BG 410019 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. BG 410019 RO
: DISTRICT RENT OFFICE
Guillermo A. Gleizer, DOCKET NOS. TA 11610, CDR 30,423
TENANTS: Peter Haviland and
Salvador Guevara
PETITIONER :
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
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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
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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
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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
notice.
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.
ISSUED:
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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