ARL01284L

                                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 505
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO. ARL01284L

                                          :  DISTRICT RENT OFFICE
           Time Equities, Inc.,              DOCKET NOS. CDR00625 
                                                         67306G   
                                                        
                                             TENANT: Donald Siegal            
                       
                            PETITIONER    : 
      ------------------------------------X                             


           ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
                AND MODIFYING DISTRICT RENT ADMINISTRATOR'S ORDER


      On October 3, 1984, the above-named petitioner-owner filed a Petition 
      for Administrative Review against an order issued on August 31, 1984, by 
      the District Rent Administrator, 10 Columbus Circle, New York, New York, 
      concerning the housing accommodations known as 35 West 90th Street, 
      New York, New York, Apartment No. 10C, wherein the District Rent 
      Administrator determined that the owner had overcharged the tenant.  On 
      March 26, 1985 the Commissioner denied the owner's appeal of such order.

      Subsequent thereto, the petitioner-owner filed a petition and order to 
      show cause in the Supreme Court pursuant to Article 78 of the Civil 
      Practice Law and Rules requesting that the denial of the petitioner's 
      administrative appeal be annulled.  The proceeding was then remitted to 
      the Division for reconsideration of the petitioner's administrative 
      appeal and the issuance of an amended order.

      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 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 issue herein is whether the Rent Administrator's order was 
      warranted.

      The applicable sections of the Law are Section 26-516 of the Rent 
      Stabilization Law, Sections 2526.1 of the current Rent Stabilization 
      Code and Sections 10B, 11 and 20A of the former Rent Stabilization Code.


      The Commissioner has reviewed all of the evidence in the record and has 
      carefully considered that portion of the record relevant to the issue 







          ARL01284L

      raised by the administrative appeal.  

      The tenant originally commenced this proceeding by filing a complaint of 
      rent overcharge on November 9, 1982 with the former New York City 
      Conciliation and Appeals Board (CAB) which was based on CAB Opinion 9612 
      wherein the Board established the prior tenant's rent at $519.13.  The 
      tenant alleged that based thereon, the tenant's initial rental on April 
      1, 1981 of $1350.00 was an overcharge.

      In April, 1983 the tenant advised the staff of the CAB that he and Time 
      Equities Inc. reached a settlement based partly on the owner's Naima 
      Saleh's and Time Equities, Inc.,'s representations that title to the 
      subject building was transferred to Time Equities, Inc. from Naima Saleh 
      on November 1, 1982.  However, in September 1983, the tenant requested 
      that the CAB reopen his complaint because in August 1983 upon a review 
      of a co-op plan, he learned that Naima Saleh still held title to the 
      subject building.

      In its response, Time Equities Inc. alleged that it became the net 
      lessee of the building on November 1, 1982; that it did not possess any 
      monies from the tenant to which it was not entitled; and that it had 
      settled the tenant's dispute with it.  In addition, Time Equities Inc. 
      contended that since the definition of an "owner" under the Rent 
      Stabilization Law was not limited to the title holder but included other 
      parties who were entitled to collect rent, Time Equities became the 
      owner of the building on November 1, 1982 when it began receiving rent.

      A check of the enrollment records of the Rent Stabilization Association 
      showed that Time Equities, Inc. was listed as the agent of the subject 
      premises and "Francis Greenburger, net lessee" was listed as the owner 
      of the subject premises.  Additionally, the records of the CAB showed 
      that Time Equities, Inc. had submitted a copy of the net lease to the 
      CAB during the course of another CAB proceeding (T/A Docket Number 
      10010).  The lease provided that Naima Saleh leased the subject premises 
      to Francis Greenburger, for a term of three years.  In an amended 
      Certificate of Incorporation dated July 9, 1969, Francis Greenburger is 
      listed as the President of Time Equities, Inc.

