BF 410304-RT, CH 410103-RT
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. BF 410304-RT,
CH 410103-RT
: DISTRICT RENT OFFICE
Gary Tinterow, DOCKET NO. AL 410332-R,
AL 410411-R
PETITIONER :
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ORDER AND OPINION DENYING PETITIONS FOR ADMINISTRATIVE REVIEW
The instant appellate proceeding is the consolidation of two identical
petitions for administrative review by the tenant against two separate
Administrative orders by the Rent Administrator concerning the housing
accommodations known as 51 West 86th Street, New York, New York,
Apartment 1701, wherein the tenant's fair market rent appeal and
overcharge complaints were dismissed.
The Administrative Appeal is being determined pursuant to the provisions
of Section 2526.1 of the Rent Stabilization Code.
The issue herein is whether the Rent Administrator's order was
warranted.
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 appeals.
This proceeding was originally commenced by the filing of a rent
overcharge complaint and a fair market rent appeal by the tenant on
November 29, 1986 in separate applications. The tenant had assumed
occupancy of apartment 1701 as the first stabilized tenant pursuant to
a two year lease commencing on February 1, 1986.
Apartment 1701 is adjacent to Apartment 1702 on the 16th floor of the
subject building. The two apartments had formerly been a single rent
controlled unit consisting of 8 rooms, and had been occupied by a single
tenant. Subsequent to the departure of the rent controlled tenant, the
owner submitted an application to the Department of Buildings, dated
October 6, 1983, requesting permission to amend the Certificate of
Occupancy by, inter alia, subdividing the (former) apartment 1701 into
2 apartments. This application was approved on January 5, 1984.
Subsequently, the proposed renovations were completed in accordance with
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departmental standards, as documented in an inspection report dated
August 7, 1985 (Although the application mis-identified the subject
apartment as "1501", it is not disputed that it is the same as the
subject apartment).
In administrative order number AL 410332-R, dated May 5, 1987, which is
appealed herein, the Administrator dismissed the tenant's fair market
rent appeal because the subject apartment had undergone a substantial
rehabilitation thereby establishing the initial rent as not subject to
challenge. The order stated in addition that all future increases were
to be in accordance with the rent guidelines.
In its petition of the first order, the tenant argues that, while the
owner has the right to determine the initial rent stabilized rent, the
tenant has the "absolute right" to challenge such rent through a fair
market appeal. Moreover, the order was incorrect in applying Section 66
from the former Rent Stabilization Code because that provision is only
meant to apply to apartments that were vacant on the base date, which is
not the present case. Petitioner also contends that the subject
apartment is comparable to all the other apartments in the #1 line, with
the exception that the kitchen contains new appliances and that the
living room is larger. Included with the petition is a letter from the
tenant to the Office of Rent Administrator dated December 1, 1986 which
describes the prior rent controlled apartment, the manner in which it
was subdivided by the owner and the resulting two rent stabilized
apartments and their dimensions. In the letter, the tenant states that
not only is the rent far in excess of others in the same line, but is
also much higher than apartments of similar dimensions in any pre-war
building in the area.
In response, the owner disputes the contention that Section 66 does not
apply, and cites CAB Opinion 8410 for the ruling that a fair market
appeal is only available to existing apartments which transfer from rent
control to rent stabilization in the same form.
On July 13, 1988, the Rent Administrator issued an order under docket
number AL 410411-R, herein appealed under docket number CH 410103-RT,
wherein the Administrator dismissed the tenant's overcharge complaint
because the initial legal registered rent of $2,500.00 had been lawfully
increased in accordance with the allowable amounts authorized in the
rent guidelines. The order also reaffirmed the determination of the
prior order that the subject apartment underwent substantial
rehabilitation thereby establishing a first rental of $2,500.00.
In its petition of the second administrative order, the tenant re-
submits the same statements from the first petition as well as a copy of
the December 1, 1986 letter. In addition, it includes a letter from the
tenant to the DHCR, dated May 10, 1988, wherein the tenant claims that
1702 is actually the "new" apartment, and not his own, as evidenced by
the fact that 1702 did not have a mailbox, a door buzzer or separate gas
and electric meters when the tenant first moved into 1701, thereby
creating confusion at that time. The tenant maintains that the owner
exploited a "loophole" that allowed him to collect a "first rent" simply
by taking an existing apartment and making it smaller, and not for
constructing new units, which is what the law intended. The petition
also includes a letter from the tenant's attorney to the DHCR, dated
July 1, 1988, wherein it is argued that, contrary to the owner's claim
that apartment 1701 was not in existence on the base date, said
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apartment was already complete as part of the larger rent controlled
apartment, and that it was improper for the owner to charge an
exorbitant first rent simply for reducing its original size. Finally,
the letter states that 1701 is actually inferior to other apartments in
the building because it lacks a second door or a fire escape.
The owner's answer contains the same material that is submitted in
response to the first petition, with the addition of its letter to the
DHCR, previously sent in response to the tenant's letter of January 1,
1988, and dated August 18, 1988, wherein the owner reaffirms its
contention that the substantial rehabilitation of the apartment is the
proper basis for Section 66, and that actual alteration of the
apartment in accordance with Department of Buildings standards is fully
documented in the record.
