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  SJR 3770
     IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
     APPEAL OF                              DOCKET NO.: BL 410784-RT
                                         :  
                                            DRO DOCKET NO.: TA 11404;
         WENDY KAUFMAN                                CDR 31273 AS AMENDED
                           PETITIONER    : 
     ------------------------------------X                             


          ORDER AND OPINION REOPENING PROCEEDING AND DENYING PETITION FOR
              ADMINISTRATIVE REVIEW AFTER REVIEW AND RECONSIDERATION
                           PURSUANT TO JUDGMENT OF COURT


     The  abovenamed  petitioner   tenant   filed   a   timely   Petition   for
     Administrative Review against an order issued on November 20, 1987 by  the
     Rent Administrator concerning the housing accommodations known as 430 West 
     24th Street, Apartment 15D, Manhattan.

     On  December  6,  1988  the  Commissioner,   after   various   intervening
     proceedings which are no longer pertinent, issued  an  order  and  opinion
     denying the tenant's petition along with a petition  filed  by  the  owner
     (London Terrace Gardens) which was  consolidated  therewith  (SJR  3338;BJ
     410294-RO;Bl 410184-RT).

     The tenant (but not the owner) instituted an Article 78 proceeding and the 
     matter was remitted by the Court to this agency to determine  whether  the
     tenant is entitled to treble damages and attorneys' fees. 

     The tenant filed a complaint  of  overcharge  on  or  about  May  1,  1983
     alleging, among other things, that she took occupancy on September 1, 1981 
     under a 1 year lease at a rent of $625.00.  A complete rental history  was
     subsequently submitted.

     It was adduced that the apartment was formerly subject to rent control and 
     became subject to stabilization by virtue of  a  vacancy  occurring  after
     June 30, 1974; that the  first  stabilized  tenant,  one  Steven  Hoffman,
     immediately prior to Ms Kaufman, had not been properly served with a  DC-2
     Notice; and, therefore, that  her complaint should be processed as a  fair
     market rent appeal.

     The owner alleged that Mr. Hoffman was both an employee and a relative  of
     one of its principals and had been charged 2 "sweetheart" lease  rents  of
     $335.00 and $385.00 and that  when  Ms  Kaufman  took  occupancy  she  was
     charged a rent of $625.00 which was more in keeping with the actual market 
     value of the apartment.






          DOCKET NUMBER: SJR 3770; BL 410784-RT
     The Commissioner notes that, in another proceeding, the owner on or  about
     July 27, 1983, apparently as an offset to the tenant's instant  complaint,
     filed an application for a rent adjustment pursuant to Section 24  of  the
     former Code (unique and peculiar circumstances) based  on  its  abovenoted
     relationship to Mr. Hoffman.  An order was  issued  on  October  25,  1985
     denying the application (OI 10861;CDR 5818).

     In the instant proceeding the Administrator issued an order on August  31,
     1987 (TA 11404;CDR 31273) establishing an  initial  fair  market  rent  of
     $329.38  based  on  the  average  of  a  special  guideline  and   certain
     "comparables" submitted by the owner  plus  certain  service  adjustments.
     The Administrator rejected 3 other comparables submitted by the owner.

     The Administrator subsequently reopened  the  proceeding  and  issued  the
     herein appealed order (TA 11404;CDR 31273 as amended) on November 20, 1987 
     which affirmed the prior order  with  respect  to  establishing  the  fair
     market rent but corrected certain  mathematical  errors  and  updated  the
     calculation of rents through August 31, 1989 and directed a  total  refund
     of $15,061.05 in excess rent through November 30, 1987.

     The tenant, among other things, has urged  in  substance  throughout  this
     proceeding that she is  entitled  to  treble  damages  because  the  owner
     willfully charged her excess rent since the inception of her tenancy,  the
     willfulness being illustrated  by  the  owner's  persistence  in  charging
     excess rent even after the abovenoted 1985 denial of its application under 
     Section 24 of the former Code; that had her complaint been processed as an 
     overcharge complaint, rather than as a fair market rent appeal, she  would
     have clearly been entitled to treble damages; and that there is  no  basis
     in law for denying her  treble  damages  simply  because  the  matter  was
     processed as a fair market rent appeal.

     In a supplementary submission to her petition  the  tenant  also  demanded
     attorneys' fees.

     The  Commissioner,  after  review  and  reconsideration  pursuant  to  the
     judgment of the Court, is of the  opinion  that  the  petition  should  be
     denied.

