DOC. NO.: AK 410566-RO
                                  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
          IN THE MATTER OF THE ADMINISTRATIVE :   ADMINISTRATIVE REVIEW
          APPEAL OF                               DOCKET NO.: AK 410566-RO
                                                  DRO DOCKET NO.:
               RALPH W. KERN,                 :             CDR 25,797
                                  PETITIONER  :   TENANTS: ALAN AND
          ------------------------------------X            BARBARA OLSEN


            ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                       IN PART

          On November 21, 1986, the above named petitioner-owner is deemed to 
          have filed a Petition for Administrative Review against an order 
          issued on October 17, 1986, by the Rent Administrator, 10 Columbus 
          Circle, New York, New York, concerning housing accommodations known 
          as Apartment 35A, 211 West 56th Street, New 
          York, New York, wherein the Rent Administrator determined that 
          there had been an overcharge and ordered a refund of $54.45 
          including interest.  (In order number AK 410534-RO, the petition 
          was dismissed as untimely.  On May 19, 1987, under the present 
          docket number, it was found to be timely and was reopened for a 
          decision on the merits.) 

          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 rent 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 the evidence in the record and 
          has carefully considered that portion of the record relevant to 
          the issues raised by the administrative appeal.

          The tenants commenced this proceeding on March 31, 1984 by filing 
          an overcharge complaint with the New York City Conciliation and 
          Appeals Board (CAB), the agency formerly charged with enforcing 
          the Rent Stabilization Law.
















          DOC. NO.: AK 410566-RO

          In answer to the complaint, the owner submitted a complete lease 
          history from January 1, 1978, the base date, i.e., the date the 
          premises became subject to Stabilization pursuant to Section 421a 
          of the Real Property Tax Law (421a) and Section 42C of the former 
          Rent Stabilization Code.

          Based on that lease history, in Order Number CDR 25,797, the Rent 
          Administrator determined that there had been an overcharge.

          In this petition, the owner contends that the Rent 
          Administrator's Order is incorrect and should be modified because 
          of certain alleged errors in computation made by the 
          Administrator.  The owner does not discuss these errors but, 
          instead, submits a copy of the Administrator's chart on which the 
          owner made certain "corrections" in red ink.

          In answer to this petition, the tenants contend that the order 
          should be upheld because in fact the rent should be furthered 
          lowered based on certain alleged diminutions in service.  In 
          addition, the tenants allege that the owner supplied them with an 
          analysis of the rental history which showed that their rent is 
          correct [after an adjustment of their initial rent from $937.45 
          to $916.35].

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

          At the outset the Commissioner notes that this building was built 
          after January 1, 1974 and therefore would not be subject to 
          Stabilization but for the fact that it was built pursuant to 421a 
          financing.   Under this program the owner was allowed to 
          initially charge fifteen per cent under the free market rent, the 
          initial rents not being subject to a Fair Market Rent Appeal 
          (FMRA).  In addition, such an owner can add 2.2% of the initial 
          rent on each of the first nine anniversary dates of the initial 
          leases.  These increases became part of the base rent, and 
          therefore subject to Guidelines increases, if imposed before 
          November 19, 1982; but if imposed on or after that date they are 
          carried as separate charges and are not subject to Guidelines 
          increases.
           
          The Commissioner will analyze the relevant "corrections" made by 
          the owner to the Administrator's rent chart.  The Administrator 
          found that the correct rent throughout the year 1980 was $613.51 
          and the owner does not contest that figure.  On February 1, 1981





          a one year vacancy lease with former tenant Bastone commenced.  
          The Administrator used $613.51 as the prior base rent and added 




          DOC. NO.: AK 410566-RO
          16% thereto plus the 421a increase.  The owner in effect argues
          that the Administrator should have added the 421a increase first 
          (as of the anniversary date January 1, 1981) and then added 21% 
          of that sum to get the new rent.

          The owner is correct that the 421a increase could have been 
          charged on January 1, 1981, assuming there was a tenant in 
          occupancy at that time.  However, a Guidelines increase is always 
          computed from the rent in effect on the last day of the prior 
          Guidelines period - in this case  June 30, 1980 so that the 
          Administrator was correct to use $613.51 as the base rent.

          The Guidelines Order in question, Number Twelve, provided for  
          11% increase for a one year lease, plus a vacancy allowance of 5% 
          or 10%, depending on whether or not there had been a "change in 
          tenantry in the apartment since July 1, 1975."  The owner is in 
          effect arguing that there had been only one tenant prior to 
          tenant Bastone so that a 10% vacancy allowance was proper.  The 
          Administrator held that the commencement of the original 421a 
          tenancy in 1978 itself constituted a "change in tenantry" within 
          the meaning of Guidelines Order Number Twelve.  The Commissioner 
          hereby affirms that finding by the Administrator.  On a basic 
          level it is clear that the transition from no tenancy at all to a 
          first tenancy is a greater "change in tenantry" than the change 
          from one stabilized tenant to another.  More importantly, the 
          obvious purpose of the variable vacancy allowance was to benefit 
          the stabilized owner who had had the same stabilized tenant for 
          the past five years and had therefore been restricted to simple 
          Guidelines increases without any vacancy allowances.   This 
          purpose is in no way served by granting a larger vacancy 
          allowance to a 421a owner who three years earlier rented to a 
          first stabilized tenant.  Compare Administrative Review Order 
          Number ARL 07405-Q in which the Commissioner found that vacancy 
          decontrol counted as a "change in tenantry."  Since the first 
          stabilized rent after vacancy decontrol must be a fair market 
          rent challengeable by a FMRA, the fact pattern of the instant 
          proceeding presents an even stronger reason not to impose the 
          higher vacancy allowance.

