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

          ------------------------------------X SJR No. 4282
          APPEAL OF                             DOCKET NO. AK 410065 RO
                                                           AJ 410353 RT

               Sara Linder, tenant,           : DISTRICT RENT 
                         and                    DOCKET NO. L 006095 R
               7 East 63rd Street Associates,    

                                PETITIONER    : 

                          FOR ADMINISTRATIVE REVIEW IN PART

          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

          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

          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.  


          AK 410065 RO, AJ 410353 RT

                                          JOSEPH A. D'AGOSTA
                                          Acting Deputy Commissioner



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