ARL08393L
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 S.J.R. NO.:,1360
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: ARL08393L
TIME EQUITIES, INC.,
DRO DOCKET NO.: L3116922T
75371G
PETITIONER CDR 12946
----------------------------------X TENANT: DOMINICK SCOTTO
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
AND
MODIFYING DISTRICT RENT ADMINISTRATOR'S ORDER
On February 26, 1986, the above-named petitioner-owner filed a
Petition for Administrative Review against an order issued on
February 5, 1986 by the District Rent Administrator, 10 Columbus
Circle, New York, New York concerning the housing accommodations
known as 221 West 82nd Street, New York, New York, Apartment 15-B
wherein the District Rent Administrator determined the fair market
rent for the subject apartment.
Subsequent thereto, the petitioner-owner filed a petition in the
Supreme Court pursuant to Article 78 of the Civil Practice Law and
Rules requesting that the "deemed denial" of the petitioner's
administrative appeal be annulled. The proceeding was then
remitted to the Division for consideration of the petitioner's
administrative appeal.
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 issue in this appeal is whether the District Rent
Administrator's order was warranted.
The applicable sections of the Law are Section 26-513 of the Rent
Stabilization Law and Sections 2521.1(d) and 2522.3 of the current
ARL08393L
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
issues raised by the administrative appeal.
This proceeding was originally commenced by the filing in March
1984 of a Fair Market Rent Adjustment Application by the tenant.
Such application listed the owner as 82nd Broadway Management
Company. The tenant stated that he took occupancy of the subject
apartment pursuant to a lease which commenced on February 1, 1983
at a rental of $900.00 per month.
Subsequently on Novmeber 9, 1984, Time Equitites, Inc. submitted a
response indicating that it "took possession" of the subject
premises on July 1, 1984.
Both 82nd Broadway Management Co. and Time Equities, Inc. were
afforded an opportunity to submit June 30, 1974 rental data for
comparable apartments or to submit post June 30, 1974 comparability
data.
The owners did not submit the required data.
In Order Number CDR12946, the District Rent Administrator
determined the initial legal regulated rent by establishing a fair
market rent of $529.69 affective February 1, 1983, the date of
commencement of the initial lease of the tenant herein, directed
that all renewal rents be computed above this initial rent and
further directed the owner to refund total excess rent of
$14,276.79 covering the period from February 1, 1983 through
January 31, 1986. The Administrator determined the fair market
rent solely on the basis of the special fair market rent guidelines
order since the owner did not supply rental data that could be used
in a comparability study. The Administrator in his order listed
the owner as 82nd Broadway Management Co. and listed the management
agent as Time Equities, Inc..
In this petition Time Equities, Inc. alleges in substance that
through a written instrument dated August 27, 1984, Time Equities,
Inc. assumed the burdens and benefits of a net leasee including the
right to collect rents and the obligation to bear all costs
commencing July 1, 1984 and thereafter, while the owner 82nd
Management Co. remains responsible for obligations arising prior to
July 1, 1984. Therefore, Time Equities, Inc. urges that the
District Rent Administrator's order should be modified to
specifically apportion the obligation for refund of excess rent
between 82nd Broadway Management Co. and Time Equities, Inc. and
that Time Equities, Inc. should only have to refund that portion of
the excess rent actually collected by it.
In answer to this petition, the tenant contends in substance that
ARL08393L
Time Equities, Inc. as the managing agent for 82nd Broadway
Management Co. is responsible for refunding the entire excess rent
amount found against the owner.
In reply to the tenant's answer, Time Equities, Inc. stated in
substance that as net lessee of the subject premises it had no
proprietary interest in the subject premises prior to July 1, 1984,
that since July 1, 1984 when it started to collect rents it should
be considered as an "owner" of the subject premises pursuant to
Section 2(h) of the former Rent Stabilization Code and that as the
new owner, it should not be responsible for excess rent collected
by the prior owner. In support of its contentions, Time Equities,
Inc. cited CAB Opinion Number 6629, T/A 9909 issued on March 22,
1984 regarding the building 35 West 90th Street wherein Time
Equities, Inc. was listed as an owner-net lessee and was held
responsible for excess rent paid by the tenant of apartment 5J in
such building commencing with the first rental collected as of
November 1, 1982.
On March 18, 1988 a Notice to Submit Evidence was sent to Time
Equities Inc. with a copy to 82nd Broadway Management Co. Time
Equities, Inc. was directed to submit the following:
1. The "net lessee agreement" with 82nd Broadway
Management Co.
2. Any contract of sale of the subject premises
221 West 82nd Street executed simultaneously
with the "net lessee agreement".
3. Written instrument dated August 27, 1984
through which Time Equities, Inc. assumed the
burdens and benefits of a net lessee.
4. Documents indicating the relationship between
Time Equities, Inc. and Francis Greenburger.
5. Any document(s) by which any net lease
agreement with the fee owner of premises 221
West 82nd Street was assigned.
6. Any conveyance by which fee title to premises
221 West 82nd Street was transferred on or
after June 1, 1984.
