the legal stabilization rent was established at
$912.00 per month for the lease term of November 1, 1985 to
October 31, 1987. The Administrator determined the overcharges
through September 30, 1986 to be $19,992.00 including excess
security and treble damages.
In her petition for administrative review, the tenant urges that
the Administrator's order be revoked. The tenant alleges that
AK 410065 RO, AJ 410353 RT
one of her supplemental pleadings, submitted August 8, 1986, was
not in the Administrator's file. She contends that the
Administrator did not consider all her pleadings, and therefore,
she was denied due process. Further, the tenant reasserts that
the Administrator's overcharge calculations should have begun
from the date she took occupancy in 1982 and should not have
based on the April 1, 1984 rental of $800.00 per month. The
tenant bases this contention on two arguments. First, she
alleges that her agreement not to challenge the rent was coerced
and that the owner breached the agreement. Second, she alleges
that she was not served with the RR-1, and therefore, the initial
registration was ineffective. Finally, the tenant requests that
the own r be ordered to provide the tenant with a rent-
stabilization lease.
In its petition, the owner repeats the contention that the
subject unit was no longer rent regulated and that no overcharge
occurred. In the alternative, the owner asserts that the tenant
ceased paying rent in February of 1986 and that treble damages
could only be assessed on rent overcharges actually collected.
In her answer to the owner's petition, the tenant, among other
things, acknowledges that no rent has been collected by the owner
since February 1986. However, she states that she tendered
payment but the owner refused to cash these checks. Further, the
tenant asserts that this refusal by the owner to cash her rent
checks should not eliminate the assessment of treble damages.
Finally, the tenant repeats the allegations made in the
proceeding before the Administrator and in her petition for
review.
After careful consideration, the Commissioner is of the opinion
that the owner's petition should be granted in part and that the
Administrator's order should be modified. The tenant's petition
should be denied.
First, the Commissioner finds that the Administrator correctly
determined that the examination of this overcharge proceeding
should begin from the base rent date of April 1, 1984. The
subject apartment was appropriately registered. In 1984 when the
initial registration became a statutory requirement, DHCR made
available to owners an Instructions for Registration manual. In
these instructions, the owner was directed to serve the RR-1 on
"...the tenant named in your lease at the time of initial
registration...." At the time of the initial registration, the
tenant named in the lease was the original prime tenant and not
the petitioner-tenant, and the original prime tenant was also
named in the RR-1. The owner was not required to serve the
petitioner-tenant. The petitioner-tenant presents no evidence
nor does she even allege that the original prime tenant was not
duly served. Accordingly, appropriate service of the RR-1 was
made by the owner.
Since the subject apartment was appropriately registered and the
original prime tenant filed no objection to that registration,
the Administrator correctly used the registered rent of $800.00
per month as the base rent and began the examination of
overcharges from April 1, 1984. Accordingly, the Commissioner
need not and will not consider the issue of the enforceability of
AK 410065 RO, AJ 410353 RT
the underlying court-approved stipulation.
Second, the Commissioner finds that the Administrator correctly
determined that an overcharge occurred. Section 2520.11 of the
Rent Stabilization Code lists those accommodations which are
exempt from rent stabilization. Specifically, Section 2520.11(n)
exempts an accommodation if it is used "exclusively" for
commercial or professional purposes. In this case, the record
contains ample evidence that the owner knew and fully authorized
the use of the subject apartment as a residence by the
petitioner-tenant. The original sublease, the court-authorized
stipulation, and the lease in effect when the complaint was filed
all indicate that the subject apartment was residential and not
"exclusively" used for commercial or professional purposes.
Accordingly, the Administrator correctly determined that a rent
overcharge occurred.
Third, the Administrator correctly determined that the record
contained insufficient evidence, presented by the owner, to
demonstrate a lack of willfulness and correctly assessed treble
damages. It is clear that the owner knew or should have known
that the subject apartment was subject to rent stabilization and
the attempt to substitute an office lease at a free market rent
was a violation of the Rent Stabilization Code.
Fourth, the Commissioner finds that the Administrator's
calculations must be amended. The Administrator correctly
determined the lawful stabilization rent to be $912.00 per month.
However, it is acknowledged by both parties that the $1,500.00
per month rent charged by the owner was actually collected for
only three months. Even though treble damages applied, they can
only be assessed on overcharges actually collected. Accordingly,
the overcharges were $5,880.00 ($588.00 per month for 3 months -
trebled + excess security of $588.00).
Finally, the Commissioner notes that, since this order and
opinion finds that the apartment was used for residential
purposes, the tenant is entitled to a rent stabilized lease. The
tenant is advised that she may file a complaint based on the
owner's failure to offer the tenant such a lease, if warranted.
Because this determination concerns lawful rents only through
October 31, 1987, 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 increases, and to register
any adjusted rents with this order and opinion being given as the
explanation for the adjustment.
THEREFORE, in accordance with the provisions of the Rent
Stabilization Law and Code, it is
ORDERED, that the owner's petition for administrative review
under Docket No. AK 410065 RO be, and the same hereby is, granted
in part, and that the tenant's petition for administrative review
under Docket No. AJ 410353 RT be, and the same hereby is, denied,
and, that the order of the Rent Administrator be, and the same
hereby is, modified in accordance with this order and opinion.
ISSUED:
AK 410065 RO, AJ 410353 RT
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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