Docket Nos.: BG 410159-RT; BG 410282-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 NOS.: BG 410159-RT
BG 410282-RO
VICTORIA MATHEWS, (TENANT) and
GENERAL REALTY GROUP OF DRO DOCKET NOS.: L-3114575-R
COMPANIES, INC., (OWNER) CDR 30569
PETITIONERS
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ORDER AND OPINION GRANTING TENANT'S PETITION FOR ADMINISTRATIVE
REVIEW AND DENYING OWNER'S PETITION FOR ADMINISTRATIVE REVIEW
On July 16, 1987 and July 13, 1987 the above-named petitioners
filed Petitions for Administrative Review against an order issued
on June 12, 1987 by the District Rent Administrator, 10 Columbus
Circle, New York, New York concerning housing accommodations known
as Apartment F3 at 137 East 26th Street, New York, New York
wherein the District Rent Administrator determined that the owner
had overcharged the tenant. The Administrator's order named the
owner as "Central Realty Group Co., Inc." at 80 Fifth Avenue. The
owner's attorney used this as the owner's name on the petition
against the order. However, the tenant's complaint, the owner's
answers, an M.C.I. order, the tenant's leases, and the Final
Notice of Pending Default all gave the names of General Realty
Associates, General Realty Associates of Murray Hill, or General
Realty Group of Companies, Inc. at 80 Fifth Avenue. The 1984,
1985 and 1986 registrations gave the owner as General Realty
Associates of Charles Street, c/o General Realty Associates, 80
Fifth Avenue. The registrations from 1987 through 1991 list the
owner as General Realty Associates of Murray Hill, and the manager
as General Realty Group of Companies, Inc., 80 Fifth Avenue. The
Administrator's order is hereby modified to name the latter,
rather than "Central Realty Group Co., Inc.," as owner. The
petitioner-owner's name is likewise altered.
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.
Docket Nos.: BG 410159-RT; BG 410282-RO
The issue in this appeal is whether the District Rent
Administrator's order was warranted.
The applicable sections of the Law are Section 26-516 of the Rent
Stabilization Law, Section 2526.1(a) of the current Rent
Stabilization Code and Section 42A of the former 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 by the filing in
February, 1984 of a rent overcharge complaint by the tenant, in
which she stated that she had commenced occupancy on January 1,
1980 at a rent of $366.04 per month.
The owner was served with a copy of the complaint and was
requested to submit rent records to prove the lawfulness of the
rent being charged. In answer to the complaint, the owner
submitted leases only from May 1, 1979, and a November 13, 1978
rent check and April 22, 1979 refrigerator and gas range invoice
to Helmsley-Spear, Inc. The invoice was not marked as paid, and
the owner did not submit any proof of payment. The tenant later
submitted a 1978 rent roll.
On July 8, 1986 the owner was sent a Final Notice of Pending
Default, which stated in substance that unless a rental history
was submitted from June 30, 1974 or a later, proven base date,
certain DHCR procedures would be used to establish the lawful
stabilization rent, and treble damages would be imposed on
overcharges occurring after April 1, 1984 unless the owner could
show that they were not willful.
In an order issued on June 12, 1987 the Administrator used the
default procedure to set the tenant's lawful rent, and determined
an overcharge of $10,697.40 as of December 31, 1985, including
interest on overcharges after April 1, 1984.
In her petition, the tenant contends in substance that the
overcharges were willful.
The owner did not submit an answer to the tenant's petition,
although given an opportunity to do so.
In its petition, the owner asserts in substance that the Omnibus
Housing Act of 1983 relieved it of any obligation to produce rent
records for any period prior to April 1, 1980; that the current
rents of other apartments in the subject building should have been
used in the comparability study; and that the tenant's initial
rent was at or near the lawful rent.
Docket Nos.: BG 410159-RT; BG 410282-RO
In answer, the tenant contends in substance that she filed an
overcharge complaint prior to April 1, 1984, not a registration
objection after April 1, 1984; that the owner's obligation to
produce rent records is therefore not limited to four years; and
that treble damages should be imposed.
The tenant also refers to "the owner's supplemental PAR." The
file of this appeal proceeding does not contain such a supplement.
