DOC. NO.: ARL 08879-K
                                   STATE OF NEW YORK
                              OFFICE OF RENT ADMINISTRATION
                                       GERTZ PLAZA
                                 92-31 UNION HALL STREET
                                 JAMAICA, NEW YORK 11433
         APPEAL OF                           :   DOCKET NO.: ARL 08879-K
                                             :   D.R.O. DOCKET NO.:
              MORRIS WEINTRAUB ASSOCIATES/            CDR 13,866
              DARBY HOUSE,        PETITIONER :

                                  ADMINISTRATIVE REVIEW

         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.


                                                 ELLIOT SANDER
                                                 Deputy Commissioner


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