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 410167-RO
: BD 410427-RO
DRO DOCKET NO.: 29612
PLAZA REALTY INVESTORS,
PETITIONER : TENANTS: TIM & KATHLEEN MURPHY
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ORDER AND OPINION REOPENING DOCKET NUMBER BD 410167-RO AND MODIFYING
COMMISSIONER'S ORDER, AND GRANTING PETITION FOR ADMINISTRATIVE
REVIEW NUMBER BD 410427-RO IN PART
On April 7, 1987 and April 8, 1987 the above named petitioner-owner filed
duplicate Petitions for Administrative Review against an order issued on
March 4, 1987 by the District Rent Administrator, 10 Columbus Circle, New
York, New York concerning housing accommodations known as Apartment 10-L
at 120 East 34th Street, New York, New York wherein the District Rent
Administrator determined that the owner had overcharged the tenant. The
rent calculation chart in the order referred to the subject premises as
127 Holmes Avenue. This is actually a mailing address in another city.
The heading of the Administrator's order listed the subject apartment as
being at 120 East 34th Street in Darien, Connecticut.
One copy of the petition was docketed as No. BD 410167-RO. Because the
file of the proceeding before the Administrator could not be located
(probably being with the file of the other copy of the petition, docketed
as No. BD 410427-RO), the Commissioner decided that petition on August 17,
1988 on the basis of the owner's contentions as they related to the copy
of the Administrator's order enclosed with the petition. The Commissioner
thus granted the owner's petition in part, limiting the overcharge to
October 31, 1985 (the end of the month that the owner claimed the tenants
vacated), but declining to allow the owner two vacancy allowances for
vacancies only two months apart. Because the tenants' answer to the
owner's petition was put in the file of Docket No. BD 410427-RO, and
because the file of the proceeding before the Administrator was not
available, the Commissioner did not have any awareness in Docket No. BD
410167-RO of the tenants' contentions regarding a sham tenancy. Because
the Commissioner believes the contentions and evidence are worth setting
forth, Docket No. BD 410167-RO is being reopened and merged with Docket
No. BD 410427-RO, even though such contentions would not require a
different result in Docket No. BD 410427-RO. The overcharge of $6,058.67
through October 31, 1985 found by that order is being reduced by $85.85
since the tenants stated that they vacated October 15, 1985 and the owner
submitted a rent ledger showing that the tenants paid only one-half
month's rent for October, 1985.
Unless otherwise noted, the documents and arguments referred to in this
order are those contained in Docket No. BD 410427-RO.
DOCKET NUMBER: BD 410167-RO
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 provision 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 these appeals 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 and Section 2526.1(a) 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 appeals.
This proceeding was originally commenced by the filing in September, 1984
of a Tenant's Objection to the Rent/Services Registration, in which the
tenants stated that they had first rented the subject apartment pursuant
to a lease commencing September 1, 1982 at a rent of $1,128.76 per month,
and had terminated their lease by mutual consent on October 15, 1985.
They also contended that they had first occupied the apartment beginning
in late June, 1982 as subtenants of the prior (prime) tenants; that the
owner had refused to approve the subtenancy and had attempted to evict the
prime tenants; and that they were required as a condition for the owner to
drop the eviction proceedings to have a friend of theirs sign a rider to
the prime tenants' lease as a sham "co-tenant" for July and August of 1982
so as to entitle the owner to an additional 15% vacancy allowance. The
tenants included a letter from them to the owner dated September 9, 1982
[after they began their own lease] transmitting their friend's lease rider
and the prime tenants' check for the new rent for July and August minus
security deposit; and a sworn affidavit from their friend that she had
that same day (September 9th) executed a sham lease rider as a "straw man"
even though she had never been a co-tenant of the prime tenants and had
never resided at the subject apartment.
The owner was sent a copy of the tenants' objection and requested to
respond. In answer, the owner asserted among other things that it was
entitled to two vacancy allowances on vacancies occurring two months
apart, since the former New York City Conciliation and Appeals Board
(C.A.B.) allowed them for vacancies 1 1/2 months apart during the same
Guidelines period.
In an order issued on March 4, 1987, the District Rent Administrator found
an overcharge of $9,811.76 as of March 31, 1987. The rent calculation
chart stated "[o]nly one increase allowed per guideline" and calculated
the rent in the complainants' September 1, 1982 lease as an increase over
the September 30, 1981 rent rather than ov r the rent during the "co-
tenancy" period beginning July 1, 1982, which period had included a 15%
vacancy allowance for a "new tenancy."