      In Order Number CDR00625 issued August 31, 1984, the District Rent 
      Administrator found an overcharge in the sum of $13,912.56 for the 
      period from April 1, 1981 through October 31, 1982 and directed Time 
      Equities, Inc. as agent for Naima Saleh to immediately refund this 
      overcharge based on its misleading the tenant into believing that there 
      had been a change in ownership and into closing his case, thereby 
      causing delay in the refund of the overcharge and based on Naima Saleh, 
      the fee title owner's failure to comply with the directives in CAB 
      Opinion Number 9612 which included a directive to roll back the rent to 
      the stabilized amount.  The District Rent Administrator further found 
      that there was no overcharge from November 1, 1982 to March 31, 1983 as 
      Time Equities, Inc. had already refunded to the tenants $4,392.44 
      covering the period from November 1, 1982 to March 31, 1983.



      In its petition, Time Equities, Inc., by it attorney contends that it 
      has already refunded to the tenant a total of $12,817.44 which amount 
      includes a refund pursuant to a previous settlement wherein it refunded 
      to the tenant $4,392.44 for rent payments covering the period November 


          ARL01284L

      1, 1982 to March 31, 1983; and $8,425.00 paid to the tenant as 
      settlement of any dispute concerning rent monies collected during the 
      term of the tenancy, from April 1, 1981 to March 31, 1983.  However the 
      record including a copy of the general release signed by the tenant 
      discloses that the tenant actually received $8250 for this period of 
      overcharges rather than the $8425 stated by the petitioner.  As to the 
      remaining $1,095.12 still owed, the petitioner asserts, it cannot be 
      compelled to refund these monies because the tenant executed a general 
      release subsequent to the issuance of CDR Order 00625; an that this 
      general release was a binding settlement of all disputes regarding rent 
      paid under the tenancy.

      Time Equities, Inc., in its petition, also contends that prior to 
      November 1, 1982 it had no proprietary interest in the subject building, 
      that it did not act as a managing agent for the owner, and that the 
      tenant paid all rent to Naima Saleh and therefore Time Equities, Inc. 
      should not have been ordered to refund that portion of the overcharge 
      which it never collected from the tenant.

      It further contends that since November 1, 1982, it clearly came within 
      the definition of "owner" under Section 2h of the former Rent 
      Stabilization Code since it assumed all the obligations of the prior 
      owner and collected all rents for the subject building and that 
      therefore based on Section 2h, it has in fact been the owner of the 
      subject premises since November 1, 1982 and therefore should only be 
      responsible for those overcharges occurring on and subsequent to its 
      date of ownership.

      In its petition Time Equities, Inc. further contends that the District 
      Rent Administrator's direction that the petitioner refund disputed rent 
      monies for the period prior to petitioner's entering into its net lease 
      agreement, is at variance with CAB Opinion 6629 wherein the CAB directed 
      Time Equities Inc. to refund only those monies dating back to the date 
      it acquired a proprietary interest in the subject building, namely 
      November 1, 1982.  The prior owner in that case was directed to refund 
      the balance of the overpayment up to November 1, 1982.

      The petitioner concludes that based upon all of the above grounds there 
      was no basis for the District Rent Administrator to diverge from the 
      established rule that the obligation of a new owner is limited to 
      refunding excess rent actually collected by it; and that requiring the 
      petitioner to refund monies collected by the prior owner was a drastic 
      penalty based upon an alleged misrepresentation by the petitioner to the 
      tenant which never took place.

      In his answer to the petition, the tenant asserts that based on his 
      calculations regarding the amount of overcharge he incurred, the amount 
      still owed him is $912.56 and not $1,095.12 as stated in the petition.  
      The tenant further asserts that he believes this amount should be 
      refunded to him because of misrepresentations made by the fee owner and 
      Time Equities, Inc. 

      The Commissioner is of the opinion that this petition should be denied 
      and that the District Rent Administrator's order should be modified.

      In proceedings involving rent overcharge complaints for overcharges 
      collected prior to April 1, 1984, the policy of the CAB adopted by the 
      DHCR provides that the obligation of a new owner to refund rent 







          ARL01284L

      overcharges is limited to such rent overcharges collected by it and may 
      not be extended to rent overcharges collected by the prior owner in the 
      absence of evidence of any collusion between the new owner and prior 
      owner.  However Section 2526.1(f)(2) of the current Rent Stabilization 
      Code provides in pertinent part that for rent overcharges collected on 
      or after April 1, 1984, a current owner shall be responsible for all 
      overcharge penalties including penalties based upon overcharges 
      collected by any prior owner.

