ADM. REVIEW DOCKET NO.: BI 410117-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

          ------------------------------------X 
          IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
          APPEAL OF                              DOCKET  NO.:  BI  410117-RO
                                                 D.R.O. ORDER NO.:        
                                              :          CDR          31,025
                                                 Tenant: Andrea Grassi
           CLAIRE            MAYERS/LEBO            REALTY            CORP.,
                

                                              
                                 PETITIONER   :  
          ------------------------------------X 

          ORDER AND OPINION REMANDING PROCEEDING TO THE RENT ADMINISTRATOR


               On September 14, 1987, the above named petitioner-owner filed 
          a Petition for Administrative Review against an  order  issued  on
          August 11, 1987, by the Rent Administrator,  10  Columbus  Circle,
          New York, New York, concerning housing accommodations known as 118 
          St. Marks Place, ground floor, New York,  New  York,  wherein  the
          Rent Administrator determined that there had been  no  overcharge,
          but  that  the  apartment  was  used  for  both   commercial   and
          residential use and therefore was subject to Rent Stabilization. 

               The Commissioner notes that  this  proceeding  was  initiated
          prior to April 1, 1984.  Section 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 October 13,  1983  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 the owner was raising the  rent  from  $325.00  to
          $650.00 per month.




               In answer  to  the  complaint,  the  owner  stated  that  the
          premises  rented  by  the  tenant  are   not   covered   by   Rent






          ADM. REVIEW DOCKET NO.: BI 410117-RO
          Stabilization because the space rented was a store and the  tenant
          "rented it as a store."  The owner did not state  whether  or  not
          the tenant lived in the "store." 

               The owner attached page one of the tenant's lease  which  the
          owner alleged "clearly indicates that he rented a  store  for  use
          as an art  and  sculpture  studio."   The  portion  of  the  lease
          submitted refers to the rented space as "Ground Floor (store)" and 
          states that it is "to be used and occupied only  for  art  studio,
          sculpture work."  (The phrase "to be used and occupied  only  for"
          is part of the printed lease form, the remaining words just quoted 
          are  hand-written.)   The  page  contains  a  handwritten   clause
          allowing the tenant to install a shower at his own  expense  after
          submitting plans from a licensed plumber to the owner.      

               In a reply dated December 8, 1983, the  tenant  alleged  that
          he had moved into the "apartment" in April 1979 when  the  subject
          building was owned by a prior owner who at the time of  the  reply
          still lived in the building.  That tenancy was alleged  to  be  an
          oral lease for $300.00 per month.  The current owner  was  alleged
          to have bought the building in May of 1980.    

               The tenant enclosed a complete copy of the lease and  alleged
          that although he thought that use as an  artist's  studio  implied
          partial residential use, he wanted  the  lease  to  be  absolutely
          clear on this point.  Accordingly, a rider to the  lease  contains
          six clauses, the first five of which are regarding  the  right  of
          the tenant to use the premises as a residence.  These five clauses 
          were crossed out by the  owner.   The  change  bears  the  owner's
          initials but not the tenant's  initials,  although  the  rider  is
          signed by both parties.  In his reply  the  tenant  described  the
          owner's crossing  out  of  the  five  clauses  as  follows:   "The
          landlord's position was that this degree of  specificity  was  not
          necessary and it therefore crossed it out."  That is,  the  tenant
          admitted that the five clauses were  not  part  of  the  lease  as
          signed but argued that the crossing out of the residential clauses 
          did not constitute a denial of the tenant's right to  continue  to
          live in the "apartment" -- which the tenant alleged  he  had  done
          for a year before the petitioner bought the building and  for  the
          six months from the petitioner's purchase to the  signing  of  the
          lease in question.     

               The tenant further argued that the clause allowing  a  shower
          and another clause allowing a pet both were "commensurate with use 
          and occupancy as a residence  and  not  as  a  commercial  store."
          Furthermore,  the  tenant  alleged  the  owner  had  been  in  his
          "apartment" "on more than several occasions" and saw that  it  was
          being used as a residence. 

               Finally, the tenant alleged that there was no certificate  of
          occupancy restricting the ground floor to commercial usage.



               On January 3, 1984,  the  owner  responded  to  the  tenant's
          reply.  The owner agreed there was no  certificate  of  occupancy,
          because  the  building  was  built  prior  to  1901  when  it  was
          classified as "Old Law  Tenement."   However,  a  1936  alteration
          permit shows the classification to be "Five Story Brick store  and






          ADM. REVIEW DOCKET NO.: BI 410117-RO
          Eight Family Dwelling," and  no  changes  in  classification  have
          occurred since that time.  

