BD410138RO; BD410305RO
                             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 No. 3951-Remit)
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NOS. BD410138RO          
                                                         BD410305RO (Reopened)

          Clermont York Associates,       :  DISTRICT RENT ADMINISTRATOR'S
                                             DOCKET NO: L3117602R (CDR 29378)  
                   
                                             TENANT: Ronald N. Weiss     
                            PETITIONER    : 
      ------------------------------------X                             

          ORDER AND OPINION REOPENING DOCKET NO. BD410138RO AND DENYING 
                       PETITIONS FOR ADMINISTRATIVE REVIEW

      On April 2, 1987 the above-named petitioner-owner filed duplicate 
      petitions for administrative review of an order issued on February 26, 
      1987 by the Rent Administrator, 10 Columbus Circle, New York, New York 
      concerning the housing accommodations known as Apartment 12N at 444 East 
      82nd Street, New York, New York wherein the Rent Administrator 
      determined that the owner had overcharged the tenant.  They were date- 
      stamped by the DHCR on April 3 and April 30 respectively.  The U.S. 
      Postal Service postmark on both envelopes read April 2, but could easily 
      be misread to be April 21. Accordingly Docket No. 410138RO, with the 
      April 30 DHCR date-stamp, was dismissed on December 5, 1988 as being 
      untimely.

      Subsequent thereto, the petitioner-owner filed a Petition in the Supreme 
      Court pursuant to Article 78 of the Civil Practice Law and Rules.  
      Docket No. BD410305RO was remitted on consent to the Division of Housing 
      and Community Renewal (DHCR) for consideration together with Docket No. 
      BD410138RO, and both of the owner's petitions are herein decided on the 
      merits.

      The Commissioner notes that this proceeding was filed 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 provision 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 issue in this appeal is whether the Rent Administrator's order was 
      warranted.

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

      This proceeding was originally commenced by the filing in March, 1984 of 
      a rent overcharge complaint by the tenant, in which he stated that he 
      had commenced occupancy on March 1, 1976 at a rent of $480.00 per month.







          BD410138RO; BD410305RO



      In answer, the owner contended in substance that there should be a 
      consideration of the equities since its failure to submit a rental 
      history was due to the fact that it purchased the property through a 
      foreclosure sale and did not receive rent records.

      In an order issued on February 26, 1987 the Administrator found an 
      overcharge of $4,418.49 as of February 28, 1985 after setting the 
      tenant's initial rent at $419.21 by using a default procedure, by 
      allowing Guidelines increases, and by imposing interest on overcharges 
      occurring on and after April 1, 1984.

      In these petitions, the owner contends in substance that it purchased 
      the property through a foreclosure sale;  that it should not have to 
      provide leases from the base date;  and that the three-pronged default 
      formula should not be used to set the initial rent.  In a supplement it 
      contends that it should not, because of the J.R.D. Management v. Eimicke 
      case, be required to produce rent records for more than four years prior 
      to the most recent registration, and that it was ultra vires for the 
      DHCR to promulgate a new Code providing that cases filed before April 1, 
      1984 would be processed under the old Code.

      In answer, the tenant asserts in substance that the owner had an 
      obligation to acquire a rental history from the former owner or former 
      tenants;  and that overcharges should be calculated through February 28, 
      1987.  

      The Commissioner is of the opinion that Docket No. BD410305RO should be 
      reopened, pursuant to the stipulation, and that these petitions should 
      be denied.

      Section 42A of the former Rent Stabilization Code requires that an owner 
      retain complete records for each stabilized apartment in effect from 
      June 30, 1974 (or the date the apartment became subject to rent 
      stabilization, if later) and produce such records to the DHCR upon 
      demand.

      Section 26-516 of the Rent Stabilization Law, effective April 1, 1984, 
      limited an owner's obligation to provide rent records by providing that 
      an owner may not be required to maintain or to produce rent records for 
      more than four (4) years prior to the most recent registration and, 
      concomitantly, established a four year limitation on the calculation of 
      rent overcharges.