          For the complaining tenant's vacancy lease commencing February 1, 
          1982, the owner again in effect argues that the 421a increase 
          should have been added on January 1, 1982 so that the Guidelines 
          increase and vacancy allowance under Guidelines Order 13 would be 
          computed from that sum.  This argument is without merit, as seen 
          above regarding Order 12.












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          DOC. NO.: AK 410566-RO
          For the month of January 1983 the Administrator found an 




          DOC. NO.: AK 410566-RO
          overcharge of $11.74, apparently because the Administrator felt 











          DOC. NO.: AK 410566-RO
          the owner had to wait until February 1, 1983, the commencement 




          DOC. NO.: AK 410566-RO
          date of the first renewal lease for the complaining tenant, to 











          DOC. NO.: AK 410566-RO
          impose the 421a increase.  However, that increase is collectible 




          DOC. NO.: AK 410566-RO
          on the anniversary date of the original 421a lease, here January 











          DOC. NO.: AK 410566-RO
          1st.   Accordingly, the $928.19 charged during January 1983 was 




          DOC. NO.: AK 410566-RO
          lawful, and the Commissioner hereby revokes the finding of a 











          DOC. NO.: AK 410566-RO
          $11.74 overcharge for that month and, for the same reason, the 




          DOC. NO.: AK 410566-RO
          $11.94 (sic) overcharge for the month of January 1984.











          DOC. NO.: AK 410566-RO





          DOC. NO.: AK 410566-RO
          Nevertheless, the Administrator correctly used the rent charged 











          DOC. NO.: AK 410566-RO
          on September 30, 1982 ($916.45) in computing the Guidelines 14 




          DOC. NO.: AK 410566-RO
          increase of 4% ($953.11) plus the 421a increase of $11.94, which 











          DOC. NO.: AK 410566-RO
          is not part of the base rent.  The owner's allegation that the 




          DOC. NO.: AK 410566-RO
          Administrator should have used $960.91 as the base rent for 











          DOC. NO.: AK 410566-RO
          computing the Guidelines 14 increase is without merit.




          DOC. NO.: AK 410566-RO












          DOC. NO.: AK 410566-RO
          Furthermore, the Administrator correctly used $953.11, the rent 




          DOC. NO.: AK 410566-RO
          charged in September 30, 1983, to compute the Guidelines 15 











          DOC. NO.: AK 410566-RO
          increase of 7% ($1019.53) for the two year renewal lease 




          DOC. NO.: AK 410566-RO
          commencing February 1, 1984.  To this must be added a separate 











          DOC. NO.: AK 410566-RO
          charge equal to $23.88 (2 x $11.94) for a total lawful rent of 




          DOC. NO.: AK 410566-RO
          $1043.41, as found by the Administrator, constituting a $1.13 per 











          DOC. NO.: AK 410566-RO
          month overcharge.  (Note that the rent can be further increased 




          DOC. NO.: AK 410566-RO
          by a separate charge of $11.94 on January 1, 1985, etc., until a 











          DOC. NO.: AK 410566-RO
          total of nine 421a increases have been taken.)  The Commissioner 




          DOC. NO.: AK 410566-RO
          hereby finds that the correct total with interest from April 1, 











          DOC. NO.: AK 410566-RO
          1984 for this $1.13 per month overcharge is $29.12, rather than 




          DOC. NO.: AK 410566-RO
          the $27.12, plus $3.68 interest found by the Administrator.  To 











          DOC. NO.: AK 410566-RO
          summarize the $54.45 overcharge found by the Administrator is 




          DOC. NO.: AK 410566-RO
          hereby reduced to $29.12.











          DOC. NO.: AK 410566-RO





          DOC. NO.: AK 410566-RO
          Finally, the Commissioner notes that the owner's "corrections" 











          DOC. NO.: AK 410566-RO
          often have "Lawful Stabilized Rents" from $30.00 to $50.00 in 




          DOC. NO.: AK 410566-RO
          excess of the actual rent charged.  This is incorrect.  In 











          DOC. NO.: AK 410566-RO
          general, an owner is deemed to have waived any otherwise 




          DOC. NO.: AK 410566-RO
          permitted rent in excess of the rent actually charged.











          DOC. NO.: AK 410566-RO





          DOC. NO.: AK 410566-RO
          This Order is without prejudice to the rights of the tenants to 











          DOC. NO.: AK 410566-RO
          file a service complaint, if the facts so warrant.




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          DOC. NO.: AK 410566-RO
                                                                     




          DOC. NO.: AK 410566-RO
          THEREFORE, in accordance with the Rent Stabilization Law and 











          DOC. NO.: AK 410566-RO
          Code, it is




          DOC. NO.: AK 410566-RO












          DOC. NO.: AK 410566-RO
          ORDERED, that this petition be, and the same hereby is, granted 




          DOC. NO.: AK 410566-RO
          in part and the Rent Administrator's order be, and the same 











          DOC. NO.: AK 410566-RO
          hereby is, modified in accordance with this Order and Opinion.




          DOC. NO.: AK 410566-RO












          DOC. NO.: AK 410566-RO
          ISSUED:




          DOC. NO.: AK 410566-RO
                                       











          DOC. NO.: AK 410566-RO
          ELLIOT SANDER




          DOC. NO.: AK 410566-RO
          Deputy Commissioner







    

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