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
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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 :
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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
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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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