     The Commissioner is of the opinion that,  since  in  this  proceeding  the
     Administrator adjusted the  rent  pursuant  to  fair  market  rent  appeal
     procedures  rather  than  overcharge  procedures,   treble   damages   and
     attorneys' fees are not warranted.

     Section 2526.1 of the current Rent Stabilization Code  provides  that  any
     owner found to have collected an  overcharge  above  the  authorized  rent
     shall be liable for a penalty equal to three  times  the  amount  of  such
     overcharge and may be assessed the reasonable costs and attorneys' fees of 
     the proceeding or interest on any overcharge which occurs after  April  1,
     1984.   This  Section  applies  to  willful   violations   of   the   Rent
     Stabilization Law and Guidelines and does not apply to  fair  market  rent
     appeals.  Pursuant to Section 26-512(b)(2) of the Rent Stabilization  Law,
     for apartments which are removed from rent control and become  subject  to
     the Rent Stabilization Law by virtue of a vacancy occurring after June 30, 
     1974, the owner is permitted to charge an  initial  fair  market  rent  as
     "agreed to by the landlord and the tenant", subject to the tenant' right 






          DOCKET NUMBER: SJR 3770; BL 410784-RT
     to challenge the initial rent as exceeding the fair market rent.   If  the
     tenant does not challenge the initial rent,  it  becomes  the  legal  base
     rent.  If the tenant challenges the initial rent, a determination  may  be
     made that the tenant's initial rent exceeds the fair market rent  for  the
     apartment.  In such case, the owner is  required  to  give  the  tenant  a
     refund or credit for the amount collected in excess  of  the  fair  market
     rent.  However, a determination that the initial  rent  exceeds  the  fair
     market tent is considered in the nature of a rent adjustment rather than a 
     rent overcharge and thus of treble damages and  attorneys'  fees  are  not
     warranted.   This is reflected in Section 2526.1(g) of  the  Current  Rent
     Stabilization Code which specifically provides that "[t]he  provisions  of
     this  section  [Section  2526.1,  concerning  overcharge   penalties   and
     assessment of costs and attorneys' fees] shall not apply to  a  proceeding
     pursuant to Section 2522.3 of this Title (Fair Market Rent Appeal)."

     Due to the particular circumstance of this  case,  the  Commissioner  also
     finds without merit the petitioner's claim that she is entitled to  treble
     damages because, independently of the fair  market  rent  adjustment,  the
     owner "willfully" raised the rent for the apartment above the  permissible
     guideline amount when she took occupancy.

     This case presents an unusual  situation  where  Mr.  Hoffman,  the  first
     occupant after the last rent controlled tenant, was a relative of  one  of
     the owner's principals as well as an employee of  the  owner  and  he  was
     charged a rent lower than the owner was charging  for  simolar  apartments
     when it might have negotiated a higher rent.   These  circumstances  could
     reasonably lead the owner to believe that Mr. Hoffman was not a stabilized 
     tenant and that the landlord could regard the  complainant  as  the  first
     stabilized tenant and charge her a market rent subject to  a  Fair  Market
     Rent Appeal or, alternatively, that it was entitled  to  a  rent  increase
     above  standard  guideline   amounts   due   to   "unique   and   peculiar
     circumstances."

     These facts indicate that the excessive rent resulted from  misconceptions
     by the owner under unusual circumstances  rather  than  from  a  "willful"
     disposition to evade the law.   The  owner's  contentions  were  at  least
     plausible, although they were ultimately rejected by the Administrator and 
     the Commissioner.

     The Commissioner also notes that during the proceedings  at  the  District
     Office the Administrator did not give the owner notice that treble damages 
     and attorneys' fees might be imposed.  Given such  notice,  an  owner  may
     well compromise and offer or credit a refund to a  complaining  tenant  in
     order to avoid potential liability for treble damages and attorneys'  fees
     although the owner may believe that it is not charging  an  illegal  rent.
     As a result, it is this  agency's  general  policy  not  to  award  treble
     damages and attorneys' fees where an owner has not received notice of  the
     possibility thereof during the proceedings before the Administrator.

     THEREFORE, pursuant to  the  Rent  Stabilization  Law  and  Code  and  the
     judgment of the Court, it is











          DOCKET NUMBER: SJR 3770; BL 410784-RT
     ORDERED, that this proceeding be, and the same hereby is,  reopened;  that
     this  petition  be,  and  the  same  hereby  is  denied;  and   that   the
     Commissioner's  prior  order  and  opinion  and  the  order  of  the  Rent
     Administrator be, and the same hereby are, affirmed.

     ISSUED:














                                                                   
                                             ELLIOT SANDER
                                          Deputy Commissioner




                                                   
    

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