               The  owner  emphasized  that  the  January  21,  1981   lease
          contained no residential  clauses  and  the  tenant's  attempt  to
          introduce such clauses was denied by the owner at which  time  the
          owner "verbally objected to his living in the premises."   

               The owner  stated  that  :  (1)  the  store  has  no  kitchen
          facilities and is not equipped for living purposes; (2) the  store
          has no hot water; (3) the owner refused permission  to  install  a
          kitchen; (4) the premises has a toilet but no  bathroom;  (5)  the
          permission given  to  install  a  shower  was  contingent  on  the
          owner's approval of plans by a licensed plumber and no such  plans
          were  submitted  so  that  the  owner  had  no  knowledge  of  the
          installation of any shower. 

               Finally, the owner argued that any residential use  has  been
          without the knowledge or acquiescence of the owner and the  tenant
          should not be unilaterally allowed to change  the  nature  of  the
          tenancy.

               On January 30,  1984,  the  tenant  replied  to  the  owner's
          January 3, 1984 response.  The  tenant  argued  that  the  owner's
          claim to have verbally objected to  the  tenant's  living  in  the
          "apartment"  contradicted  the  owner's  claim  to  have  had   no
          knowledge of such use.  Furthermore, the tenant denied  that  such
          objections took place even though the owner visited the  apartment
          on "numerous occasions" and accepted  the  tenant's  rent  without
          objection.  In addition, the tenant alleged that the  owner  never
          objected to the tenant's residential use in writing, so  that  the
          owner had waived any such objection.  

               The tenant stated that he had hot and cold  water,  a  simple
          kitchen, consisting of a refrigerator, sink, counter, cabinets,  a
          kitchen table and chairs and a two burner hot plate.  

               Regarding the shower, the tenant stated the plumbing therefor 
          was already in place when he  moved  in  and  only  needed  to  be
          reconnected, which was done by a  licensed  plumber  but  did  not
          require any plans or permits.

               The tenant denied that he had unilaterally changed the nature 
          of the tenancy, stating that the rear  of  the  first  floor  "was
          clearly used, even before I moved in, as an apartment.  There  is,
          for  example,  a  separate  doorway  leading  directly  into   the
          apartment building hallway, and in the bathroom plumbing and  some
          of the fixtures were still there when I first moved in."  He added 



          that it would be impossible to live there without the knowledge of
          the owners  and  in  fact  both  owners  had  that  knowledge  and
          consented to his living there, as evidenced by their acceptance of 
          his rent.    

               The tenant further  argued  that  the  fact  that  the  owner
          required a commercial lease and now claims non-residential use  is
          not determinative of the stabilization status of the "apartment."






          ADM. REVIEW DOCKET NO.: BI 410117-RO

               Finally, the tenant argued that even without the knowledge or 
          consent of the owner he should be covered by the Emergency  Tenant
          Protection Act of 1974 by virtue of Article  7C  of  the  Multiple
          Dwelling Law.

               On November 14, 1984, the tenant filed a copy of  a  November
          27, 1985 letter from the owner to the tenant, notifying the tenant 
          of  a  rent  increase  for  a  Major  Capital  Improvement   (MCI)
          consisting of  storm  windows.   This  letter  is  a  form  letter
          apparently sent to all tenants in the building, with  spaces  left
          to be filled in by hand for the recipient's name and the amount of 
          the increase for the recipient's apartment.  (The word "apartment" 
          is crossed out and replaced by "store" in the complaining tenant's 
          copy.)   In  a  May  28,  1986  letter  the  tenant,  through  his
          attorney, argued that "the landlord is trying to get the  best  of
          all possible worlds: firstly claiming that the  tenant  Grassi  is
          not a rent controlled (sic) tenant and then claiming that although 
          he is not a rent controlled or rent stabilized tenant he should be 
          liable for an increase based on major improvements."  Attached  to
          this letter are three pages from the owner's November 26, 1984 MCI 
          application for new windows, bearing docket number  LC  000212-OM,
          and addressed to the complaining tenant.  (The owner describes the 
          tenant's "apartment" as a "store" on this application.)  

