BJ 430282 RO

                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          APPEAL OF                              DOCKET NO. BJ 430282 RO

                                              :  DISTRICT RENT OFFICE
               Sal Iuso,                         DOCKET NO. L 003139 R
                                                 TENANT: Nancy Yohanan        
                                PETITIONER    : 

                                       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 

          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.


                                          JOSEPH A. D'AGOSTA
                                          Acting Deputy Commissioner



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