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
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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.
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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
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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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For the month of January 1983 the Administrator found an
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overcharge of $11.74, apparently because the Administrator felt
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the owner had to wait until February 1, 1983, the commencement
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date of the first renewal lease for the complaining tenant, to
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impose the 421a increase. However, that increase is collectible
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on the anniversary date of the original 421a lease, here January
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1st. Accordingly, the $928.19 charged during January 1983 was
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lawful, and the Commissioner hereby revokes the finding of a
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$11.74 overcharge for that month and, for the same reason, the
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$11.94 (sic) overcharge for the month of January 1984.
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Nevertheless, the Administrator correctly used the rent charged
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on September 30, 1982 ($916.45) in computing the Guidelines 14
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increase of 4% ($953.11) plus the 421a increase of $11.94, which
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is not part of the base rent. The owner's allegation that the
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Administrator should have used $960.91 as the base rent for
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computing the Guidelines 14 increase is without merit.
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Furthermore, the Administrator correctly used $953.11, the rent
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charged in September 30, 1983, to compute the Guidelines 15
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increase of 7% ($1019.53) for the two year renewal lease
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commencing February 1, 1984. To this must be added a separate
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charge equal to $23.88 (2 x $11.94) for a total lawful rent of
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$1043.41, as found by the Administrator, constituting a $1.13 per
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month overcharge. (Note that the rent can be further increased
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by a separate charge of $11.94 on January 1, 1985, etc., until a
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total of nine 421a increases have been taken.) The Commissioner
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hereby finds that the correct total with interest from April 1,
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1984 for this $1.13 per month overcharge is $29.12, rather than
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the $27.12, plus $3.68 interest found by the Administrator. To
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summarize the $54.45 overcharge found by the Administrator is
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hereby reduced to $29.12.
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Finally, the Commissioner notes that the owner's "corrections"
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often have "Lawful Stabilized Rents" from $30.00 to $50.00 in
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excess of the actual rent charged. This is incorrect. In
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general, an owner is deemed to have waived any otherwise
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permitted rent in excess of the rent actually charged.
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This Order is without prejudice to the rights of the tenants to
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file a service complaint, if the facts so warrant.
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THEREFORE, in accordance with the Rent Stabilization Law and
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Code, it is
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ORDERED, that this petition be, and the same hereby is, granted
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in part and the Rent Administrator's order be, and the same
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hereby is, modified in accordance with this Order and Opinion.
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ISSUED:
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ELLIOT SANDER
DOC. NO.: AK 410566-RO
Deputy Commissioner
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