               On April 9, 1987 the premises were inspected by the Division. 
          The inspector found that the unit consisted of a front  room  used
          as  a  store  or  showroom  with  a  workbench  area  and  shelves
          containing sculpture.  The other half was found to be  residential
          with a "full kitchen" including  a  gas  stove,  refrigerator  and
          kitchen sink.  The living space included a "living room area"  and
          "bedroom area" as well as a toilet and a  shower  stall.   On  the
          back of the inspection report is a diagram of the  premises.   The
          premises is shaped like a capital "F" with the store occupying the 
          top horizontal and half of the top vertical  and  the  residential
          area occupying the rest.  At the right end of the lower horizontal 
          (the living room area) is a doorway labelled  "apartment  entrance
          door."  At the top of the upper  horizontal  area  is  the  "store
          entrance door" opening to St. Marks Place.   

               In Order Number CDR 31,025, herein  under  review,  the  Rent
          Administrator  determined  that  the  unit  was  subject  to  Rent
          Stabilization based on the Division's policy that a premises  used





          for both residential and commercial purposes is  covered  by  Rent
          Stabilization.  The order did not address the owner's  claim  that
          any residential use was without the knowledge or  consent  of  the
          owner.  No overcharge was found. 

               In  this  petition,  the  owner  contends   that   the   Rent
          Administrator's Order is incorrect and should be modified  because
          the Administrator should not have gone beyond finding  that  there
          was no overcharge because the "question  of  the  coverage  [under
          Rent Stabilization] of this unit was not before the  agency."   In
          the alternative, the owner argues that even if the coverage  issue






          ADM. REVIEW DOCKET NO.: BI 410117-RO
          was properly before the Administrator, the Administrator failed to 
          consider the owner's contention that "[i]f the tenant is using any 
          portion of the premises as a residence it is in violation of  both
          the law and the lease  and  was  done  without  the  knowledge  or
          approval  of  the  owner...[but  was]  pursuant  to  a  subterfuge
          initiated by the tenant."   

               The owner argues that the tenant should  not  be  allowed  to
          force the unit into stabilized status  through  the  tenant's  own
          wrongdoing.

               The owner further states, upon information and  belief,  that
          "the tenant's cooking facility consists of a hot  plate  installed
          by the tenant without the  landlord's  permission  or  knowledge."
          The owner alleges that the tenant had represented  that  his  need
          for a shower was to clean up after sculpting, i.e., no  permission
          or knowledge of residential use should be inferred from the  right
          given to have a shower.  

               Finally, the petitioner distinguishes  certain  CAB  Opinions
          cited by the Administrator on the basis that they did not  involve
          a situation in which the unit was  rented  solely  for  commercial
          purposes and in which all tenant requests for residential use were 
          denied.  

               The tenant did not answer the petition,  although  given  the
          opportunity to do so. 

               The Commissioner is  of  the  opinion  that  this  proceeding
          should be remanded to the Administrator for further  fact-finding,
          including a hearing.

               The owner's contention that the issue of coverage  under  the
          Stabilization Law was not  before  the  Administrator  is  clearly
          without merit.  Indeed, the owner raised this issue in its  answer
          to  the  complaint.   However,  the  owner  is  correct  that  the
          Administrator's order failed to discuss the issue of  whether  the
          owner had knowledge of or consented to the partial residential use 
          of the ground floor unit, nor did any of the cases  cited  therein
          deal  with  this  issue.   In  general,  if  such  usage  under  a
          commercial lease was without the knowledge or consent of an owner, 
          the unit would not be stabilized.   However,  the  fact  that  the
          tenancy in this proceeding commenced under a prior owner  


          complicates the application of this  general  rule.   For  if  the
          prior owner had knowledge of and/or consented to  the  residential
          use of the subject premises, the unit would have  been  stabilized
          before the  petitioner  took  ownership.   In  such  a  case,  the
          petitioner would be unable to remove the stabilized status of  the
          unit by requiring the tenant to sign a commercial lease. 

               In this proceeding the tenant  has  alleged  that  the  prior
          owner had knowledge of and consented  to  the  residential  usage.
          However, even though the prior  owner  was  still  living  in  the
          subject building  at  the  time  of  the  allegation,  the  tenant
          submitted no evidence, such as a statement  from  that  owner,  to
          support his allegation.  Furthermore, even though  the  inspection
          shows  conclusively  that  the  unit  was  used  as  a  residence,






          ADM. REVIEW DOCKET NO.: BI 410117-RO
          including a stove, in April  of  1987,  the  tenant  had  admitted
          earlier that he cooked on a  hot  plate  and  it  is,  of  course,
          undisputed that there was no shower stall at the time the tenant's 
          initial lease with the petitioner commenced some six months  after
          the petitioner acquired the building. (The tenant  was  without  a
          lease under the prior owner.)  Thus, in spite  of  the  fact  that
          there is a door  from  the  living  room  area  to  the  apartment
          building  hallway,  the   Commissioner   finds   the   record   is
          insufficient  to  determine  whether  the  tenant  lived  in   the
          apartment under the prior owner and, if so, whether such  use  was
          with the knowledge  or  approval  of  the  prior  owner.   (Merely
          sleeping  on  the  premises  occasionally  does   not   constitute
          residential use.  See  Administrative  Review  Docket  Number  ART
          06400-L.)   