      It has been the DHCR's policy that overcharge complaints filed prior to 
      April 1, 1984 are to be processed pursuant to the Law or Code in effect 
      on March 31, 1984. [See Section 2526.1 (a) (4) of the current Rent 
      Stabilization Code.]  The DHCR has therefore applied Section 42A of the 
      former Code to overcharge complaints filed prior to April 1, 1984, 
      requiring complete rent records in these cases.  In following this 
      policy, the DHCR has sought to be consistent with the legislative intent 
      of the Omnibus Housing Act (Chapter 403, Laws of 1983), as implemented 
      by the New York City Conciliation and Appeals Board (CAB), the 
      predecessor agency to the DHCR, to determine rent overcharge complaints 
      filed with the CAB prior to April 1, 1984 by applying the law in effect 
      at the time such complaints were filed so as not to deprive such tenants 
      of their right to have the lawful stabilized rent determined from the 


          BD410138RO; BD410305RO


      June 30, 1974 base date and so as not to deprive tenants whose 
      overcharge claims accrued more than four years prior to April 1, 1984 of 
      the right to recover such overcharges.  In such cases, if the owner 
      failed to produce the required rent records, the lawful stabilized rent 
      would be determined pursuant to the default procedure approved by the 
      Court of Appeals in 61 Jane Street Associates v. CAB, 65 N.Y.2d 898, 493 
      N.Y. S. 2d 455 (1985).

      However, it has recently been held in the case of J.R.D. Mgmt. v. 
      Eimicke, 148 A.D.2d 610, 539 N.Y.S. 2d 667 (App. Div. 2d Dept., 1989), 
      motion for leave to reargue or for leave to appeal to the Court of 
      Appeals denied ( App. Div. 2d Dept., N.Y.L.J., June 28, 1989, p.25, col. 
      1), motion for leave to appeal to the Court of Appeals denied (Court of 
      Appeals, N.Y.L.J., Nov. 24, 1989, p.24, col. 4), motion for leave to 
      reargue denied (Court of Appeals, N.Y.L.J., Feb. 15, 1990, p.25, col. 1) 
      that the Law in effect at the time of the determination of the 
      administrative complaint rather than the Law in effect at the time of 
      the filing of the complaint must be applied and that the DHCR could not 
      require an owner to produce more than four years of rent records.

      Since the issuance of the decision in JRD, the Appellate Division, First 
      Department, in the case of Lavanant v. DHCR, 148 A.D.2d 185, 544 
      N.Y.S.2d 331 (App. Div. 1st Dept. 1989), has issued a decision in direct 
      conflict with the holding in JRD.  The Lavanant court expressly rejected 
      the JRD ruling, finding that the DHCR may properly require an owner to 
      submit complete rent records, rather than records for just four years, 
      and that such requirement is both rational and supported by the Law and 
      legislative history of the Omnibus Housing Act.  Further the Court of 
      Appeals in Century Towers v. Division of Housing and Community Renewal 
      (N.Y.L.J., March 24, 1994, p. 29, cols. 3,4,5,6) affirmed the Lavanant 
      decision and overuled JRD.

      In any event, in the instant case the subject dwelling unit is located 
      in the First Department, so the former Code is clearly applicable, and 
      a rental history is required from June 30, 1974.  Since the owner did 
      not furnish any rent records for the period prior to the time that the 
      tenant commenced occupancy in 1976, it is proper to use default 
      procedures to establish a lawful rent be frozen for the tenant's initial 
      lease.

      Generally, where there are incomplete rent records in an overcharge 
      proceeding, DHCR currently establishes the legal regulated rent at the 
      lowest of:  a) the lowest rent in the building for an apartment with the 
      same number of registered rooms;  b) the complaining tenant's initial 
      rent, minus the guidelines;  or c) the prior tenant's rent, if known.  
      This rent is then frozen until the end of the lease in effect at the 
      time of issuance of the Rent Administrator's order.

      However, the DHCR has recently adopted a new policy modifying the 
      default procedure with respect to the processing of overcharge cases 
      involving judicial sale purchasers.  Where rent records are not 
      available upon judicial sale, DHCR will establish the legal regulated 
      rent as the average, rather than the lowest, of:  a) the lowest rent in 
      the building for an apartment with the same number of registered rooms; 
      b) the complaining tenant's initial rent, minus the guidelines 
      (including the vacancy allowance);  and c) the prior tenant's rent, if 
      known.  The legal regulated rent so established is to be frozen for 







          BD410138RO; BD410305RO


      three years, or two lease terms, whichever is greater, starting with the 
      commencement date of the complaining tenant's initial lease.  In no 
      event, however, shall the rent be frozen for a total of more than four 
      years.

