BD 410505 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 410505 RO
ADAM REALTY,
D.R.O. DOCKET NO.: T/A 9594
CDR 29,428
PEITITIONER
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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,
1979.
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
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tenants.
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
denied.
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.
ISSUED:
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ELLIOT SANDER
Deputy Commissioner
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