ARL 10629-L; ART 10989-L
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 S.J.R. 4616
APPEALS OF ADMINISTRATIVE REVIEW
DOCKET NOS.: ARL 10629 L
ART 10989 L
LEN RAGOZIN, Tenant and DRO DOCKET NO.:
ANITA SHAPOLSKY of K-3116108 R
56-11 REALTY CO., Owner CDR 16,191
ORDER AND OPINION GRANTING IN PART OWNER'S PETITION,
DENYING TENANT'S PETITION, AND MODIFYING ADMINISTRATOR'S ORDER
AFTER RECONSIDERATION OF PRIOR COMMISSIONER'S ORDER PURSUANT TO
REMIT ON CONSENT
On May 28, 1986 and June 10, 1986 the above named petitioners
filed Petitions for Administrative Review against an order issued
on May 6, 1986 by the District Rent Administrator, Gertz Plaza,
Jamaica, New York concerning the housing accommodation known as
Apartment 2, 56 East 11 Street, New York, New York wherein the
District Rent Administrator established the lawful stabilized
rent at $779.17 effective November 1, 1979 and directed the owner
to refund $40,462.44 in overcharges including excess security and
treble damages on overcharges collected on or after April 1,
The Commissioner issued an order and opinion on October 3, 1989
granting the owner's petition, denying the tenant's petition and
revoking the Administrator's order.
Subsequent thereto, the tenant sought judicial review of the
Commissioner's order pursuant to Article 78 of the Civil Practice
Law and Rules. The agency consented to a remand of the matter
for further consideration and on May 24, 1990, Justice Eugene L.
Nardelli, Supreme Court, New York County, remitted the proceeding
to DHCR for review and a new determination.
The Commissioner has again reviewed all of the evidence in the
record and has carefully considered that portion of the record
relevant to the issue raised by the administrative appeals.
The tenant commenced this proceeding on March 30, 1984 by filing
an overcharge complaint in which he asserted that the $935 rent
for his first lease commencing November 1, 1979 was excessive
because the prior tenant had paid less than $500 per month.
In an answer to the complaint it was asserted that the subject
building is an interim multiple dwelling within the jurisdiction
ARL 10629-L; ART 10989-L
of the New York City Loft Board and not DHCR.
Based on the owner's failure to submit rent records, the adminis
trator used established default procedures to determine the
lawful rent for the subject apartment. The complaining tenant's
vacancy rent ($935.00) was reduced by a guideline increase (15%)
and a vacancy allowance (5%) for an initial rent of $779.17 and
overcharges of $40,462.44 were computed from November 1, 1979
through August 31, 1985 including treble damages on overcharges
collected on or after April 1, 1984.
The owner and tenant both filed petitions for administrative
review. The owner argued that DHCR had no jurisdiction to
determine the rent because the subject building is a 9-story loft
building and all the units were rented under commercial leases
providing for commercial uses to tenants who thereafter used
their units for residential purposes. The owner refers to certain
litigation the former owner had with various tenants, not
including the complainant herein, who were violating their
commercial leases by occupying the commercial spaces for resi-
dential purposes. The owner submitted with the petition a copy
of a judgment by Justice Nathaniel T. Helman, Supreme Court,
New York County, dated July 1, 1981, finding that the lofts on
the second through eighth floors of the subject building are
housing accommodations, that the building is subject to the
Emergency Tenant Protection Act of 1974 and the New York City
Rent Stabilization Law, and that the four tenants who were the
plaintiffs in that proceeding were entitled to renewal of their
The owner argued that Justice Helman's decision was preempted by
Article 7-C of the Multiple Dwelling Law (Loft Law) which was
enacted in 1982 specifically to address the problems created by
the conversion of commercial and manufacturing buildings to
residential use and which creat d the Loft Board with juris-
diction over buildings that are in the process of achieving
compliance with applicable building codes.
The owner also referred in the petition to a nonpayment pro-
ceeding brought against the complainant which was settled by a
"stipulation of discontinuance with prejudice" that was executed
on July 1, 1982 between the attorneys for the landlord and the
tenant pursuant to which $9,315.00 was paid to the landlord. A
copy of this check, dated June 30, 1982, was submitted.
In answer to the petition, the tenant argued in relevant part
that the Loft Law did not and could not invalidate rights granted
to tenants by a court. The tenant also claimed that the check
for $9,315.00 represented rent withheld by the tenant to force
the owner to carry out necessary repairs of dangerous conditions.
The tenant, in his petition, simply objected to the method in
which the rent was determined, asserting that the former tenant's
last rent should have been used. The tenant asserts that the
rent of the previous tenant is not "unknown" s the Administra-
tor's order stated. He states that he requested this information
ARL 10629-L; ART 10989-L
from the landlord by registered letter which was refused and
returned unopened. The tenant then wrote to the former tenant
who returned a notarized account of the rents he paid. This
account shows that the last rent paid was $400.00 at the time he
terminated his occupancy in October 1979.
The Commissioner's order and opinion issued on October 3, 1989
determined that the subject building is an interim multiple
dwelling as defined by Article 7-C of the Multiple Dwelling Law
(Loft Law), that it is registered as such with the Loft Board
which is solely responsible for establishing the initial
regulated rent and any lawful adjustments, and th t the Admini-
strator's order should be revoked for lack of jurisdiction.
A remand was deemed warranted in order to consider 1) whether the
subject unit was subject to rent stabilization and to the rent
agency's jurisdiction prior to the enactment of the Loft Law and
if so 2) whether the rent agency retained or was deprived of
jurisdiction over the unit as a result of the Loft Law.
Upon reconsideration, the Commissioner is of the opinion that the
prior Order and Opinion should be modified, that the owner's
petition should be granted in part, the tenant's petition should
be denied, and the Administrator's order should be modified.
