ARL 5600-L

                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                             JAMAICA, NEW YORK    11433

          APPEAL OF                               ADMINISTRATIVE REVIEW
                                                  DOCKET NO.: ARL 5600-L

                                                  DRO DOCKET NO.: 85181-G
                                                  DRO ORDER NO.: CDR 7813

                                                  TENANTS:  GEORGE AND INEZ
                                 PETITIONER                 KIRBY LOCKHART

                                       IN PART

          On October 11, 1985 the  above  named  petitioner-owner  filed  a
          Petition for Administrative Review against  an  order  issued  on
          September  16,  1985  by  the  Rent  Administrator,  10  Columbus
          Circle, New York,  New  York  concerning  housing  accommodations
          known as 113 Stanton Street, New  York,  New  York,  Apartment  1
          wherein the Administrator established the  legal  regulated  rent
          and directed the refund of rent overcharges totalling $10,255.86, 
          including treble damages for the period since April 1, 1984.

          The Commissioner notes that this proceeding was  filed  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
          provision  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 tenants initially filed  a complaint of rent overcharge  with
          the former Conciliation and Appeals Board in  December,  1981  in
          which the petitioner herein (Hing Dat Realty) was listed  as  the
          owner and in which the  tenants  stated  that  "  I  believe  the
          initial legal regulated rent should be based  on  the  rent  paid
          when we moved in in 1975, i.e. $250.00 per month  plus  the  rent
          stabilized 3 yr. increases since, i.e. 11 1/2% in 1978 and 17% in 
          1981 or $326.75."  Since the records of  the  Rent  Stabilization
          Association  (RSA)  failed  to  show  that  the   premises   were
          registered with the RSA the matter was referred to the  New  York
          City Department of Housing Preservation and Development.  After a 
          physical inspection and notice to  both  the  current  owner  and
          former owner (Essex - Stanton Corporation) it was found that  the

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          subject premises (which contains four apartments)  together  with
          115/117 Stanton Street and 153/155 Essex Street forms part  of  a
          horizontal   multiple   dwelling   subject    to    stabilization
          jurisdiction.  Pursuant to an order (2AD40288) issued on May  16,
          1983 the owner  herein  was  directed  to  register  the  subject
          premises with the Rent Stabilization Association  or  face  being
          placed under standard Rent Control.

          Thereafter, on December 1, 1983 the tenants refiled  the  instant
          complaint of rent overcharge noting  the  jurisdictional  finding
          made under Docket No. 2AD40288 (supra).  The  tenants  reiterated
          that they first moved into the subject premises on September  15,
          1975 under a two-year lease at a rental  of  $250.00  per  month;
          that they continued in occupancy on a month-to-month basis paying 
          $300.00 per month as of May 6, 1980 and $350.00 per month  as  of
          June 18, 1981.  The tenants further stated that after a one  year
          battle in which the landlord  sought  their  eviction  they  were
          given a three year lease and paid a rental of $450.00  per  month
          as of June 1, 1982.  The tenants submitted copies of the 1975 and 
          1982 leases, the latter providing for increments  of  $25.00  per
          month for the second and third years of  the  lease  term.   Also
          submitted was  a  copy  of  a  settlement  agreement  (Index  No.
          53834/82) setting forth the terms of the  lease  agreement.   The
          tenants subsequently advised the Administrator that as of January 
          1, 1984 they paid, and the owner accepted, $326.75 per month.

          On November 15, 1984 the owner herein was served with a  copy  of
          the tenants' complaint and was  directed  to  submit  a  complete
          rental history for the subject  apartment  from  the  base  date,
          including copies of all leases since June 30, 1974, rent  ledgers
          or other satisfactory proof of rent  collected.   The  owner  was
          advised that it could  be  liable  for  treble  damages  for  any
          overcharges found to have been collected subsequent to  April  1,
          1984.  The owner failed to respond in this proceeding.

          In his order, based on the owner's failure to submit  a  complete
          rental history or a current rent roll, the Administrator utilized 
          the Division of Housing  and  Community  Renewal  (DHCR)  default
          procedures to establish  the  tenants'  initial  lawful  rent  at
          $218.34 per month, and froze the rent  at  that  amount  for  the
          period September 15, 1975 through August 31, 1985.

          In this  petition  the  owner  contends  in  substance  that  the
          Administrator erred in failing to allow any  guideline  increases
          for the intervening ten years;  that  the  imposition  of  treble
          damages was unwarranted since it was not  until  March  31,  1983
          that it was advised by Rent Control of the intent  to  place  the
          subject premises under stabilization; and that it was  not  until
          May 16, 1983 that the subject premises were determined to be part 
          of  a  horizontal  multiple  dwelling   and   thus   subject   to
          stabilization jurisdiction.

          In answer, the tenants contend in substance that the current  and
          former owners actively misled them by the inclusion  of  a  lease
          rider in which they acknowledged the apartment was not subject to 
          stabilization; that such lease  provision  would  not  have  been
          included if the owners were not concerned about this possibility; 
          and that after the 1983 decision under Docket No.  2AD40288,  the
          owner took no action  to  ascertain  the  correct  rent  for  the

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          After  a  careful  consideration  of  the  entire   record,   the
          Commissioner is of the  opinion  that  this  petition  should  be
          granted in part.

