AK 410538 RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          ------------------------------------X  SJR 6147 (Mandamus)
          APPEAL OF                              DOCKET NO.: AK 410538-RO

                                                 DISTRICT RENT OFFICE
               Thurcon Properties, Ltd.,         DOCKET NO.: TC-82455-G
                                                             CDR 24611
                                                 TENANT: Peter Axelrod &
                                   PETITIONER            Sharon Klein

                                       IN PART

          On November 20, 1986 the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on     
          October 16, 1986 by the Rent Administrator, 10 Columbus Circle,  
          New York, New York concerning the housing accommodations known as 
          321 East 22nd Street, New York, New York, Apartment No. 6M wherein 
          the Rent Administrator determined that the owner had overcharged 
          the tenants.

          Subsequent thereto, the tenants filed a Petition in the Supreme 
          Court pursuant to Article 78 of the Civil Practice Law and Rules 
          requesting that the Court mandate an expeditious determination of 
          the owner's Petition for Administrative Review.  The proceeding was 
          remitted to the Division of Housing and Community Renewal (DHCR), 
          and the owner's petition is herein decided on the merits.

          The Commissioner notes that this proceeding was filed 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 rent proceedings provide that 
          determination of these matters be based upon the law or code 
          provision 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, 

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

          The applicable sections of the Law are Section 26-516 of the Rent 
          Stabilization Law and Section 2526.1(a) of the current Rent 
          Stabilization Code.

          AK 410538 RO

          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 in March, 
          1984 of a rent overcharge complaint by the tenants, in which they 
          stated that they had commenced occupancy on June 15, 1981 at a rent 
          of $772.00 per month, that they believed the owner had installed 
          phony tenants in order to obtain improper rent increases, and that 
          their lease had been improperly cancelled due to a fire. 
          The owner was served with a copy of the complaint and was requested 
          to submit rent records to prove the lawfulness of the rent being 
          charged.  By letter dated August 16, 1984 the owner's attorney 
          requested an extension of time.  No further communications were 
          received from the owner.  Another copy of the complaint and answer 
          forms sent to the owner on July 21, 1986 at East Meadow, New York 
          (an address not given on the tenant's complaint, on the tenants' 
          leases, or on the 1984 registration [which was the only time the 
          owner registered the buildings]) was returned by the Postal Service 
          as "moved, not forwardable."  The record does not indicate that a 
          mailing was sent to the owner at any other address on that date.

          In an order issued on October 16, 1986 the Administrator used DHCR 
          default procedures to establish a lawful stabilization rent and 
          determine that the tenants had been overcharged in the amount of 
          $5,158.35 as of June 14, 1984, including treble damages on 
          overcharges occurring on and after April 1, 1984.

          In this petition the owner contends in substance that a fire 
          occurred in the subject building on November 19, 1983, terminating 
          all tenancies; that the tenants' complaint objecting to the 
          termination of their tenancy included an allegation of rent 
          overcharge; that subsequent to the filing of their complaint the 
          tenants informed the owner by letter dated February 5, 1985 of 
          their intention not to reoccupy the subject apartment despite their 
          legal right to do so; that the owner in good faith believed that 
          this rendered their entire complaint moot; that the DHCR should 
          accept the enclosed leases and rent ledgers; that the base date is 
          November 1, 1973, the date of initial occupancy of the apartment; 
          that the subject building was constructed after the Rent 
          Stabilization Law was enacted, and would not have been subject to 
          such law but for its receipt of tax benefits under Real Property 
          Tax Law (RPTL) Section 421-a for a 10-year period; that the owner 
          was permitted to collect an annual increase of 2.2% of the base 
          rent in addition to Guideline increases; that there is a small 
          overcharge when these factors are taken into account; that the 
          owner intends to refund those overcharges which it has calculated; 
          and that treble damages should not be imposed, both because the 
          owner's good faith is clearly demonstrated by its intent to refund 
          all overcharges for which it is responsible, and because the 
          computation of rent increases in a building receiving RPTL Section 

          AK 410538 RO

          421-a benefits is a complicated task for a layman, resulting in an 
          unintentional calculation error.  With the petition the owner has 
          enclosed a proposed rent calculation chart showing an overcharge of 
          $519.08 as of November 9, 1983.  Although the leases and rent 
          ledgers mentioned by the owner were not included, the owner 
          submitted them on May 3, 1989.

