ARL 5600-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
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IN THE MATTER OF THE ADMINISTRATIVE
APPEAL OF ADMINISTRATIVE REVIEW
DOCKET NO.: ARL 5600-L
HING DAT REALTY CORPORATION,
DRO DOCKET NO.: 85181-G
DRO ORDER NO.: CDR 7813
TENANTS: GEORGE AND INEZ
PETITIONER KIRBY LOCKHART
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
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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apartment.
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,
1985.
ISSUED:
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JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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