In response to the aforementioned Notice, Time Equities, Inc.
submitted the following:
a) A contract of sale dated June 26, 1984 with
82nd Broadway Management Co. being listed as
the seller and 221 West 82nd Street Equities
ARL08393L
Group, general partnership c/o Francis
Greenburger, General Partner, 55 Fifth Avenue
being listed as the purchaser and the property
being sold listed as the subject premises
herein. In such contract it was stated that
"Time shall be of essence as to Purchaser's
obligation to close and acquire title
hereunder by March 2, 1987" and that
"Purchaser or Purchaser's designee (the
"Managing Agent") and Seller have
contemporaneously herewith entered into a
management agreement (the "Management
Agreement") whereby Seller has employed and
retained the Managing Agent, between the date
hereof and the earlier of the Closing date, or
such date upon which this contract and/or the
Management Agreement shall have been
terminated pursuant to its terms."
b) A Certificate of Amendment of Certificate of
Incorporation of T.C.C. Productions, Inc.
dated July 9, 1969 amending the name of the
corporation to Time Equities, Inc. and listing
the President of the Corporation as Francis
Greenburger.
c) Copy of Management Contract dated June 26,
1984 between 82nd Broadway Management Company
as owner and Time Equities, Inc. as agent
whereby owner appointed agent as sole and
exclusive renting and managing agent for the
subject premises.
d) Copy of letter dated June 26, 1984 confirming
the parties' understanding of the Contract of
Sale and Management Agreement regarding the
subject premises. Such letter was signed by
the general partner of 82nd Broadway
Management Company, the general partner of 221
West 82nd Street Equities Group (Francis
Greenburger) and the President of Time
Equities, Inc. (Francis Greenburger).
e) Copy of a Closing Statement for Contract of
Sale and Management Contract for the subject
premises dated August 27, 1984.
f) Copy of a Power of Attorney form dated August
27, 1984 whereby 82nd Broadway Management Co.
made Time Equities, Inc. the Managing Agent of
the subject premises pursuant to Management
Agreement dated June 26, 1984.
ARL08393L
g) Letter dated December 12, 1986 amending the
June 26, 1984 contract of sale of the subject
premises changing amount of purchase price and date
of closing.
h) Copy of a deed signed by the Seller dated
December 24, 1986 conveying the subject
premises from 82 Broadway Management Co. to
221-223 West 82 Owner Co. 55 Fifth Avenue, c/o
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 fair market rent adjustments, where there
has been a transfer of ownership of a building, the policy of the
former Conciliation and Appeals Board (hereafter CAB) adopted by
the DHCR during the period in question provides that the obligation
of a new owner to refund excess rent is limited to such excess rent
collected by it and may not be extended to excess rent collected by
the prior owner in the absence of evidence of any collusion between
the new owner and prior owner. In view of the difficulties
encountered by tenants in locating owners to whom rent payments are
no longer made and in obtaining excess rent payments paid to such
owners and in view of the complicated, entangled owner's history in
the proceeding herein, the Commissioner is of the opinion that if
an actual change of ownership of the premises (transfer of title)
has not occurred, the owner (including a managing agent) currently
collecting the rent is responsible for all refunds of excess rent.
Therefore the question presented in this proceeding is whether an
actual change of ownership of the subject premises occurred as of
July 1, 1984 when Time Equities, Inc. first began collecting rents
at the subject premises thus making Time Equities, Inc. not
responsible for refunding excess rent paid by the tenant prior to
July 1, 1984. The Commissioner is of the opinion that no such
change of ownership occurred and that Time Equities, Inc. is liable
for refunding excess rent paid by the tenant herein prior to July
1, 1984. A careful examination of the record including the
documentary evidence submitted on behalf of Time Equities, Inc.
discloses that although there was a 1984 contract of sale, fee
ownership of the subject premises was not transferred from 82nd
Broadway Management Company until at least December 1986, that from
July 1, 1984 to at least December 1986 Time Equities, Inc. acted in
the capacity of a managing agent for 82nd Broadway Management
Company with regard to the subject premises and that the period for
which the tenant herein was found to have paid excess rent was from
February 1, 1983 through January 31, 1986. The Commissioner finds
that Time Equities, Inc. was acting as the managing agent for the
fee owner 82nd Broadway Management Co. and as such is responsible
ARL08393L
for refunding to the tenant herein the full amount of the excess
rent collected from February 1, 1983 through January 31, 1986.
The District Rent Administrator's order is hereby amended to
reflect that as regards the tenant herein, Time Equities, Inc. is
solely liable for refunding all excess rent. However, the
Commissioner's order and opinion herein is issued without prejudice
to whatever rights, if any, Time Equities, Inc. has against 82nd
Broadway Management Company for the recovery of that portion of the
excess rent to be refunded to the tenant which was actually
collected by 82nd Broadway Management Company - the excess rent
collected prior to July 1, 1984.
CAB Opinion 6629, T/A 9909 issued on March 22, 1984 and cited by
Time Equities, Inc. in its petition, did not consider the question
of whether ownership of 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.
The owner is further directed to roll back the rent to the
stabilized rent consistent with this order and opinion, and to
refund or fully credit against future rents over a period not
exceeding six months from the date of receipt of this order, any
rent paid by the tenant herein in excess of the lawful
stabilization rent.
In the event the owner does not take appropriate action to comply
within 60 days from the date of this order, the tenant may credit
the excess rent against the next month(s) rent until fully offset.
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.
ARL08393L
ISSUED:
------------------------
JOSEPH A. D'AGOSTA
Deputy Commissioner
|