      When the default procedure was adopted in 1982, the first prong used the 
      lowest rent of an apartment in the same line.  For reasons set forth in 
      detail in an order in Docket No. BK410153RO (issued February 28, 1992), 
      the DHCR has since some time prior to July 1, 1987 been using the lowest 
      rent of an apartment with the same number of rooms in the building, 
      rather than just of an apartment in the same line.  The new policy for 
      defaults in judicial sale cases uses the version in effect since 1987.  
      The Administrator's order used $691.37, the lowest registered rent 
      stabilized April 1, 1984 rent in the line.  (This prong did not, 
      however, affect the default rent since the second prong of the formula 
      yielded a lower figure, which was used as the default rent.)  If the new 
      foreclosure policy were to be used, the $357.44 rent of apartment 7K 
      (the lowest registered rent stabilized April 1, 1984 rent of an 
      apartment in the building with the same number of rooms as the subject 
      apartment) would be averaged with the second prong of the formula 
      ($419.21) to give an initial rent of $388.33, rather than the $419.21 
      figure used by the Administrator.  

      When the Administrator's order was issued on February 26, 1987 there 
      was, according to the registration, a lease in effect through February 
      28, 1987.  Proper application of the default procedure by the 
      Administrator would have resulted in a lawful rent of $419.21 continuing 
      through February 28, 1987, with the subsequent rent being based on that 
      rent.  By failing to freeze the rent, the Administrator calculated a 
      lawful rent of $561.92 as of February 28, 1985, which would have 
      resulted in a rent of $612.49 rather than $419.21 for a two-year lease 
      ending February 28, 1987.  While the new policy is designed to 
      ameliorate the effects of the default procedure for judicial sale cases, 
      since it uses the average rather than the lowest of the three prongs, 
      and since it freezes the rent for no more than four years (rather than 
      for the eleven years that the Administrator should have done in the 
      present case), the fact that the Administrator failed to freeze the rent 
      at all, and that the lowest rent of a three-room apartment in the 
      building rather than in the line would be used, means that application 
      of the new policy would result in an overcharge more than double that 
      calculated by the Administrator, and that the lawful rent in the lease 
      from March 1, 1982 to February 28, 1985 (the last one used by the 
      Administrator) would be more than $50 per month less than calculated by 
      the Administrator.  In the absence of a Petition for Administrative 
      Review by the tenant challenging the Administrator's errors, the 
      Commissioner declines to apply the new policy and put the owner in a 
      worse position than it would have been if it left the Administrator's 
      order unchallenged.

      The Commissioner notes that the registrations do not reflect the owner 
      as having reduced the rent as directed by the Administrator's order.  
      The owner is directed to reflect the findings and determinations made in 
      the Administrator's order on all future registration statements, 
      including those for the current year if not already filed, citing the 
      Administrator's order as the basis for the change.  Registration 
      statements already on file, however, should not be amended to reflect 
      the findings and determinations made in the Administrator's order.  The 


          BD410138RO; BD410305RO


      owner is further directed to adjust subsequent rents to an amount no 
      greater than that determined by the Administrator's order plus any 
      lawful increases.
           
      The Commissioner has determined in this Order and Opinion that the owner 
      collected overcharges of $4,418.49.  This order may, upon expiration of 
      the period for seeking review of this Order and Opinion pursuant to 
      Article Seventy-eight of the Civil Practice Law and Rules, be filed and 
      enforced as a judgment or not in excess of twenty percent per month of 
      the overcharge may be offset against any rent thereafter due the owner.  
      Where the tenant credits the overcharge, the tenant may add to the 
      overcharge, or where the tenant files this Order as a judgment, the 
      County Clerk may add to the overcharge, interest at the rate payable on 
      a judgment pursuant to section 5004 of the Civil Practice Law and Rules 
      from the issuance date of the Rent Administrator's Order to the issuance 
      date of the Commissioner's Order.

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

      ORDERED, that Docket No. BD410305RO be, and the same hereby is, 
      reopened;  that these petitions for administrative review be, and the 
      same hereby are, denied;  and that the order of the Rent Administrator 
      be, and the same hereby is, affirmed.  The total overcharge, including 
      excess security of $43.25, is $4,418.49 for the period through February 
      28, 1985.  The lawful stabilization rent is $561.92 per month in the 
      lease from March 1, 1982 to February 28, 1985.


      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner 





    

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