DOC. NO.: ARL 08879-K
STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF : DOCKET NO.: ARL 08879-K
: D.R.O. DOCKET NO.:
MORRIS WEINTRAUB ASSOCIATES/ CDR 13,866
DARBY HOUSE, PETITIONER :
ORDER AND OPINION GRANTING PETITION FOR
On March 17, 1986, the above named petitioner-owner filed a Petition for
Administrative Review against an order issued on March 11, 1986, by the
Rent Administrator, 10 Columbus Circle, New York, New York, concerning
housing accommodations known as Apartment 2K, 1355 East 18th Street,
Brooklyn, New York, wherein the Rent Administrator determined that there
had been an overcharge and ordered a refund of $3557.97, including
interest and excess security.
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 of the evidence in the record and has
carefully considered that portion of the record relevant to the issues
raised by the administrative appeal.
The tenant (Robert Berger) commenced this proceeding on March 28, 1984 by
filing an overcharge complaint with the New York City Conciliation and
Appeals Board (CAB), the predecessor of the DHCR, based in part on an
alleged failure by the owner to provide a complete rental history.
In answer to the complaint, the owner stated that the complainant had
taken occupancy September 1, 1971, during the period of statutory
decontrol, and that his initial rent was $175.00 pursuant to a three year
lease. On July 1, 1973 the rent was increased to $193.20 pursuant to
clause 38 of that lease which provided for an increase equal to 3% of any
increase in real estate taxes on the property in which the subject
apartment was located. Therefore, the owner contended, $193.20 was the
Initial Legal Regulated Rent on June 30, 1974, pursuant to the Emergency
DOC. NO.: ARL 08879-K
Tenant Protection Act of 1974, under which the apartment became stabilized
on July 1, 1974.
Nevertheless, in Order Number CDR 13,866, the Rent Administrator used
$175.00 as the Initial Legal Regulated Rent and found an overcharge based
thereon, including the $18.20 excess of $193.20 over the $175.00 during
the initial 1971-197 4 lease itself.
In this petition, the owner contends that the Rent Administrator's Order
is incorrect and should be modified because the tax escalator clause was
lawful when the lease commenced on September 1, 1971 and when the rent was
increased to $193.20 on July 1, 1973. Therefore, $193.20 was the base
rent from which subsequent rents should have been computed.
In answer to this petition, the tenant contends that the order should be
upheld because the owner never proved that it was eligible to take a
$18.20 rent increase in 1973, i.e., that $18.20 was 3% of an actual
increase in taxes.
The Commissioner is of the opinion that this petition should be granted.
In a letter dated June 14, 1976 from the Rent Guidelines Board to the then
- Chairperson of the CAB, Dean Prince, the policy regarding escalator
clauses was clarified, stating in past:
"In this regard, however, there is need for further
clarification of the interplay between tax escalation
clauses and Rent Guidelines Orders. Except insofar as
increases through tax escalation clauses were due and
payable on June 30, 1974 (the ILRR date), any increase
pursuant to such tax escalation clauses effective
within one year of a lease increase pursuant to Rent
Guidelines Orders Nos. 6 (et seq.) and 7 shall not be
considered as part of the base rent over which such
lease increase is computed."
Thus, although certain exceptions were created regarding escalator clauses
in leases entered during decontrol it is clear that if the escalator rent
was due and payable on June 30, 1974, it was part of the base rent.
Accordingly, the owner is correct that the $193.20 charged and collected
commencing July 1, 1973, was the base rent and the Administrator erred by
using $175.00 as the base rent.
Using the $193.20 as the base rent, all subsequent rents are seen to be
within the Guidelines' limits. Thus, there was no overcharge.
DOC. NO.: ARL 08879-K
In addition, the $254.80 overcharge found by the Administrator for the
period July 1, 1973 - August 30, 1974 was clearly incorrect as the $193.20
rent charged for that period was clearly lawful, being a rent charged for
the first time during statutory decontrol.
The tenant claims that the owner did not prove in 1973 that the $18.20
increase was 3% of an actual increase in real estate taxes. That claim is
essentially a claim that the owner violated a term of their contract
during the period of statutory decontrol and is, accordingly, outside the
Rent Stabilization Law and will not be considered by the Commissioner.
If the owner has already complied with the Administrator's Order and, as
a result of the instant determination, there are arrears due to the owner
from the tenant, the tenant is directed to pay off the arrears in twelve
equal monthly installments during the next twelve months. Should the
tenant vacate after the issuance of this Order, all arrears shall be paid
THEREFORE, in accordance with the Rent Stabilization Law and Code, the
Emergency Tenant Protection Act of 1974, and Chapter 403 of the Laws of
1983, as amended by Chapter 102 of the Laws of 1984, as implemented by
Operational Bulletin 84-1, it is
ORDERED, that this petition be, and the same hereby is, granted and the
Rent Administrator's order be, and the same hereby is, modified in
accordance with this Order and Opinion.