As stated by the tenant such supplement contended that $966.60 had
been expended in 1979 for appliances for the prior tenant, that
the tenant's allegations about prior rents are hearsay, and that
the tenant has not shown that her rents were unlawful. The
tenant's response to this is that all of her appliances were old,
that she does not have to prove the unlawfulness of her rent, and
that the owner has the obligation to prove that the rent was not
unlawful.
(On October 30, 1991 Central Realty Group of Companies, 80 Fifth
Avenue, and General Realty Groups of Companies, in care of its
attorney, were requested to submit copies of the "supplemental
PAR: No reply has been received from either of them to date.)
The Commissioner is of the opinion that the tenant's petition
(Docket No. BG 410159-RT) should be granted and that the owner's
petition (Docket No. BG 410282-RO) should be denied.
Section 42A of the former Rent Stabilization Code requires that
an owner retain complete records for each stabilized apartment in
effect from June 30, 1974 (or the date the apartment became
subject to rent stabilization, if later) to date and to produce
such records to the DHCR upon demand.
Section 26-516 of Rent Stabilization Law, effective April 1,
1984, limited an owner's obligation to provide rent records by
providing that an owner may not be required to maintain or
produce rent records for more than 4 years prior to the most
recent registration and, concomitantly, established a 4 year
limitation on the calculation of rent overcharges.
It has been the DHCR's policy that overcharge complaints filed
prior to April 1, 1984 are to be processed pursuant to the law or
Code in effect on March 31, 1984. [See Section 2526.1(a)(4) of
the current Rent Stabilization Code.] The DHCR has therefore
applied Section 42A of the former Code to overcharge complaints
filed prior to April 1, 1984, requiring complete rent records in
these cases. In following this policy, the DHCR has sought to be
consistent with the legislative intent of the Omnibus Housing Act
(Chapter 403, Laws of 1983), as implemented by the New York City
Conciliation and Appeals Board (CAB), the predecessor agency to
the DHCR, to determine rent overcharge complaints filed with the
Docket Nos.: BG 410159-RT; BG 410282-RO
CAB prior to April 1, 1984 by applying the law in effect at the
time such complaints were filed so as not to deprive such tenants
of their right to have the lawful stabilized rent determined from
the June 30, 1974 base date and so as not to deprive tenants
whose overcharge claims accrued more than 4 years prior to April
1, 1984 of their right to recover such overcharges. In such
cases, if the owner failed to produce the required rent records,
the lawful stabilized rent would be determined pursuant to the
default procedure approved by the Court of Appeals in 61 Jane
Street Associates v. CAB, 65 N.Y.2d 898, 493 N.Y.S.2d 455 (1985),
in cases involving rent overcharge complaints filed prior to
April 1, 1984.
However, it has recently been held in the case of J.R.D. Mgt. v.
Eimicke, 148 A.D.2d 610, 539 N.Y.S.2d 667 (App. Div. 2d Dep't
1989), motion for leave to reargue or for leave to appeal to the
Court of Appeals denied (App. Div. 2d Dep't, N.Y.L.J., June 28,
1989, p.25, col. 1), motion for leave to appeal to the Court of
Appeals denied (Court of Appeals, N.Y.L.J., Nov. 24, 1989, p. 24,
col. 4), motion for leave to reargue denied (Court of Appeals,
N.Y.L.J., Feb 15, 1990, p. 25, col. 1), that the law in effect at
the time of the determination of the administrative complaint
rather than the law in effect at the time of the filing of the
complaint must be applied and that the DHCR could not require an
owner to produce more than 4 years of rent records.
Since the issuance of the decision in JRD, the Appellate
Division, First Department, in the case of Lavanant v. DHCR, 148
A.D. 2d 185, 544 N.Y.S.2d 331 (App. Div. 1st Dep't 1989), has
issued a decision in direct conflict with the holding in JRD.
The Lavanant court expressly rejected the JRD ruling, finding
that the DHCR may properly require an owner to submit complete
rent records, rather than records for just four years, and that
such requirement is both rational and supported by the law and
legislative history of the Omnibus Housing Act.