          In answer, the tenants assert in substance that the owner may not 
          submit a rental history for the first time on appeal; that the 
          owner's "good faith belief" that the tenants intended to waive 
          their claim to the rental overcharge is an absolute 
          misrepresentation; that the letter of intent not to reoccupy the 
          subject apartment was not sent to the owner until 14 months after 
          the overcharge complaint was filed, and long after the owner was 
          requested, and failed, to submit the required rental history; that 
          the owner had, less than one month after the tenants vacated 
          because of the fire, served them with a notice that it was 
          terminating their lease; that the tenants attempted to retain their 
          leasehold rights by tendering $1.00 per month; that the owner 
          returned their check; that on December 18, 1984 the owner offered 
          to permit the tenants to reoccupy the subject apartment; that the 
          tenants advised the owner that they would be unable to occupy it 
          until at least the end of January, 1985; that it was not until 
          February, 1985 that they informed the owner that they were 
          relinquishing their rights to the subject apartment because of the 
          expenses they had already incurred for another apartment due to the 
          false and fraudulent information disseminated by the owner that 
          their lease was terminated and that they had no leasehold interest 
          in the subject apartment; that the owner is not a "layman", but 
          rather a major force in the New York City rental market; that a May 
          25, 1984 amendment to an offering plan from the owner for the 
          subject building was rejected by the Attorney General's office with 
          mention of the owner's concession that it had made an inaccurate 
          representation in its earlier offering plan; and that the 
          overcharges were willful.

          In response, the owner contends in substance that it was not sent 
          a copy of the tenants' complaint until August, 1984; that its 
          ownership of other buildings is irrelevant to the present 
          proceeding; that it understandably made an error in the complicated 
          calculations of lawful rents in a building receiving 421-a 
          benefits; that the Attorney General's letter is irrelevant; that a 
          refund check was sent to the tenants on November 24, 1986 for the 
          amount of overcharge for which the owner was responsible; that it 
          did not willfully fail to submit evidence to the Administrator; and 
          that the rental history now submitted should be considered.  The 
          file of the appeal proceeding does not contain the copy of the 
          refund check which the owner stated was being enclosed.

          The Commissioner is of the opinion that this petition should be 
          granted in part.

          AK 410538 RO

          Because an Administrative Review is not a de novo proceeding, but 
          is rather limited to the evidence and issues which were before the 
          Administrator, new evidence is generally not considered when 
          submitted for the first time on appeal.  However, on July 21, 1986 
          [which was after the tenants informed the owner that they were 
          relinquishing any rights to return to the subject apartment], the 
          Administrator sent a notice to the owner giving another opportunity 
          to submit a rental history.  The owner was never made  aware of 
          this proffered opportunity, because the notice was returned by the 
          Postal Service after having been sent to an address not mentioned 
          anywhere in the record or in the only registration filed by the 
          owner.  [The address is, however, one given on a February 5, 1985 
          letter from the tenants to the owner, submitted in the tenants' 
          answer to the owner's petition.]  Upon becoming aware, by receiving 
          the Administrator's order at the one address mentioned throughout 
          the record and in the registration, that the proceeding had 
          continued on, the owner submitted a complete rental history.  The 
          Commissioner considers it appropriate to accept it as if it had 
          been submitted in response to the July 21, 1986 notice which the 
          owner did not receive.  While the owner did not submit evidence, 
          such as a Final Certification of Eligibility, of the subject 
          building's participation in the 421-a program, such evidence is a 
          matter of public record and has been obtained from the New York 
          City Department of Finance and the New York City Department of 
          Housing Preservation and Development.  Evidence of the building's 
          participation in the 421-a program was also contained in the DHCR's 
          files of other proceedings in the building.  The building was 
          completed on November 16, 1973.  It received 421-a benefits during 
          the fiscal year from July 1, 1973 to June 30, 1974, during which 
          construction began; and then for the next 10 fiscal years from July 
          1, 1974 to June 30, 1984.  

