BD 410505 RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                             JAMAICA, NEW YORK    11433

          APPEAL OF                               DOCKET NO.:  BD 410505 RO
                      ADAM REALTY,
                                                  D.R.O. DOCKET NO.: T/A 9594
                                                                     CDR 29,428


          On April 16, 1987, the above named petitioner-prior owner filed a 
          Petition for Administrative Review against  an  order  issued  on
          March 12, 1987, by the District Rent Administrator,  10  Columbus
          Circle, New York, New  York,  concerning  housing  accommodations
          known as Apartment 1E, 760 West End Avenue, New York,  New  York,
          wherein the  District  Rent  Administrator  determined  the  fair
          market rent for the subject apartment.

          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  issue  in  this  appeal  is  whether   the   District   Rent
          Administrator's order was warranted.

          The applicable sections of the law are Sections 10B, 25 and 26 of 
          the former Rent Stabilization Code and Sections 2522.3 and 2526.1 
          of the current Rent Stabilization Code.

          The Commissioner has 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 appeal.

          This proceeding was commenced on May 27, 1981,  by  the  tenant's
          filing of a fair market  rent  appeal  with  the  New  York  City
          Conciliation and Appeals Board (CAB), the agency formerly charged 
          with enforcing the Rent Stabilization Law.

          In its  answer  to  the  tenants'  complaint,  the  former  owner

          BD 410505 RO
          contended in substance that the prior tenant,  J.  Low,  was  the
          first rent stabilized tenant of the subject apartment,  that  the
          prior tenant was served with the  Initial  Legal  Regulated  Rent
          Notice (DC-2 Notice) by certified mail, but failed to file a fair 
          market rent appeal  within  ninety  days  of  service,  and  that
          therefore,  the  complaining  tenants'  application   should   be
          rejected.  In support of  these  contentions,  the  former  owner
          submitted copies of a DC-2 Notice to J. Low dated August 1,  1979
          with an unpostmarked certified mail  receipt,  a  one-year  lease
          commencing August 1, 1979  which  contained  the  prior  tenant's
          initials by a clause stating that the prior tenant had received a 
          DC-2 Notice along with the lease, and  rent  ledgers  from  March
          1979 through September 1979.

          In response, the tenants contended that they were the first  rent
          stabilized tenants to reside in the subject apartment  after  the
          rent controlled tenant (Mrs. Appel) died.   In  support  of  this
          contention, the tenants submitted a copy of a  Landlord's  Report
          of Statutory Decontrol dated December 1, 1979 in which the former 
          owner stated that the subject apartment became vacant on  October
          1, 1979 and was rented to the complaining tenants on November  1,

          On June 4, 1984, the Division of Housing  and  Community  Renewal
          (DHCR) requested from the former owner the current address of the 
          prior decontrolled tenant (J. Low) and an affidavit from Mr.  Low
          relating the manner and date in which he was served with the DC-2 
          Notice.  The former owner did not comply with this request.

          On October 30, 1984, DHCR requested  from  the  former  owner  an
          affidavit from either the prior tenant  or  from  the  party  who
          served the prior tenant with the DC-2 Notice.  The  former  owner
          did not comply with this request.

          On December 22, 1986, a hearing was held to determine whether the 
          alleged prior  tenant,  J.  Low,  was  a  legitimate  tenant  who
          actually resided in the subject apartment, and if so, whether  he
          was properly served with a DC-2 Notice.  The  Administrative  Law
          Judge determined that the complaining tenants were the first rent 
          stabilized  tenants  following  the  decontrol  of  the   subject
          apartment and did timely file a fair market rent appeal, and that 
          there was no credible evidence that there had ever been a  tenant
          named Low who resided in the subject apartment.  The Commissioner 
          notes that the former owner appeared by its attorney, but did not 
          produce any  witnesses  or  evidence  at  the  hearing.   At  the
          conclusion of the hearing, the former owner's attorney  requested
          permission to reopen the hearing as she was  attempting  to  find
          and produce the prior tenant.  The former owner was  given  until
          January 12, 1987 to move to reopen the hearing, however no motion 
          was ever  made.   The  former  owner's  attorney  also  requested
          permission to file a legal brief, and was given until January 22, 
          1987 to file a brief, however no brief was filed.

