BJ 430282 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. BJ 430282 RO
: DISTRICT RENT OFFICE
Sal Iuso, DOCKET NO. L 003139 R
TENANT: Nancy Yohanan
PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART
On October 5, 1987, the above-named owner filed a Petition for
Administrative Review against an order issued on August 31, 1987, by
the Rent Administrator in Jamaica, New York, concerning the housing
accommodations known as 330 West 55th Street, New York, New York,
Apartment No. 2-B, wherein the Rent Administrator determined that
the owner had overcharged the tenant.
The tenant originally commenced this proceeding by filing a
complaint of rent overcharge. The owner was served with a copy of
the complaint and was directed to submit a complete rental history.
The owner was advised that if it claimed a rent increase for the
installation of new equipment, it was required to submit invoice(s)
showing the cost and date of installation. The owner submitted a
bill from "Rover Repair Company" for $5130 and a cancelled check
corresponding thereto, dated August 28 and October 10, 1984,
respectively, for the following improvements: new base and wall
cabinents, new counter top and sink, new stove and refrigerator, new
plywood sub-flooring and linoleum, new marble-top vanity and other
bathroom improvements and accessories.
In the ensuing order, here appealed, the Administrator added to the
rent under the lease commencing September 1, 1984, the sum of $25.12
for improvements made to the apartment during the preceding vacancy
period. She arrived at that amount by evaluating the various
claimed improvements under this Division's "J-51" cost schedule,
using it, rather than the higher figures the owner had submitted,
because the evidence demonstrated a "tie-in" between the owner and
the contractor.
The owner now seeks modification of that order insofar as concerns
those improvements. He states that "Rover Repair Company is an
independent company . . . and should not be discriminated against"
for the aforementioned tie-in. Petitioner has enclosed photocopies
of apparent bills from suppliers to Rover Repair, showing a total
cost to the latter of $3710.29 for the improvements in question.
The tenant has answered the petition by stating: that the tie-in in
question was established by evidence before the Administrator and
BJ 430282 RO
admitted by the owner in another proceeding; that petitioner may not
now submit new evidence (the suppliers' bills) without a reason for
not having proffered same to the Administrator; that (in response to
petitioner's statement that the contractor is entitled to be paid
for labor) an owner cannot include in the cost of improvements, the
labor cost of his own employees; and that the owner's statement in
the petition that Rover Repair Company is an independent contractor
is false so that the overcharge should now be considered willful and
treble damages imposed.
The Commissioner is of the opinion that the petition should be
granted in part.
Section 2522.4 of the Rent Stabilization Code permits a rent
increase equal to one-fortieth the cost of new equipment. The
Commissioner need not here determine whether a familial tie-in
existed here, as the premise on which that issue is based -- that
such a tie-in calls for use of a J-51 schedule in lieu of documented
costs -- is faulty, such use having been disallowed in court
proceedings. The same criteria are to be applied to "tie-in" cases
-- albeit with greater attention to the possibility of abuse
inherent in a close owner-contractor relationship -- as are used in
other vacancy-improvement cases.
Having found error in the Administrator's use of the schedule, the
Commissioner must now determine what documents to consider in
determining the amount of the increase in question, and specifically
whether the suppliers' bills to Rover Repair should be rejected as
tardy submissions.
Evidentiary items that should have been presented to the
Administrator (i.e., that were relevant, material and in the actual
or constructive possession of a party while the case was before the
Administrator) but were not so presented, will not be considered by
the Commissioner at a later procedural stage. In the realm of
improvements to housing accommodations, evidence of obligation
(bills and invoices) and of payment (checks) for same, between the
owner and the party(ies) he hired to make those improvements, must
therefore be submitted in the proceeding before the Rent
Administrator. There is no requirement, however, to provide
documents that only passed between contractor and subcontractor.
Ordinarily the latter sort of document would be immaterial at any
stage of the proceeding, but in the instant case it is not; the
Administrator has refused to consider the bill submitted to him and
petitioner seeks to show, through subcontractors' bills, that the
amount he paid was not inflated by a tie-in. The question then is,
was the tie-in raised before the Administrator so as to have obliged
the owner to deal with it at that stage?
The record reflects that the issue was first brought up in the
tenant's 1985 Rebuttal to Answer Filed by Landlord, and was expanded
on in the tenant's letter of March 5, 1987. There is no evidence,
however, that either of those were served on the owner; what he was
sent, rather, was a request for: "Copies of cancelled checks . . .
and bills showing the cost and date the . . . equipment was
installed for which 1/40 of the cost is claimed. The receipts must
show a breakdown of the costs or [sic] each item separately." That
BJ 430282 RO
constitutes neither a request for subcontractors' bills, nor a
warning that the integrity of the final bill was threatened by a
"tie-in" problem. There was thus no reason for petitioner to have
proffered the disputed evidence to the Administrator. Only when the
latter's order adverted to the tie-in, was the owner on notice of
the relevancy of subcontractors bills, and the Commissioner will
therefore consider them on this appeal.
Comparison of those bills with that paid to Rover Repair shows a 28%
"markup" by the latter. The Commissioner cannot call that markup
unreasonable, and will therefore accept the Rover Repair bill as
valid evidence of the cost of improvements with this exception: The
cost of linoleum and plywood subflooring, $540, will be omitted as
consisting of repair work rather than an improvement.
The cost of vacancy improvements herein is thus $4590 which, divided
by 40, yields an increase of $114.75 instead of the $25.12 allowed
by the Administrator. The lawful rent under the aforementioned
lease effective September 1, 1984 is therefore $512.08 plus that
$114.75 or $626.83, resulting in a monthly overcharge of $12.69
($639.52 actually charged minus $626.83) for the two-year term
thereof, or $304.56; interest on that amount is $190.73. The lawful
rent for the succeeding lease is arrived at by adding 6.5% of the
aforementioned $626.83 to that amount, which yields $667.57;
subtracting that from the actual rent charged of $681.09 reveals a
monthly overcharge of $13.52 to be multiplied by the 13 months
encompassed by the Administrator's order, for a total of $175.76
plus interest of 85.69 thereon. Adding the overcharges for the two
leases in question, the interest due on each, and the excess
security deposited of $13.52, yields a total refundable overcharge
of $770.26.
Regarding the tenant's assertion that treble damages should be
assessed, the Commissioner can only entertain arguments raised in
Petitions for Administrative Review; not having filed such a
Petition, the tenant is precluded from seeking relief through her
answer to the owner's (there being no exception to this rule based
on one party's having been unaware of error before reading the
other's PAR). Further the fact that the owner chose to characterize
Rover Repair as an independent contractor in his petition represents
the owner's opinion and does not amount to a fraudulent
misrepresentation on the owner's part.
Because this determination concerns lawful rents only through
September 30, 1987, the owner is cautioned to adjust subsequent
rents to an amount no greater than that determined by this order
plus any lawful increases, and to register any adjusted rents with
this order and opinion being given as the explanation for the
adjustment.
Upon the expiration of the period in which the owner may institute
a proceeding pursuant to Article 78 of the Civil Practice Law and
Rules, not in excess of twenty percent per month of the overcharge
may be offset against any rent thereafter due the owner.
THEREFORE, in accordance with the Rent Stabilization Law and Code,
BJ 430282 RO
it is
ORDERED, that this petition be, and the same hereby is granted in
part, and the Rent Administrator's order modified in accordance
herewith to show a rental overcharge of $770.26 through September
30, 1987, and a lawful stabilization rent of $667.57 effective
September 1, 1986.
ISSUED:
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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