DOCKET NUMBER: BD 210061-RO
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 : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: BD 210061-RO
:
: DRO DOCKET NO.: K 3103107-RT
:
M.C.D. REALTY CORP PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW IN PART
On April 3, 1987 the above-named owner filed a petition for Administrative
Review of an order issued March 12, 1987 by a District Rent Administrator
concerning the housing accommodation known as Apartment 6C, 1776 Union
Street, Brooklyn, New York, wherein the District Rent Administrator
determined that the tenant had paid excess rent in the amount of
$2,151.15 pursuant to a Fair Market Rent Appeal.
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 the evidence in the record and has
carefully considered that portion of the record relevant to the issues
raised by the administrative appeal.
The original proceeding was initiated by the tenant on March 24, 1984, by
filing an overcharge complaint and a fair market rent appeal. The tenant
took occupancy on December 15, 1982 at an initial rent of $295.00. The
tenant also stated that she had never received a copy of the DC-2 notice
advising her of the opportunity to file a Fair Market Rent Appeal as the
first rent stabilized tenant.
On December 4, 1984 the owner was advised to submit a rent history of the
apartment. The notice specified that the complaint was in the nature of a
Fair Market Rent Appeal, and that the owner's proof of (certified) mailing
of the DC-1 or DC-2 notice to the tenant was therefore essential to the
proceeding. On December 20, 1984 the owner mailed a copy of the 1984
apartment registration, RR-1, and a post office record sheet indicating
its service on the tenant.
On September 26, 1986 the DHCR sent notice to the owner that it was
processing the tenant's Fair Market Rent Appeal, and that the owner must
submit complete copies of all leases or rent ledgers for the subject
apartment since June 30, 1974 or the date on which the last rent
DOCKET NUMBER: BD 210061-RO
controlled tenant vacated the apartment, whichever was later. The notice
restated the need for the owner to provide proof of the mailing of the DC
1 or DC-2 notice on the tenant. Finally, the owner was notified of the
documentation that the owner would be allowed to submit in determining the
fair market rent, including the rents for the apartments in the subject
line and/or rents prevailing in the same area for similar apartments. On
October 27, 1986 the owner submitted copies of the tenants' leases to the
DHCR, as well as the 1974 rent roll for the building through July.
On March 12, 1987 the Rent Administrator issued the order herein appealed,
which established an initial fair market rent of $250.01, found total
overcharges of $2,151.15 through December 14, 1986 and directed a rent
rollback and refund of overcharges.
The initial rent was established on the basis of the last Maximum Base
Rent adjusted by Special Guidelines Order Number 14 because the District
Rent Administrator found that the owner did not submit sufficient rental
data for consideration of comparable apartment rents. Accordingly, the
1982 Maximum Base Rent of $217.40 was adjusted by an additional 15%
resulting in a Fair Market Rent of $250.01.
In its petition, dated April 3, 1987 the owner contends that the
Administrator erred in calculating the fair market rent in that the DHCR
did not average the rent of the MBR with comparable rents paid on that
line in 1974. The owner here resubmits the same rent roll sheets that
were submitted in 1986. Finally the owner contends that the tenant is not
entitled to a fair market rent appeal because she received the DC-2
notice. Attached to the petition is a copy of the DC-2 notice, which
states the date of vacancy decontrol as December 15, 1982, and which was
signed by the tenant under the handwritten statement "original received by
tenant on December 15, 1982."
It is the considered opinion of the Commissioner that this petition should
be granted in part.
Section 25 of the former Rent Stabilization Code provides that a fair
market rent appeal application must be filed within 90 days of receipt of
the initial legal regulated rent notice (DC-2 notice). Section 26 of the
Code provides that said notice shall be served by the owner on the tenant
by certified mail.
In the present case, the owner submits on appeal a photocopy of the DC-2
notice for the subject apartment, and states that the tenant is not
eligible for a fair market rent appeal because she had filed it more than
90 days after the date she received the notice. The owner's contention is
based on the appearance of the tenant's signature on the printed notice
under a handwritten statement to the effect that the tenant received the
"original" on December 15, 1982, which is the stated date of decontrol.
The Commissioner finds that the owner's submission of the notice is
procedurally defective and thus of no substantive weight in this
proceeding. The owner may not now submit such material on appeal, without
explanation of why it was not submitted below, and attempt to have it
incorporated into the record. As narrated above, the owner was directly
informed on at least three occasions that it must submit proof of its
certified mailing of the DC-2 notice to the tenant if it wishes to
challenge the tenant's right to a fair market rent appeal. Without such
proof, the Administrator must proceed with the tenant's appeal, as there
is no way the Administrator could know from DHCR records that the tenant
received it. Therefore, the 90 day statutory time period for filing the
DOCKET NUMBER: BD 210061-RO
appeal never started to run and the tenant was entitled to challenge the
initial legal regulated rent. (Accord: ARL 04630).
