BH 410108 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.:  BH 410108 RO

                 
                                                  D.R.O ORDER NO.: CDR 30,877
                  SKYLINE                                           ENTERPRISES,
                                                  TENANT:  KAREN L. THORSON
                                                  PRIOR OWNER:   236  EAST  13TH
                                                  STREET ASSOCIATION
                                                  C/O JED MANAGEMENT CORPORATION
                                  PETITIONER
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            ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
                                         AND
                         MODIFYING THE ADMINISTRATOR'S ORDER


          On August 18, 1987,  the  above-named  petitioner-owner  filed  a
          Petition for Administrative Review against  an  order  issued  on
          July 14, 1987, by the Rent Administrator, 10 Columbus Circle, New 
          York,  New  York,  concerning  housing  accommodations  known  as
          Apartment 9, 240 East 13th Street, New York,  New  York,  wherein
          the  Rent  Administrator  determined  that  there  had  been   an
          overcharge and ordered a refund of $14,774.34, including interest 
          and excess security.

          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.

          The Commissioner has reviewed all of the evidence in  the  record
          and has carefully considered that portion of the record  relevant
          to the issues raised by the administrative appeal.

          The tenant commenced this proceeding on March 30, 1984 by  filing
          an overcharge complaint with the New York City  Conciliation  and
          Appeals Board (CAB), the agency formerly charged  with  enforcing
          the Rent Stabilization Law, based in part on the allegation  that
          her initial rent of $975.00 was  an  overcharge  evidenced  by  a
          prior rent of $240.00 (actually $237.31) and the  assertion  that
          the improvements made on the apartment prior to her occupancy did 
          not suffice to justify a rent increase of over $700.00.






          BH 410108 RO

          In answer to the complaint, the owner submitted a  lease  history
          for  the  apartment  and  documentation  for  $7,014.40  in   new
          equipment and  improvements  to  the  subject  apartment.   Based
          thereon, the owner contended it should have been able  to  charge
          the complaining tenant a "first rent" pursuant to Section  66  of
          the prior Code.  That is, the owner argued that  the  renovations
          were so substantial as to amount to the creation of an  apartment
          which did not previously exist  and  was  therefore  functionally
          equivalent to having been vacant  on  the  base  date  so  as  to
          trigger the "first rent" provisions of Section 66.

          In Order Number CDR 30,877,  the  Rent  Administrator  determined
          that the renovations did not suffice to allow a "first rent," but 
          allowed a one-fortieth rent increase ($175.36) pursuant to former 
          Code Section 20C(1) for the $7,014.40 in renovations.

          In  this   petition,   the   owner   contends   that   the   Rent
          Administrator's  Order  is  incorrect  and  should  be   modified
          because the renovations were sufficient to enable  the  owner  to
          charge  a  first  rent.   The  owner  concedes  that  the   outer
          dimensions of the apartment were not changed, but emphasizes that 
          due to the renovation a third bedroom was created and the  living
          room was enlarged.  In  addition,  one  doorway  was  sealed  and
          another created, the apartment  was  rewired,  new  plumbing  was
          installed,  the  kitchen  was  renovated,  and  other   specified
          improvements were made.

          In support of its contentions the owner cites CAB Opinion Numbers 
          216 and 916 as well as Division of Housing and Community  Renewal
          (DHCR) Administrator's Order Number CDR 22,714, as amended.   The
          owner asserts that in the last-cited  opinion  the  Division  had
          allowed a first rent based on a reconfiguration of the  apartment
          by the removal of internal walls even though the outer dimensions 
          had not been changed.  A purported floor plan for the renovations 
          in the CDR 22,714 proceeding is attached to the owner's petition. 
          The  floor  plan  submitted  shows  no  changes  in   the   outer
          dimensions of the apartment.  The owner asserts that  the  tenant
          in that proceeding did not file a petition so that the order is a 
          final determination and therefore "binding" on the Division.


          In answer to this petition, the tenant contends  that  the  order
          should be upheld but modified  to  show  a  lower  cost  for  the
          improvements made by the owner and to extend the  computation  of
          overcharges through May of  1987  when  the  tenant  vacated  the
          apartment.  The tenant submits a  copy  of  a  stipulation  in  a
          housing court proceeding whereby the  1986-1988  lease  rent  and
          security deposits were reduced by half,  i.e.,  to  $519.19.   In
          addition, the tenant alleges  that  the  Administrator's  opinion
          (CDR 22,714) cited by the owner does  not  state  the  underlying
          facts so that it is impossible to know the basis  therefore.   In
          addition, the tenant analyzes the floor plans in that  proceeding
          and the present proceeding and concludes that the  relocation  of
          internal walls in the cited  proceeding  improved  the  apartment
          therein  whereas  in  the  present  proceeding  the   change   in
          configuration actually was detrimental due to an increase in dead 
          space and a decrease in privacy within the apartment.







          BH 410108 RO
          The Commissioner is of the opinion that this petition  should  be
          denied and the Administrator's order should be modified. 

