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

          APPEAL OF                              DOCKET NO   BE410445RO
                                              :  DRO DOCKET NO. 082002G  as  
          CENTURY OPERATING CORP.                             amended
                                                 TENANT:  Lee Moss         
                                PETITIONER    : 

               On May 8, 1987, the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on 
          April 3, 1987, by the Rent Administrator, 92-31 Union Hall Street, 
          Jamaica, New York, concerning the housing accommodations known as 
          444 East 82nd Street, New York, Apartment No. 7P  wherein the 
          Administrator established the lawful stabilization rent and directed 
          the owner to refund an overcharge of $11,639.05 lncluding interest 
          on the overcharge occurring on and after April 1, 1984.

               The issue herein is whether the Rent Administrator's order was 

               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.  

                The tenant commenced this proceeding in March 1984 by filing 
          a rent overcharge complaint.  The tenant stated that she had made 
          numerous  attempts to get a rent history of the subject apartment
          without success and that she believed she was being overcharged.

               In answer to the complaint, the owner stated that since the 
          building had been purchased at foreclosure, it had been unable to 
          get complete rental records for tenants not in occupancy while the 
          building was in the hands of the receiver  and thus was unable to 
          provide a complete rent history.  

               In the order herein appealed, the Administrator applied court- 
          approved default procedures to establish the legal stabilized rent 
          at $517.99 effective October 1,1984 and based thereon determined 
          that the owner had overcharged the tenant.

                In this appeal, the owner contends that the order should be 
          reversed because:

               1.  the owner is not required to provide leases from the base  
                   date because the property was purchased through a          
                   foreclosure sale;


               2.  the "three-pronged" method to determine the stabilized rent  
                   should not have been utilized because it unduly penalized  
                   the owner;
               3.  the Rent Administrator failed to consider "all factors     
                    bearing upon the equities involved".

               In response to the petition, the tenant contends that the order 
          should be upheld for the following reasons:

               1.  the owner has offered no excuse for its default;
               2.  the owner has failed to demonstrate a meritorious defense  
                   in that it has not established that it purchased the       
                   property at foreclosure;
               3.  the owner has not proved that it made a good faith effort 
                   to get the missing leases;  
               4.  the owner has been inconsistent in its statements regarding 
                   the lease, alternately stating that it had no leases, or   
                   that the tenant had examined the leases.

               In reply, the owner states that the property was actually 
          purchased through a foreclosure sale by the prior owner in or about 
          February 1977.  As the subsequent purchaser, it received only those 
          leases from the approximate date of the appointment of the Receiver 
          by the Supreme Court.  The owner reiterates that it should not be 
          penalized by the use of the punitive three-prong default formula for 
          its failure to produce leases which it had never received due to the 
          circumstances under which the property was purchased.  

               The Commissioner is of the opinion that this petition should be 

               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 last 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.  

               Consistent with the exemptions from treble damage liability
          and from responsibility for refunding overcharges collected by prior 
          owners extended to purchasers at a judicial sale under the Rent 
          Stabilization Code, and in consideration of court rulings that have 
          directed DHCR to modify the default procedures for certain owners 
          (e.g. trustees in bankruptcy), DHCR is adopting a new policy 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 
          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; and c) the prior tenant's rent, 
          if known.

                The legal regulated rent so established is to be frozen for 
          three years, or two lease terms, whichever is greater, starting with 
          the commencement date  of the complainant's initial lease.  The 
          rent, however shall not be frozen for more than four years.


               Although the instant owner was not the purchaser at a judicial 
          sale but was the subsequent purchaser, in consideration of all the 
          factors bearing upon the equities involved, the Commissioner has 
          compared the application of the policy related above with that of 
          the prior procedure and determines that owing to another error in 
          the Administrator's order, in the instant case, the failure to 
          freeze the default rent in any subsequent lease, the new policy 
          produces a harsher result than the Administrator determined.  
          Accordingly, the Commissioner declines to apply the new policy to 
          this proceeding and finds that the Administrator's order should be 

               The owner is directed to reflect the findings and 
          determinations made in this order on all future registration 
          statements, including those for the current year if not already 
          filed, citing this 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 this order.  The 
          owner is further directed to adjust subsequent rents to an amount no 
          greater than that determined by this order plus any lawful 

               The Commissioner has determined in this Order and Opinion that 
          the owner collected overcharges of $11,639.05.  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 this petition for administrative review be, and 
          the same hereby is, denied, and, that the order of the Rent 
          Administrator be, and the same hereby is, affirmed.


                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner



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