          Taking the rental history into account, the Commissioner has 
          recalculated the lawful stabilization rents and the amount of rent 
          overcharge.  They are set forth on the amended rent calculation 
          chart attached hereto and made a part hereof.  As made clear by the 
          Appellate Division, First Department in Matter of Glenwood 
          Managment Corp., N.Y.L.J. May 4, 1992, p.26, col.3, only nine 421-a 
          increases can be taken during the ten-year period of partial tax 
          exemption, since the first increase cannot be taken until the 
          anniversary date of the initial lease.  Because the first 
          anniversary in the present case was November 1, 1974 the ninth, and 
          final, increase was chargeable on November 1, 1982.

          The willfulness of overcharges is not relevant here, since both the 
          tenants and the owner have stated that the tenants vacated on 
          November 9, 1983, which is prior to April 1, 1984, the earliest 
          date at which treble damages or interest could be imposed by the 

          Contrary to the owner's contention on appeal, the Commissioner 

          AK 410538 RO

          notes that the subject building continues to be subject to rent 
          stabilization despite the expiration of 421-a benefits on June 30, 
          1984.  When the building was constructed in 1973, the Rent 
          Stabilization Law provided that only buildings of six or more units 
          constructed before March, 1969 were subject to rent regulation.  
          The building was subject to the Rent Stabilization Law beginning in 
          1973 solely by virtue of the owner's participation in the 421 
          partial tax exemption program.  However, with the passage of the 
          Emergency Tenant Protection Act of 1974, all buildings of six or 
          more units built before January 1, 1974 became subject to the Rent 
          Stabilization Law.  The fact that this building had first become 
          subject to the Rent Stabilization Law by virtue of the 421 program 
          did not now distinguish this building from any other building built 
          before January 1, 1974.  The continuing receipt of the 421 benefits 
          no longer had any relevance to the building's rent regulation 
          status, so the expiration of 421-a benefits, or the vacancy of 
          tenants after the benefits expired, would not serve to remove any 
          apartments from rent regulation.  Accordingly a copy of this order 
          is being sent to the tenant now in occupancy of the subject 

          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 
          tenants in the same manner as a judgment.

          No allowance has been made for any purported refund, since there is 
          no evidence in the record of any refund made by the owner after the 
          Administrator's order.  (The February 5, 1985 letter from the 
          tenants to the owner in which they state their intention not to re- 
          occupy the subject apartment mentions a check of $1,620.72 from the 
          owner.  Because this was more than a year after the owner attempted 
          to terminate their lease, because it was prior to the 
          Administrator's order, and because the owner in its petition dated 
          November 19, 1986 states an intent to later refund overcharges, 
          this cannot be assumed to represent a refund of overcharges which 
          the owner calculated it owed the tenants).  If the owner has 
          previously made any partial refund of overcharges, the parties 
          should make an appropriate adjustment between themselves.

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

          ORDERED, that this Petition be, and the same hereby is, granted in 
          part and that the Rent Administrator's order be, and the same 
          hereby is, modified in accordance with this Order and Opinion.  The 
          lawful stabilization rents and the amount of overcharge are 
          established on the attached chart, which is fully made a part of 
          this order.  The total overcharge is $1,430.00 as of November 9, 
          1983.  The lawful stabilization rent is $825.77 per month as of 

          AK 410538 RO

          November 9, 1983.  


                                          JOSEPH A. D'AGOSTA
                                          Acting Deputy Commissioner



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