               On the other hand,  long-standing  Division  policy  dictates
          that the mere fact that a lease states "for commercial  use  only"
          does  not  remove  an  apartment  from  coverage  under  the  Rent
          Stabilization Law.  Accordingly, the lease in this proceeding,  by
          itself, does not require a finding  that  the  owner  neither  had
          knowledge  of  nor  consented  to  the  residential  usage.    The
          Commissioner finds that the shower and pet clauses are  compatible
          with either side in  this  dispute,  especially  in  view  of  the
          special nature of the tenant's profession.  

               Although the tenant has alleged that the owner had  knowledge
          of the residential usage, the owner  has  denied  it  and  neither
          party has offered any evidence of such knowledge or lack  thereof.
          If such knowledge were proved, the owner's acceptance of rent with 
          such  knowledge  would  constitute  a  waiver   of   the   lease's
          prohibition against non-commercial usage and the  apartment  would
          be stabilized even if the prior owner had not allowed  residential
          usage and/or even if there was  no  residential  usage  under  the
          prior owner. 

               Moreover, the Commissioner finds that the MCI application  is
          insufficient  proof  that  the  owner  treated  the  apartment  as
          stabilized.  The owner did not seek and  the  MCI  order  did  not
          grant, a rent increase for this tenant.    



               The Commissioner  notes  that  this  proceeding  can  not  be
          resolved by Article 7C of the Multiple Dwelling Law, the  tenant's
          contention to the contrary notwithstanding.  Section 281.1 thereof 
          defines  "interim  multiple  dwelling"  to  include   only   those
          buildings or portions thereof which were or  had  been  commercial
          and since a certain date had been occupied residentially by  three
          or more independent families.  In the subject  building  only  the
          ground floor ever had commercial status, the other apartments  had
          always been residential.  Therefore, the three-family  requirement
          is not met.  See Azizfard Trading Co. v. Smilovici, 480 N.Y.S.  2d
          166 (1984). 

               Finally, the Commissioner notes that there is nothing in  the
          record  to  substantiate  the  owner's  claim  that  the  tenant's
          residential use of the  apartment  violated  any  law.  The  owner
          admits there is no Certificate of Occupancy for the building.  The 
          March 14, 1980 report on this issue, attached to a Certificate and 






          ADM. REVIEW DOCKET NO.: BI 410117-RO
          Report of  Title  submitted  by  the  owner  cites  an  alteration
          application (1936) and  a  Housing  Department  inspection  (1902)
          which describe the building as a five story brick store and  eight
          family dwelling  or  a  five  story  brick  nine  family  dwelling
          respectively.  The 1902 inspection apparently did  not  mention  a
          store and the 1936 alteration application did not create a y  use-
          restrictions.  Furthermore, regarding a partial commercial use  in
          violation of zoning laws a court noted that  "illegality  is  not,
          per se, one of the grounds  for  exemption  from  regulations  set
          forth in the [Rent Stabilization] statutes."  [Citations omitted.] 
          The court further noted that "[a]s a matter of public  policy,  it
          is by far the  better  approach  to  require  a  landlord  who  is
          aggrieved by an illegal use to resort to a summary  proceeding  to
          recover possession of the premises."  Kace Realty Co. v. DHCR, 526 
          N.Y.S. 2d 337 (Sup. Ct., N.Y.Co., 1988).   

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

               ORDERED, that this petition  be,  and  the  same  hereby  is,
          granted to the extent of remanding this  proceeding  to  the  Rent
          Administrator for further processing in accordance with this Order 
          and Opinion.  The  Rent  Administrator's  order  shall  remain  in
          effect until a new order is issued on remand.    

          ISSUED:






                                                                        
                                          ELLIOT SANDER
                                          Deputy Commissioner



                                          


























          ADM. REVIEW DOCKET NO.: BI 410117-RO










    

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