BG 410019 RO

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

      APPEAL OF                              DOCKET NO. BG 410019 RO

                                          :  DISTRICT RENT OFFICE
           Guillermo A. Gleizer,             DOCKET NOS. TA 11610, CDR 30,423
                                             TENANTS: Peter Haviland and      
                                                      Salvador Guevara

                            PETITIONER    : 


      On June 30, 1987, the above-named petitioner-prior owner filed a 
      Petition for Administrative Review against an order issued on           
      June 11, 1987, by the Rent Administrator, 10 Columbus Circle, New York, 
      New York, concerning the housing accommodations known as 32 Spring 
      Street, New York, New York, Apartment No. 5, wherein the Rent 
      Administrator determined the fair market rent pursuant to the special 
      fair market rent guideline promulgated by the New York City Rent 
      Guidelines Board for use in calculating fair market rent appeals.

      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 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 Administrative Appeal is being determined pursuant to the provisions 
      of Section 26-513 of the Rent Stabilization Law and Section 21 and 62A 
      of the 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 originally commenced in October 1983 by the filing 
      of a fair market rent adjustment application by the tenants who took 
      occupancy of the subject apartment on February 1, 1981 at a rental of 
      $525.00 per month.

      The tenants, further asserted that their initial leasing of the 
      apartment was pursuant to a sublease but submitted rental documents to 
      support their contention that the prime tenancy was illusory.
      The current owner as well as all prior owners, were served with a copy 
      of the tenant's application and afforded an opportunity to submit June 

          BG 410019 RO

      30, 1974 or post June 30, 1974 comparability data for determining the 
      fair market rent of the subject apartment and to submit proof of any 
      improvements made in the subject apartment.

      In response, the prior owner stated in substance that they bought the 
      building in August, 1981 and didn't know the June 30, 1974 rent.

      In Order Number CDR 30,423, the Rent Administrator adjusted the initial 
      regulated rent by establishing a fair market rent of $179.24 and 
      established the complainants as the prime tenants from their initial 
      occupancy in February, 1981.

      In this petition, the first prior owner contends in substance that the 
      apartment was rented by him to the prime tenant (Colbert) after the 
      death of the Rent controlled tenant in December 1980; that the apartment 
      was rented in January 1981 to the prime tenant but required extensive 
      rehabilitation; that consent was given to allow the complainants to live 
      in the apartment while rehabilitating it for the prime tenant; that the 
      complainants paid the rent to the prime tenant who gave it to the owner 
      and that the prime tenant actually lived in the apartment and the 
      complainants stayed there only to do repairs.

      In answer to the prior-owner's petition, the tenants stated in substance 
      that evidence submitted to the Rent Administrator shows that the prime 
      lease and sublease both commenced on February 1, 1981 and no rental 
      agreement existed before that date; that other tenants in the building 
      deny occupancy by the prime tenant; that utility records indicate no 
      occupancy of the subject apartment after the death of the rent 
      controlled tenant until their occupancy on February 1, 1981; that the 
      apartment was found by the complainants in the Village Voice and the 
      leasing of the apartment negotiated with Guillermo Gleizer who signed 
      the receipt for the $100.00 deposit presented to the Rent Administrator 
      previously; that they only met the "prime tenant" at the signing of the 
      "sublease" and were there advised to send the prime tenant's rent checks 
      directly to Guillermo Gleizer as specified in the "sublease" and 
      moreover that Guillermo Gleizer doesn't challenge the reduction of the 
      initial rent to $179.24 in his petition, thereby conceding the fact that 
      the initial rent of $524.00 was excessive.

      The Commissioner is of the opinion that this petition should be denied.

      Section 26-513 of the Rent Stabilization Law provides, in pertinent 
      part, that fair market rent adjustment applications may be filed by the 
      first tenant to take occupancy of an apartment upon vacancy decontrol by 
      the rent controlled tenant; that the application must be filed within 90 
      days of the certified service of an Initial Legal Regulated Rent notice 
      (hereafter DC-2) on the first or subsequent tenants. 