It is noted, at the outset, that the settlement of the aforemen-
tioned nonpayment proceeding did not include any determination or
agreement as to the lawful rent for the subject accommodation.
A review of the Supreme Court's decision, N.Y.L.J, July 15, 1981,
P.11, cols. 1,2,3 (Sup. Ct. N.Y. Co., Helman, J.) reveals that
the court found that the subject building is a loft building
which began to be occupied for both business and residential
purposes some fifteen years earlier and therefore fits within the
structure of the Multiple Dwelling Law. The court further
determined that in accordance with the apparent purpose of the
Emergency Tenant Protection Act of 1974 to extend rent regulation
to categories of housing stock not previously regulated, "the
dwelling units occupied by the plaintiffs in this action are
subject to" stabilization and "the plaintiffs are entitled to
have their leases renewed with rent increases of no more than the
limits applicable to other rent stabilization buildings."
Although the complaining tenant herein was not a party to the
Supreme Court proceeding, the Commissioner finds that the owner
is bound by the Court's determination that the subject apartment
was subject to stabilization. The Commissioner finds without
merit the owner's claim that the Court's final judgment was
preempted by the Loft Law.
Accordingly, upon reconsideration, the Commissioner finds that
since the subject apartment had been found to be subject to
stabilization, the Administrator properly established the ten-
ant's initial rent at $779.17 using procedures developed for use
when rent records are not provided.
However, the Commissioner notes that the Loft Law, which was
ARL 10629-L; ART 10989-L
enacted subsequent to the Supreme Court's 1981 decision, was
specifically intended to address the situation presented by the
subject building of assuring that commercial and manufacturing
loft buildings that are being used for residential purposes
achieve compliance with applicable building codes and laws,
minimum housing maintenance standards, and minimum standards for
health, safety and fire protection. The Loft Law created a cate
gory of buildings designated as "interim Multiple Dwellings"
under the jurisdiction of the Loft Board. The subject building
meets the statutory definition of an interim multiple dwelling
and has been duly registered as such with the Loft Board. While
it is necessary to find that the subject unit is rent stabilized
because of the 1981 Court determination, it became subject to the
jurisdiction of the Loft Board as of June 21, 1982, the date the
Loft Law became effective.
In making this determination it is necessary to distinguish the
case of Blackgold Realty Corp v. Milne, 501 N.Y.S. 2d 44,
affirmed by the Court of Appeals 69 N.Y. 2d 721, cited by the
tenant in his Article 78 petition for the proposition that the
Loft Law does not apply to premises that have already been
determined to be multiple dwellin s subject to the Rent Con-
trol Law. In Blackgold, however, the Court relied, in part, on
the fact that there was no evidence in the record that t e prem-
ises had been converted from commercial to residential use. The
court noted the Rent Commissioner's determination in 1980 that
the building was used for residential purposes from 1865 to 1903
and vacant from 1903 to the early 1930's when the accommodations
therein were again occupied for residential use until the pre-
sent. Any commercial use of the building, the court said, was
de minimis in nature and duration and plainly not within the
purview of the Loft Law.
In the instant case, however, the Supreme Court found that the
building is a loft building "which some fifteen years ago began
to be occupied for both business and residential purposes."
Unlike the building in Blackgold, the subject building is clearly
within the purview of the Loft Law given its stated purposes of
integrating the uncertain and unregulated residential units in
buildings formerly used for manufacturing, warehousing, and
commercial purposes into the Rent Stabilization system in a
manner which ensures compliance with the Multiple Dwelling Law
and various building codes.
Accordingly, the rent established by the Administrator of $779.17
is effective from November 1, 1979, the date of commencement of
the tenant's vacancy lease, up until June 21, 1982, the date the
Loft Law took effect, resulting in total overcharges of $6,552.16
computed as follows:
11/1/79 - 4/30/81 $ 935.00 - $779.17 = $155.83/mo. x 18 mos. = $2,804.94
5/1/81 - 4/30/82 $1,035.00 - $779.17 = $255.83/mo. x 12 mos. = $3,069.96
5/1/82 - 6/21/82 $1,296.65 - $779.17 = $338.63/mo. x 2 mos. = $ 677.26
ARL 10629-L; ART 10989-L
The Commissioner rejects the tenant's contention that the prior
tenant's rent is not unknown but was $400.00 which would then be
the lowest of the three factors in the default computation and
should be used to determine the complaining tenant's rent. The
tenant did not submit evidence of the prior tenant's rent to the
Administrator and the type of evidence submitted with the peti-
tion, consisting of a notarized letter, is not sufficient
evidence to establish the actual rent charged and paid by that
tenant. Moreover, because of the unique circumstances con-
cerning leases for loft units which may involve the purchase of
fixtures by the tenant from either the prior tenant or the
landlord, the Commissioner finds that using the prior tenant's
rent, even if proven, is not an appropriate method for
establishing the rent in this case.
The tenant may enforce this order as a judgment after the time
to file a petition for judicial review has expired.
The determination herein as to the lawful rent is without preju-
dice to whatever action the Loft Board may wish to take for rents
subsequent to June 21, 1982.
THEREFORE, in accordance with the Rent Stabilization Law and
Code, it is
ORDERED, that the Commissioner's prior order be, and the same
hereby is, modified, that the owner's petition be, and the same
hereby is, granted in part, that the tenant's petition be, and
the same hereby is, denied, and that the Administrator's order
be, and the same hereby is, modified to find that the tenant has
been overcharged in the amount of $6,552.16, from November 1,
1979 through June 21, 1982, and that as of June 21, 1982 said
unit became subject to the jurisdiction of the Loft Board.