ARL 10629-L;  ART 10989-L
                                   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
          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

                                   PETITIONER
          -----------------------------------X


                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,
          1984.

          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
          leases.

          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.


          ISSUED:



                                                  _____________________
                                                  ELLIOT SANDER
                                                  Deputy Commissioner
    

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