      In view of the difficulties encountered by tenants in locating owners to 
      whom rent payments are no longer made and in obtaining rent overcharges 
      paid to such owners; in view of the change in policy to hold current 
      owners liable for all overcharges collected on or after April 1, 1984; 
      and in view of the complicated, entangled owner history in the 
      proceeding herein, the Commissioner is of the opinion that in this case 
      the policy for rent overcharges collected prior to April 1, 1984 of 
      limiting the obligation of a new owner to refund only overcharges 
      actually collected by it must be strictly construed and applied only if 
      an actual change of ownership of the premises (transfer of title) has 
      occurred.  Otherwise the owner currently collecting the rent is 
      responsible for refunding all rent overcharges.

      In the instant case, the evidence of record discloses no change of 
      ownership during the period of the rent overcharge (from April 1, 1981 
      through March 31, 1983).  Naima Saleh remained the fee owner during this 
      entire period and Time Equities, Inc. began collecting rents at the 
      subject premises as of November 1, 1982.  Accordingly Time Equities, 
      Inc. was properly directed by the District Rent Administrator to refund 
      the full amount of the rent overcharges from April 1, 1981 through March 
      31, 1983.  The record further discloses that although the tenant's lease 
      during the period from April 1, 1981 to October 31, 1982 stated that the 
      rent was $1350.00 per month, the tenant actually paid $1100 per month 
      during such period.  Accordingly, the total overcharge for the period 
      from April 1, 1982 to October 31 1982 should have been listed by the 
      Rent Administrator as $9162.56 rather than $13,912.56.  Since Time 
      Equities, Inc. has already refunded $8250.00 in overcharges for the 
      period from April 1, 1981 to October 31, 1982, it still owes $912.56.  
      Accordingly, the Rent Administrator's order must be modified to show a 
      rent overcharge of $9,162.56 rather than $13,912.56 for the period from 
      April 1, 1981 to October 31, 1982 and to note that Time Equities, Inc. 
      has refunded $8250.00 of this amount and still owes $912.56.

      This order is issued without prejudice to whatever rights, if any, Time 
      Equities, Inc. has against the fee owner Naima Saleh for the recovery of 
      that portion of the overcharge refunded by Time Equities, Inc to the 
      tenant which was actually collected by Naima Saleh.




      With regard to the settlement signed by the parties on September 12, 
      1984, the Commissioner finds that such settlement did not act as a 
      general release of all disputes regarding rent paid under the tenancy 
      since pursuant to Section 11 of the former Rent Stabilization Code an 
      agreement by a tenant to waive the benefit of any provision of the Rent 
      Stabilization Law or Code shall be void.

      CAB Opinion 6629, T/A9909 issued on March 22, 1984 and cited by Time 


          ARL01284L

      Equities, Inc. in its petition, did not consider the question of whether 
      ownership in the subject premises had changed when Time Equities, Inc. 
      first began collecting rent.

      The owner is directed to reflect the findings and determinations made in 
      this order on all future registration statements, including those for 
      the current year if not already filed, citing this order as the basis 
      for the change.  Registration statements already on file, however, 
      should not be amended to reflect the findings and determinations made in 
      this order.  The owner is further directed to adjust subsequent rents to 
      an amount no greater than that determined by this order plus any lawful 
      increases.

      Upon the expiration of the period in which the owner may institute a 
      proceeding pursuant to Article 78 of the Civil Practice Law and Rules, 
      not in excess of twenty percent per month thereof of the remaining 
      overcharge may be offset against any rent thereafter due the owner.

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

      ORDERED, that this petition be, and the same hereby is, denied, and the 
      Rent Administrator's order be, and the same hereby is, modified in 
      accordance with this order and opinion and that the Commissioner's prior 
      Order and Opinion issued on March 26, 1985 be, and the same hereby is, 
      affirmed as modified herein.

      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner





    

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