          At the outset the Commissioner notes that  the  order  (2AD40288)
          finding the subject premises subject to stabilization constitutes 
          a final and  binding  determination  not  subject  to  review  or
          collateral attack.  A review of said  docket  discloses  that  on
          June 21, 1985 the petitioner herein, via its attorney,  submitted
          a letter to the effect that it  was  experiencing  difficulty  in
          obtaining old leases because the former landlord was no longer in 
          New York City, but did furnish a  copy  of  the  1982  lease  and
          settlement agreement previously submitted by the tenants  in  the
          instant docket  (85181-G).   The  Commissioner  notes  that  this
          settlement agreement, which is not "so ordered" by the court  and
          which does not purport to  reflect  a  stabilized  rent,  is  not
          binding on the Division.

          The Administrator's setting of a default rent was  predicated  on
          the current owner's failure to provide a complete rental  history
          from the apartment's base date.  However,  the  tenants  did  not
          make  a  general  complaint  of  overcharge,  which  would   have
          triggered the requirement of the  submission  of  a  full  rental
          history, but rather stated that the lawful rents should be  based
          on  their  initial  rent  of  $250.00.   The   Commissioner   has
          calculated the lawful rents above that amount,  as  well  as  the
          amount of overcharge.  They are set  forth  on  an  amended  rent
          calculation chart attached hereto and made a part hereof.

          It would appear  that  the  prior  owner  may  well  have  had  a
          justifiable reason to believe the premises free of  stabilization
          jurisdiction since it contains less than six units  (albeit  part
          of a horizontal multiple dwelling).  The record further discloses 
          that subsequent to the Administrator's order 2AD40288 putting the 
          owner herein on specific notice that the  subject  apartment  was
          stabilized, the owner accepted a reduced rental as of January  1,
          1984 (in an amount computed by the tenants) well below the rental 
          reserved in the 1982 lease.  Because of these  factors,  and  the
          fact that the tenants actually were in occupancy during the  time
          from October 1, 1977 to May 31, 1982 when the parties  could  not
          agree on a lease,  a one-year and a three-year  lease  have  been
          deemed from October 1, 1977, since this  results  in  the  lowest
          percentage of increase of any one-,two-or three-year leases  that
          can be contained in that 56-month period.

          Section  2526.1(f)  of  the  current  Rent   Stabilization   Code
          provides, in pertinent part, that for overcharges collected prior 
          to April 1, 1984, an owner will  be  held  responsible  only  for
          that portion of the overcharge  it  actually  collected,  in  the
          absence of collusion or any relationship between such  owner  and
          the prior owner.

          An examination of the records in this case, including Docket  No.
          2AD40288, reveals  that  the  petitioner  herein  first  acquired
          ownership of the subject premises on October 5,  1981,  and  that
          there is no evidence of any collusion between  the  owner  herein
          and the prior owner Essex-Stanton Corporation.  Accordingly,  the

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          current owner is responsible only for overcharges occurring since 
          October 5, 1981.  The Commissioner notes in  this  respect  that,
          due to a failure to include overcharge amounts set forth  on  the
          first page of the Administrator's  rent  calculation  chart,  the
          total amount of overcharges  set  forth  in  the  Administrator's
          order ($10,364.09) only covers the period between  June  1,  1982
          and August 31, 1985.  It is noted that treble  damages  have  not
          been imposed due to the fact that no overcharge occurred on rents 
          on and after April 1, 1984, and  treble  damages  would  only  be
          applicable to such overcharges.

          Inasmuch as the prior owner is not a party to these  proceedings,
          the determination herein is without prejudice to any  rights  the
          tenants may have to proceed  against  said  prior  owner,  Essex-
          Stanton Corporation, in a court of appropriate jurisdiction.

          Because the apartment registrations from 1984  to  1989  indicate
          rents of $475.00 or $500.00, both with and  without  leases,  the
          owner is cautioned to adjust the  rent,  in  leases  after  those
          considered in  this  order,  to  amounts  no  greater  than  that
          determined by this  order  plus  any  lawful  increases,  and  to
          register any adjusted rent, with this order being  given  as  the
          reason for the adjustment.  Because the tenants herein  may  have
          vacated by the time that this determination is issued, a copy  of
          this determination is being mailed to the tenant-in-occupancy.

          This order may, upon the expiration of the period  in  which  the
          owner may institute a proceedi g  pursuant  to  Article  Seventy-
          Eight of the Civil Practice Law and Rules, be filed and  enforced
          in the same manner as a judgment  or  not  in  excess  of  twenty
          percent  thereof  per  month  may  be  offset  against  any  rent
          thereafter due the owner.
          THEREFORE,  in  accordance  with  the  provisions  of  the   Rent
          Stabilization Law and Code, it is

          ORDERED, that this petition be, and the same hereby  is,  granted
          in part; and that the Administrator's  order  be,  and  the  same
          hereby is, modified in accordance with this  Order  and  Opinion.
          The lawful stabilization rents and amount of overcharge  are  set
          forth on an amended rent calculation chart  attached  hereto  and
          made  a  part  hereof.   The  overcharge  owed  by  Essex-Stanton
          Corporation is $203.15, and the overcharge owed  by  the  current
          owner, Hing Dat Realty Corporation, is $2,602.99 as  of  May  31,


                                                  JOSEPH A. D'AGOSTA
                                                  Acting Deputy Commissioner

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