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

      ------------------------------------X  S.J.R. NO. 385
      APPEAL OF                              DOCKET NO.: BF 410028-RO

      Herman Management, Inc.,               DRO DOCKET NO.: T/C47669-G

                                             TENANT: Laura Vega               


      This Order and Opinion is issued pursuant to judgment entered on May 5, 
      1987 by Mr. Justice Harold J. Reynolds which remitted the proceeding to 
      the Division of Housing and Community Renewal for further consideration.

      The Commissioner notes that this proceeding was initiated prior to April 
      1, 1984.  Sections 9 NYCRR 2526.2 (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 provisions in effect on May 31, 
      1984.  Therefore, unless otherwise indicated, reference to Sections of 
      the Rent Stabilization Code (Code) contained herein area to the Code in 
      effect on April 30, 1987.

      The tenant originally commenced this proceeding by filing a complaint of 
      rent overcharge with the former New York City Conciliation and Appeals 
      Board (CAB) concerning housing accommodations known as Apartment 3L, 10- 
      22 Fairview Avenue, New York, New York .  The tenant took occupancy of 
      the subject apartment pursuant to a lease which commenced on January 1, 
      1979 and expired on December 30, 1980 at a rental of $193.07 per month.

      The owner was served with a tenant's complaint and requested to submit 
      leases or rent ledgers reflecting a complete rental history for the 
      subject apartment or a current rent roll if it was missing any lease 
      documents for any period of tenancy since the base date.  The owner 
      submitted leases for the subject apartment dating from July 1, 1976 and 
      a letter in which it explained that it had no prior leases because the 
      subject building had previously been under receivership due to 
      foreclosure.  The owner also submitted a current rent roll.

      In Opinion Number 23,294, issued November 18, 1982, the CAB determined 
      that the owner had failed to provide a full rental history as demanded 
      and established the lawful stabilization rent by presuming that the 
      subject apartment had been vacancy decontrolled prior to July 1, 1974 
      and utilizing the 1974 rent determined by the Division of Rent Control.  

      Subsequent thereto, the owner requested reconsideration of Opinion 
      Number 23,294, asserting that the CAB had failed to acknowledge the 


      rental data it submitted.  The CAB granted the owner's request and 
      issued an amended Opinion on March 8, 1984 which found that the owner 
      had not provided a full rental history and recalculated the lawful 
      stabilization rent for the subject apartment by utilizing the 1974 
      Maximum Collectible Rent as determined by the Division of Rent Control.

      On appeal, the owner contends, in substance, that it had complied with 
      the directive of the Division's predecessor agency to provide a current 
      rent roll, that there was no rational basis upon which to conclude that 
      the tenant's rent should be reduced and rolled back and that therefore, 
      Opinion 23,294 is arbitrary and capricious.

      The Commissioner is of the opinion that this petition should be granted 
      in part.

      Code Section 2526.1 (f) provides in pertinent part that where no records 
      sufficient to establish the legal regulated rent were provided at a 
      judicial sale, in the absence of collusion or any relationship between 
      a current owner and any prior owner, a current owner who purchases at 
      such judicial sale shall be liable only for his or her portion of the 
      overcharge and shall not be liable for treble damages upon such portion 
      resulting from overcharges caused by any prior owner.  Section 2526.1 
      (f) further provides that for overcharges collected prior to April 1, 
      1984, an owner will be held responsible only for his or her portion of 
      the overcharges.

      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 directing to DHCR to modify 
      default procedures for certain owners, DHCR has adopted 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; c) the prior tenant's rent, if known.  Such procedure is a 
      recent modification of the standard default method of computation, which 
      remains in effect in all other cases, in which the legal rent would be 
      the lowest of the three amounts.

      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 complaining tenant's initial lease.

      In the instant case, the three applicable rental amounts are:

           1.   The lowest rent in the line:
                Apartment 2L rent: $227.23.

           2.   The current tenant's initial rent minus any
                allowance for the tenant's initial  lease:
                $193.07 minus an 11% allowance (6% guideline
                increase plus 5% vacancy allowance)
                pursuant to Rent Guidelines Board Order
                Number 10, 10a = $173.16.

           3.   The prior tenant's last rent:  $183.00


      The average of these combined amounts is $194.46.  However, since the 
      lawful rent cannot be more than the amount actually charged, it is 
      reduced to $193.07, which was the complainant's initial rent.  As a 
      result, total overcharges are determined to be $1,870.01, as documented 
      in the enclosed rent calculation chart affixed hereto and made a part 

      The Commissioner has determined in this Order and Opinion that the owner 
      collected overcharges of $1,870.01.  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.

      If the owner has already complied with the Rent Administrator's order 
      and there are arrears due to the owner as a result of the instant 
      determination, the tenant shall be permitted to pay off the arrears in 
      twenty four equal monthly installments.  Should the tenant vacate after 
      the issuance of this order or have already vacated, said arrears shall 
      be payable immediately.   

      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 

      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, granted in part, and, that the order of the Rent 
      Administrator be, and the same hereby is, modified in accordance with 
      this order and opinion.


                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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