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

     ------------------------------------X 
     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
     ------------------------------------X                             

       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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