In a letter dated March 9, 1989 the tenant responds that it is the
intention of the Rent Stabilization Code as expressed in Section 2520.3,
to avoid the kind of "unjust result" that has occurred in the instant
case. The owner then responds, in a letter dated March 13, 1989, that
the tenant is avoiding the real issue by emphasizing the diminution of
size of the apartment, and claims that the law exempts the apartment
from a fair market appeal as long as the apartment "is not in the same
condition" as on the base date, even if it was made smaller.
The Commissioner is of the considered opinion that these petitions
should be denied.
Under the system of rent stabilization, an apartment's legal regulated
rent is computed by adding guidelines increases and other permitted
increases to an initial base rent. This system assumes that the
apartment will remain essentially the same throughout its stabilized
rental history.
Prior administrative decisions have created an exception to this rule.
Where an owner substantially alters an apartment to the extent that it
was not in existence in its new state on the base date, the owner is
permitted to collect a free market rent from the first tenant to take
occupancy after the alteration. A review of these cases shows that this
special rule has been applied where the outside walls of the apartment
were either enlarged or contracted. In such cases, the alteration had
in effect broken the rental history of the apartment. It makes no sense
to continue to base the current legal regulated rent on a base rent and
stabilized increases collected for an apartment that no longer exists.
Therefore, after the new apartment is created, the owner is entitled to
collect a free market rent, which becomes the new base rent upon which
future stabilized increases are to be computed.
In the present case, the record establishes that the subject apartment
did not exist in its present form on the base date of June 30, 1974. On
that date, the space that presently includes the subject apartment 1701
and the adjacent apartment 1702 was a single rent-controlled unit which,
according to the records for the Office of Rent Control, consisted of 8
rooms on the 17th floor. Subsequent to the departure of the rent
controlled tenant, the owner submitted an application to the Department
of Buildings to subdivide this unit into 2 apartments. Apparent
inconsistencies in the documentation as to the identity of the unit in
question - namely the reference on the D.O.B. application to unit "1503"
being located on the 16th floor - are not of major importance; rent
BF 410304-RT, CH 410103-RT
control records prove that no other apartment in the building had more
than 4 rooms. The application was approved, and an inspection report
from the D.O.B. dated August 7, 1985 indicates that the work was
completed in a satisfactory manner.
Complainant assumed occupancy of the subject apartment 1701 on February
1, 1986 as the first stabilized tenant at a rent of $2,500.00 per month.
Apartment 1702 was first rented on March 16, 1986 at a rent of $1,200.00
per month. Although the complainant contends that to strictly
interpret Section 66 is unjust in this case because the owner gets the
benefit of a first rent simply by reducing the size of the subject
premises, the Commissioner must rely upon the interpretation that has
been used in all other cases presenting this issue, namely that for an
owner to qualify for a free market rent, an owner must alter the outer
dimensions of the apartment (Accord: AL 410418-RO, ARL 10644-L). This
policy has also been upheld in the courts (Merits Management Co. v. DHCR
(Dec. 15 1986, Sup. Ct. N.Y.C., Bowman, J.)). Moreover, contrary to the
tenant's contention that it is improper to interpret Section 66 as
applying to cases where an existing unit is made smaller, the CAB has
followed this interpretation. In CAB Opinion Number 16,172 a first rent
was approved for a unit that was approximately one half its original
size after substantial alterations. In the instant case, the actual
subdivision of the former apartment 1701 into the two units currently in
that same space, now 1701 and 1702, created two separate apartments that
were not in existence on the base date of June 30, 1974, when the
subject building became subject to the Rent Stabilization Law. This
situation is to be distinguished from those cases where a first rent
was denied when the owner simply constructed or removed interior walls
within an existing apartment, thereby changing interior dimensions only.
Here the outer dimensions of both units were created by the construction
of an interior wall within an existing unit which, by that construction,
eliminated the former unit entirely. Therefore, the Commissioner
recognizes that the rent control Maximum Base Rent should not properly
be used to determine the first stabilized rent, as it would in a usual
fair market rent appeal, since the Maximum Base Rent only applied to a
unit that is no longer in existence. A fair market appeal is
unavailable for the two newly created units, since there is no rental
history to draw upon. Accordingly, the Administrator properly dismissed
both proceedings insofar as the relief requested was a fair market rent
appeal. In addition, the Administrator in order number AL 410411-R
correctly determined that there were no overcharges because all rent
increases subsequent to the first stabilized rent were in accordance
with the guidelines.
THEREFORE, in accordance with the Rent Stabilization Law and Code, it is
ORDERED, that the tenant's petitions of administrative orders AL 410441-
R and AL 410332-R be and the same hereby are denied, and that the
administrative orders AL 410411-R and AL 410332-R be and the same hereby
are affirmed.
ISSUED:
BF 410304-RT, CH 410103-RT
JOSEPH A. D'AGOSTA
Deputy Commissioner
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