      Section 21 of the Rent Stabilization Code (hereafter RSC) governs the 
      conditions under which an rent stabilized apartment may be sublet. 

      Section 62A of the RSC prohibits evasionary practices in the renting of 
      rent stabilized apartments including the renting to illusory prime 
      tenants who never occupied or intend to re-occupy the dwelling unit.
      The definition of the term "illusory tenant" has been set forth in the 
      following relevant decisions:

      In Hutchins v. C.A.B., 125 Misc. 2d 809, 480 N.Y.S. 2d 684 by Martin 

          BG 410019 RO

      Evans, J. an "illusory tenant ... denotes a lessee of residential 
      premises who does not occupy the premises for his residential use and 
      who subleases it for profit, not because of necessity or other legally 
      cognizable reason."

      In Van Seplow v. C.A.B., N.O.R., Sup. Ct., N.Y.Co., Index No. 100334/75, 
      Asch, J.the following definition of illusory tenancy is offered: "... 
      illusory tenancy involves a prime tenant who is an individual 
      entrepreneur trafficking in stabilized or controlled apartments which he 
      subleases as a business."

      In addition, in the case known as Conti v. Citrin, 505 2d 481 (Sup. 
      1985), the definition of illusory tenancy is set forth as follows: 
      "illusory tenant" is a straw man who as landlord's alter ego, subleases 
      apartments to permit landlord to circumvent or evade obligations under 
      rent laws, or prime tenant who is individual entrepreneur trafficking in 
      stabilized or controlled apartments which he subleases as business."

      An examination of the record in this case discloses that in the 
      proceeding before the Rent Administrator the complainants had submitted 
      the following evidence in support of their contention that they were the 
      bonafide first rent stabilized tenants of the subject apartment and that 
      the purported "prime tenancy" was illusory:

      1)   copies of both the "prime" and "sublease" both commencing on 
           February 1, 1981.

      2)   5 cancelled checks for rent payable to the "prime tenant" (Colbert) 
           but counter-endorsed by the owner (Gleizer).

      3)   a receipt for $100.00 as a temporary deposit for the rental of the 
           subject apartment applicable to the first month's rent signed by 
           the prior owner (Gleizer).

      4)   the sublease which in paragraph #3 directs, that after the first 
           payment, the subsequent rent checks are to be paid directly to the 
           owner (Gleizer) at the owner's address.

      5)   rent receipts from the rent controlled tenant indicating occupancy 
           from 1932 through December 1980.

      6)   their renewal lease issued by a subsequent prior owner in the 
           complainants' own names commencing February 1, 1983.

      The Commissioner is of the opinion that the evidence submitted by the 
      tenants in the proceeding before the Rent Administrator clearly 
      established that the "prime tenant" (Colbert) was illusory in accordance 
      with the definitions of "illusory tenant" cited above and that the 
      complainants were the first rent stabilized tenants to take occupancy of 
      the subject apartment.

      In contrast, neither the prior owner-petitioner nor any subsequent owner 
      has submitted evidence in support of the contention that the prime 
      tenant (Colbert) was not illusory and actually took occupancy of the 
      subject apartment, either below or on appeal.

      Further, no evidence, was submitted in either proceeding proving that 

          BG 410019 RO

      the required DC-2 notice was ever served on either the "illusory" or 
      subsequent tenants which would have precluded a challenge to the initial 
      rent upon the elapsing of the 90 day period after service of such 

      Moreover, the prior-owner although given the opportunity never contested 
      the complainants' assertion of illusory prime tenancy in the proceeding 
      before the Rent Administrator nor has submitted a reasonable excuse for 
      his failure to do so.  Since this is not a de novo proceeding, it would 
      be inappropriate to allow the owner to first contest the illusory prime 
      tenancy assertion for the first time on appeal.

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

      ORDERED, that this petition for administrative review be, and the same 
      hereby is, denied, and, that the order of the Rent Administrator be, and 
      the same hereby is, affirmed.


                                      JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner

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