Section 26-513 of the Rent Stabilization Law provides, in pertinent part,
that fair market rent adjustment applications are to be determined by the
use of special fair market rent guidelines orders promulgated by the New
York City Rent Guidelines Board and by the rents generally prevailing in
the same area for substantially similar housing accommodations. In order
to determine rents generally prevailing in the same area for substantially
similar housing accommodations, it is DHCR's procedure for fair market
rent appeal cases filed prior to April 1, 1984 to allow owners to submit
June 30, 1974 free market rental data for complete lines of apartments,
beginning with the subject line. The average of such comparable rentals
will then be updated by annual guideline increases. Alternatively, DHCR
procedure allows owners to have comparability determined on the basis of
rents charged after June 30, 1974. In order to use this method, owners
were required prior to November 1, 1984 to submit rental history data for
all stabilized apartments in the subject premises and subsequent to
November 1, 1984 to submit such data for complete lines of apartments
beginning with the subject line. Post-June 30, 1974 rent data will be
utilized if the comparable apartment was rented to a first stabilized
tenant within one year of the renting of the subject apartment and if the
owner submits proof of service of an initial legal regulated rent notice
(DC-2 Notice) or apartment registration form indicating that the rent is
not subject to challenge.
In the present case the owner has submitted the June 30, 1974 rents for
all apartments in the same line as the subject apartment, which qualifies
as comparability data in determining the fair market rent. The record
establishes, however, that the Administrator failed to consider this in
its calculations, relying solely upon the Special Guidelines Order
increases for the subject apartment. While the Administrator correctly
calculated the MBR for the year of occupancy as $250.01, the failure to
apply the comparability test resulted in an insufficient fair market rent,
thereby inflating the amount of excess rent owed the tenant. It is also
noted that, although the tenant took occupancy under Guidelines 14, which
authorized the addition of the allowable fuel cost adjustment in
determining the fair market rent, the owner did not file for a fuel cost
adjustment increase for that Guidelines period.
The adjusted calculations for the tenant's fair market rent are as
follows:
A) Apartment 6C: $163.35..........1976 MBR
Special Guidelines + 9% conversion factor to 1978 MBR
$178.05 1978 MBR
+_ 10%.......conversion factor to 1980 MBR
$195.86 1980 MBR
+ 11%.......conversion factor to 1982 MBR
$217.40 1982 MBR
+ 15%.......Special Guideline Order #14
adjustment for Fair Market Rent
$250.01
B) Comparability: #1C $145.00
Average of 6/30/74 #3C $145.00
decontrolled rents in the #5C $160.22
DOCKET NUMBER: BD 210061-RO
subject line: $150.07
Guidelines Period #6: 7/1/74
6/30/75 (8 & 1/2 + $150.07)..............$162.83
Guidelines Period #7: 7/1/75
6/30/76 (7 & 1/2 + $162.83)..............$175.04
Guidelines Period #8: 7/1/76
6/30/77 (6 & 1/2 + $175.04)..............$186.42
Guidelines Period #9: 7/1/77
6/30/78 (6 & 1/2% + $186.42).............$198.54
Guidelines Period #10: 7/1/78
6/30/79 (4 & 1/2% + $198.54).............$207.47
Guidelines Period #11: 7/1/79
6/30/80 (8 & 1/2% + $207.47).............$225.10
Guidelines Period #12: 7/1/80
6/30/81 (11% + $225.10)..................$249.86
Guidelines Period #12a: 7/1/81
6/30/82 (11% + $249.86)..................$277.34
Guidelines Period #14: 10/1/82
9/30/83 (4% + 0% vacancy increase + $277.34)....$288.43
The Fair Market Rent for the subject apartment is determined by averaging
the result of the Special Guidelines test with the result of the
Comparability study. This results in a final Fair Market Rent of $269.22.
$250.01 + $288.43 : 2 = $269.22
As a result of the increased fair market rent, the amount of excess rent
as calculated for the period under review is reduced to $1,182.92,
including excess security of $16.28, as documented in the rent
calculations chart annexed hereto and made part hereof.
The tenant may upon the expiration of the period in which the owner may
institute a proceeding pursuant to Article Seventy-Eight of the Civil
Practice Law and Rules, institute a proceeding against the owner to
recover the above amount of excess rent in a court of competent
jurisdiction.
If the owner has already complied with the Administrator's order and there
are arrears due to the owner as a result of the instant determination, the
tenant may pay off the arrears in twelve (12) equal monthly installments.
Should the tenant vacate after the issuance of this order, said arrears
shall be payable immediately.
THEREFORE, pursuant to the Rent Stabilization Law and Code, it is
ORDERED, that the Petition be, and the same hereby is granted in part; and
that the Administrator's order be, and the same hereby is amended in
accordance with this order and opinion.
ISSUED:
DOCKET NUMBER: BD 210061-RO
ELLIOT SANDER
Deputy Commissioner
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