Since in the present case the subject dwelling unit is located in
the First Department, rent records are required from June 30, 1974
or a later, proven base date. As the owner did not furnish the
required records it was proper for the Administrator to utilize
the default procedure. Such procedure sets the lawful rent in a
complainant's vacancy lease as the lowest of three amounts arrived
at by different means. An M.C.I. order granted several years
prior to the complainant's occupancy is not specifically included
in the default procedure setting the tenant's lawful vacancy rent,
particularly since the $245.79 rent of Apartment 1-F [being the
lowest of the three amounts used in the default procedure]
presumably already includes it. While it might be appropriate to
allow an increase for the properly-substantiated installation of
new equipment during the vacancy immediately prior to the time
Docket Nos.: BG 410159-RT; BG 410282-RO
that the complainant commenced occupancy, such improvements
constituting an increase in the services and value of the
apartment compared to what the prior tenant was receiving, the
owner gave the Administrator an (unpaid) invoice for only $615.60
for a new refrigerator and gase range, the tenant has claimed that
her refrigerator, stove and sink were all old when she moved in,
and the owner has not submitted any further evidence to contradict
the tenant's assertions. In addition there is not, despite the
October 30, 1991 request to the owner and its attorney for a copy
of a "supplemental PAR," even any challenge in this appeal
proceeding to the Administrator's failure to allow any increase
for purported new equipment. The Administrator's order is
therefore not changed in that respect.
Regarding the owner's contention that the current rents of other
apartments in the building should have been used in a
comparability study, and that the tenant's initial rent was at or
near the lawful rent: This is not a Fair Market Rent Appeal,
where an attempt is being made to set an initial legal regulated
rent comparable to other units in a building, but rather an
overcharge complaint regarding an already-stabilized apartment
whose lawful rent is determined by its individual history. The
default procedure is used both because the unknown individual
history of the apartment cannot be presumed to have resulted in a
rent comparable to other apartments, and because the procedure is
in part a penalty for use against owners who have defaulted in
their obligation to retain records sufficient to prove the
lawfulness of the rents charged.
Section 2526.1(a) of the current Rent Stabilization Code provides
in pertinent part for the imposition of treble damages on
overcharges occurring on or after April 1, 1984, unless an owner
can establish that the overcharge was not willful. Because the
owner was put on notice of the possibility of treble damages by
the Final Notice of Pending Default, because the tenant has
challenged the Administrator's failure to find that the overcharge
was willful, and because the owner has not rebutted the
presumption of willfulness, treble damages are hereby imposed on
overcharges occurring on and after April 1, 1984. The overcharge
calculations are as follows:
January 1, 1980 to $120.25 per month x 12
December 31, 1980 months = $1,443.00
January 1, 1981 to $141.80 per month x 24
December 31, 1982 months = $3,403.20
January 1, 1983 to $151.38 per month x 15
March 31, 1984 months = $2,270.70
April 1, 1984 to $151.38 per month x 21
December 31, 1985 months x 3= $9,536.94
Docket Nos.: BG 410159-RT; BG 410282-RO
The total overcharge, including excess security of $151.38, is
therefore $16,805.22 from January 1, 1980 to December 31, 1985.
This order may, upon the expiration of the period in which the
owner may institute a proceeding pursuant to Article Seventy-
Eight of the Civil Practice Law and Rules, be filed and enforced
by the tenant in the same manner as a judgment or not in excess
of twenty percent thereof per month may be offset against any
rent thereafter due the owner.
Because of the possibility that the rents charged were not reduced
after the Administrator's order, the owner is cautioned to adjust
the rent, in leases after those considered by the Administrator,
to amounts no greater than that determined by the Administrator's
order plus any lawful increases, and to register any adjusted
rents with the Administrator's order being given as the reason for
the adjustment. Because of the possibility that the tenant herein
may have vacated by the time that this determination is issued, a
copy of this determinati n is being mailed to the tenant-in-
occupancy.
THEREFORE, in accordance with the Rent Stabilization Law and
Code, it is
ORDERED, that the tenant's petition be, and the same hereby is,
granted; that the owner's petition be, and the same hereby is,
denied; and that the District Rent Administrator's order be, and
the same hereby is, modified in accordance with this order and
opinion, including the correction of the owner's name to General
Realty Group of Companies, Inc. The total overcharge, including
excess security of $151.38, is $16,805.22 as of December 31, 1985.
The lawful stabilization rent is $308.22 per month in the lease
from January 1, 1983 to December 31, 1985.
ISSUED:
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ELLIOT SANDER
Deputy Commissioner
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