In these petitions the owner contends in substance that there is no
probative evidence on the record that would support the tenants' claim of
DOCKET NUMBER: BD 410167-RO
a sham lease; that the tenants vacated in October, 1985 rather than
continuing through the time of the Administrator's order in 1987; that
Guideline 13 specifically allowed a 15% increase for each vacancy and did
not limit vacancy increases to one per Guidelines period; and that
previous CAB and DHCR orders have allowed multiple vacancy increases in
the same Guidelines period.
In answer, the tenants assert in substance that one of the owner's
petitions was untimely and was not served on them; that the owner has not
disputed the affidavit of their friend swearing that she was a sham
tenant; and that the owner was attempting to terminate the prior tenants'
lease at the same time that it was supposedly modifying the lease to add
their friend to it. With their answer the tenants have included a June
23, 1982 letter from the owner to the prior tenants rejecting the
complainants as subtenants for the balance of the lease (less one day); of
a Notice to Cure of dated July 21, 1982 sent to the prior tenants by the
owner regarding the occupancy, subletting or assignment of the subject
apartment to the complaints, "Jane Doe", and "John Doe"; a Notice of
Termination dated August 17, 1982 sent to the prior tenants by the owner
requiring the prior tenants to vacate by August 25th; of two letters in
July, 1982 returning rent checks to the prior tenants because legal
proceedings had been commenced; of an undated lease rider signed by the
owner, the prior tenants and the complainants' friend for a co-tenancy
commencing July 1, 1982 at a 15% increase over t e prior tenants' then-
current rent; of the complainants' September 9th letter transmitting the
lease rider along with the prior tenants' rent check for July and August;
and of the "co-tenant's" September 9th affidavit that she had just signed
a lease rider to be a "sham tenant" for July and August although she had
never lived in the subject apartment.
The Commissioner is of the opinion that Docket No. BD 410167-RO should be
reopened, that the Commissioner's order in that proceeding should be
modified, and that the owner's petition in Docket No. BD 410427-RO should
be granted in part.
The owner is correct that the tenants were in occupancy only until October
15, 1985. The overcharge through that date, not including any excess
security as the owner no longer has a security deposit, is $5,972.82,
including interest on overcharges occurring on or after April 1, 1984.
The Commissioner is persuaded by the evidence that the complainants
commenced occupancy in June or July of 1982, and that t e supported "co-
tenancy" prior to the beginning date of their own lease on September 1st
was actually a sham tenancy required by the owner. Such a sham tenancy
would not be the basis for a vacancy increase.
Even if the complainants' friend had been a legitimate co-tenant with the
prior tenants for July and August of 1982, rather than a sham "straw man",
the vacancy allowance chargeable for that two-month period would not have
become part of the base rent. While the owner is correct that multiple
vacancy allowances in the same Guidelines period are not automatically
disallowed, it is DHCR policy that an intervening rent increase can
support a subsequent rent increase only where the intervening rent lasted
for at least three months (Administrative Review Docket Nos. AK 410186-RO,
AL 110093-RO). Administrative Review Docket No. ARL 00751-K, submitted by
the owner, is not to the contrary. In that case a tenant had commenced
DOCKET NUMBER: BD 410167-RO
occupancy, with a vacancy increase, one-half month after a renewal lease
of a prior tenant had commenced. A new tenant moved in 9 and 1/2 months
later. Both vacancy increases were allowed; neither of them had been
taken less than 3 months after a previous vacancy increase. While the
owner has enclosed a February 25, 1982 C.A.B, opinion allowing a
permanent vacancy allowance for a 1 1/2 month vacancy, the strength of
this citation is undercut by the fact that the C.A.B. on August 4, 1983
disallowed a permanent increase in Opinion No. 26,974 because the two
vacancies were only 2 and 1/2 months apart.
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 October 15, 1985, 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 and this order being
given as the reason for the adjustment. A copy of this determination is
also being mailed to the tenant-in-occupancy.
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 tenants in the same
manner as a judgment unless the tenants have previously collected part or
all of the overcharge as a result of the Commissioner's order in Docket
No. BD 410167-RO.
THEREFORE, in accordance with the Rent Stabilization Law and Code, it is
ORDERED, that Administrative Review Docket No. BD 410167-RO be, and the
same hereby is, reopened; that the Commissioner's order in that proceeding
be, and the same hereby is, modified in accordance with this order and
opinion; and that the owner's petition in Docket No. BD 410427-RO be, and
the same hereby is, granted in part. The total overcharge is $5,972.82 as
of October 15, 1985. The lawful stabilization rent is $1,144.77 as of
October 15, 1985.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
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