          In Order Number CDR 29,428 issued March 12,  1987,  the  District
          Rent Administrator determined that the complaining  tenants  were
          the first rent stabilized tenants who were  entitled  to  file  a
          fair market rent appeal.  The Administrator established the  fair
          market rent as  $510.50  and  determined  that  the  current  and
          former owners had collected $28,600.53 in excess  rent  from  the

          BD 410505 RO

          In this petition, the former owner contends in substance that the 
          District Rent Administrator's order is incorrect  and  should  be
          revoked because it was deprived of its  constitutional  right  to
          due process of law in that a hearing was held  to  determine  the
          legitimacy of the tenancy  of  the  prior  tenant,  Mr.  J.  Low,
          despite the fact that the prior tenant was unable to  attend  the
          hearing due to circumstances beyond his control.  In  support  of
          this contention, the former owner submits an  unsigned  statement
          in the form of an affidavit from the alleged prior tenant stating 
          that he was the first  rent  stabilized  tenant  of  the  subject
          apartment, that he was served with a  DC-2  Notice  in  April  of
          1979, but that he did not challenge his initial  legal  regulated
          rent.  The former owner further stated that  the  prior  tenant's
          "affidavit" was not available prior  to  the  submission  of  its
          petition due to the fact that the prior tenant was out  of  town,
          but that the "affidavit" would be submitted as soon as possible.

          In response to the former owner's petition, the  tenants  contend
          in substance that the alleged tenancy of J. Low was  an  illusory
          tenancy, that they were the first rent stabilized tenants of  the
          subject apartment as is evidenced by  the  Landlord's  Report  of
          Statutory Decontrol filed by the former owner, that  no  specific
          reason was given by  the  former  owner  for  the  alleged  prior
          tenant's failure to  appear  at  the  hearing,  and  that  treble
          damages should have been assessed against the former owner.  

          The Commissioner is of the opinion that this peititon  should  be

          A review of the record in the instant case  indicates  that  from
          the time of filing of the tenants' complaint in May of 1981 until 
          the Administrator's order was issued in March of 1987, the former
          owner was repeatedly asked by the CAB and DHCR to submit proof of 
          service  of  the  DC-2  Notice.    The   former   owner   without
          justification failed to submit  such  proof  of  service  despite
          having ample opportunity to do so.  Furthermore, on two  separate
          occasions dating back to June and October  of  1984,  the  former
          owner was requested to submit an affidavit of the  alleged  prior
          tenant, but failed to do so.  Finally, with regard to the  former
          owner's contention that it was denied  due  process  because  the
          alleged prior tenant was unavilable to  testify  at  the  hearing
          "due to circumstances beyond his control", the Commissioner notes 
          that no such contention was ever raised  by  the  former  owner's
          attorney at the hearing of December 22, 1986.  On  the  contrary,
          the former owner's attorney requested permission  to  reopen  the
          hearing as she was attempting to locate  and  produce  the  prior
          tenant.  The Administrative Law Judge gave the former owner until 
          January 12, 1987 to move to reopen the hearing, however  no  such
          motion was  ever  made  by  the  former  owner's  attorney.   The
          Commissioner further notes that the "affidavit"  of  the  alleged
          prior tenant  which  was  submitted  with  the  former's  owner's
          petition is unsigned, and thus, is rejected.  No signed affidavit 
          of the alleged prior tenant was received by  DHCR  subsequent  to
          the filing of the former's owner's petition.

          Based on the  foregoing,  the  Commissioner  rejects  the  former
          owner's contention of a lack of due process.

          BD 410505 RO

          With regard to the tenant's contention that treble damages should 
          have been imposed, Section 26-516 of the Rent  Stabilization  Law
          provides in pertinent part that any owner found to have collected 
          a willful overcharge above the authorized rent  shall  be  liable
          for a penalty equal to three times the amount of such  overcharge
          occurring on and after April 1, 1984.  In addition, if the  owner
          establishes that the overcharge  was  not  willful,  the  penalty
          shall be the amount of  the  overcharge  plus  interest  on  that
          portion of  the  overcharge  occurring  on  and  after  April  1,
          1984.This section of the law does not apply to fair  market  rent
          appeals.  Pursuant to Section 26-512 of  the  Rent  Stabilization
          Law, for apartments which  are  removed  from  rent  control  and
          become subject to the Rent  Stabilization  Law  by  virtue  of  a
          vacancy occurring after June 30, 1974, the owner is permitted  to
          charge an initial free market rent as "agreed to by the  landlord
          and the tenant" subject to the tenant's right  to  challenge  the
          initial rent as exceeding the fair market rent.   If  the  tenant
          does not challenge the  initial  rent,  it  becomes  the  initial
          legal regulated rent upon which  all  future  increases  must  be
          based.   If  the  tenant  does  challenge  the  initial  rent,  a
          determination may be made that the tenant's rent exceeds the fair 
          market rent for the apartment.  Such determination  would  result
          in a rent adjustment and refund of excess rent to the tenant  but
          is not considered an overcharge within the intent and meaning  of
          Section 26-561.  Accordingly the imposition of treble damages  is
          not warranted.

          THEREFORE, in accordance with  the  Rent  Stabilization  Law  and
          Code, it is

          ORDERED, that this petition be, and the same  hereby  is,  denied
          and that the District Rent Administrator's order be, and the same 
          hereby is, affirmed.

                                                  ELLIOT SANDER
                                                  Deputy Commissioner

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