          DHCR policy, inherited from the CAB, has always been  to  require
          a change in the outer walls of an apartment in order  to  trigger
          the first  rent  provisions  of  former  Code  Section  66.   See
          Administrative Review Docket Numbers ARL 1707-L, ARL 04062-L, and 
          ARL 01231-L.  Indeed, the two CAB Opinions (Numbers 216 and  916)
          cited by the petitioner involved situations in  which  the  outer
          walls were so modified.

          The Administrator's decision cited by the  owner  (CDR  22,  714)
          cites three CAB Opinions:  the two cited by the  owner  and  also
          Opinion  Number  2359.   The  latter  opinion  also  involves   a
          situation in which the outer walls of an apartment were  changed.
          Furthermore, nowhere in CDR 22,714 are the underlying renovations 
          described.  Accordingly, on  its  face  the  decision  is  not  a
          precedent for any rule or policy not included in  the  three  CAB
          Opinions cited therein--all three of which  involved  changes  in
          the outer walls of their respective apartments.

          Furthermore, the purported floor  plan  submitted  by  the  owner
          includes no identifying marks whatsoever to indicate that it is a 
          representation of any apartment in the building  covered  in  CDR
          22,714.

          More importantly, even if the cited Administrator's order were to 
          have stated explicitly that a first rent under Section 66 did not 
          require a change in the outer walls, the order would be in  error
          and the Commissioner would not be bound to follow that order.

          The tenant's contentions regarding the cost  of  the  renovations
          could only have been raised in a timely petition by  the  tenant,
          being beyond the scope of  the  owner's  petition.   Accordingly,
          these allegations will not be considered.

          An administrative appeal is not a  de  novo  proceeding,  but  is
          limited  to  the  issues  and  evidence  which  were  before  the
          Administrator.  Therefore, the  Commissioner  normally  will  not
          extend  the  computation  period   on   appeal.    However,   the
          Commissioner notes that the tenant has stated that by stipulating 
          the rent and security were reduced by 50% i.e.,  to  $519.19  for
          the 1986-88 lease, as of May 1, 1986.   Furthermore,  the  tenant
          vacated the apartment as of May 31, 1987 and therefore would  not
          be able to credit the excess rent  collected  from  May  1,  1986
          through May 31, 1987.  Accordingly,  the  Commissioner  finds  it
          appropriate in this case, given these special  facts,  to  hereby
          modify the Administrator's Order in order  to  reflect  both  the
          vacature and the stipulation.

          The Administrator ordered a refund of $14,774.34 which included a 
          refund of $542.09 in excess  security.   Presumably,  the  entire
          security deposit was refunded or otherwise allocated at the  time
          of the vacature on May 31, 1987.  Therefore, only  $14,232.25  in
          overcharges plus interest remains to be refunded pursuant to  the
          Administrator's order and this affirmance thereof.

          Regarding the substance of the stipulation, the  tenant  did  not
          pay rent from May 1, 1986 until vacating  as  of  May  31,  1987.






          BH 410108 RO
          (The Administrator computed overcharges only  through  April  30,
          1986.)  The reason for  the  non-payment  was  unrelated  to  the
          tenant's overcharge  complaint.   Instead,  the  tenant  withheld
          rent based on an allegation  that  the  owner  had  violated  the
          warranty of habitability.  By the stipulation the rent  owed  for
          the thirteen month period commencing May 1, 1986 was  reduced  by
          half.

          The stipulation, which was so-ordered  by  Judge  Colgan  of  the
          Civil Court of the City of New York on May 27,  1987,  explicitly
          states  that  it  was  without  prejudice  to  the   then-pending
          overcharge  complaint  before   the   DHCR.    Furthermore,   the
          stipulation states that upon resolution of  the  DHCR  overcharge
          proceeding the 50% rent abatement should be adjusted  to  reflect
          the actual lawful rent.   In  other  words,  the  intent  of  the
          stipulation was that the tenant pay 50% of the lawful  stabilized
          rent for the thirteen month period May 1, 1986-May 31, 1987.  The 
          tenant paid 13 X $519.00 for that period,  being  half  the  rent
          charged.  Since the lawful rent for that period was determined to 
          be $496.29, the tenant should have paid 13  X  $248.15  for  that
          period.  Accordingly, the owner should now refund  an  additional
          13 X ($519.19 - $248.15), i.e., $3,523.52, for that period.  When 
          added to the $14,232.25 stated above  the  total  refund  due  is
          $17,755.77.

          A copy of this Order will be served on the current tenant.

          This order may, upon the expiration of the period  in  which  the
          owner may institute a proceedi g  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 judgement or not in  excess
          of twenty percent thereof per month may  be  offset  against  any
          rent thereafter due the owner.

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

          ORDERED, that this petition be, and the same  hereby  is,  denied
          and the Rent Administrator's order be, and the  same  hereby  is,
          affirmed as modified by this Order and Opinion.



          ISSUED:
                                                  ------------------------
                                                  ELLIOT SANDER
                                                  Deputy Commissioner
           
             
                                          
    

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