BH410337RO
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 NO. BH410337RO
: DRO DOCKET NO. TC048795G
EMBASSY ENTERPRISES & CO. TENANT: KERROLL KUNZ
PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW IN
PART
On August 7, 1987, the above-named petitioner-owner filed a
Petition for Administrative Review against an order issued on July
2, 1987, by the Rent Administrator, 92-31 Union Hall Street,
Jamaica, New York, concerning the housing accommodations known as
1394 York Avenue, New York, New York, Apartment No. 3B wherein the
Rent Administrator determined that the owner had overcharged the
tenant.
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 provisions 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 Administrative Appeal is being determined pursuant to the
provisions of Section 42A of the Rent Stabilization Code.
The issue herein 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 commenced in 1977 by the tenant's filing of
a fair market rent adjustment application in which the tenant stated
in substance that she first moved to the subject apartment in June,
1976, at a rental of $330.00 per month; and that the current owner
had purchased the subject premises in August, 1977.
In an answer to the tenant's application, the current owner in
a response dated June 16, 1980, stated in substance that the subject
apartment was already a rent stabilized apartment in 1974 and
submitted a copy of the 1974-75 maximum base rent and maximum
collectible rent schedule for the subject premises. Said schedule
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listed all rent controlled apartments as of 1974-75 and did not list
the subject apartment.
In a response dated October 14, 1980, the prior owner's
attorney stated in substance that his client sold the building in
1977 and that most of the records covering the year 1974 were
destroyed. Attached to such response was a statement that the
subject apartment was not rent controlled in 1973 but rented at a
rental of $300.00; that the owner no longer had a copy of the 1973
lease; that the subject apartment was then rented pursuant to a
lease commencing May 1, 1975 for $325.00 with a prior tenant and was
then rented to the tenant herein. No copies of any leases were
submitted.
The tenant's complaint was then redocketed as a rent overcharge
complaint and the current owner was afforded an opportunity to
submit a complete rental history. In response, the owner advised
that it purchased the subject premises in 1977 and no leases for the
subject apartment were turned over to it although the prior tenant
did pay a rent of $325.00 per month. In a final notice of pending
default sent to the owner on March 17, 1986, the owner was advised
of DHCR procedures to set the rent in the event that the owner
failed to submit a complete rental history.
In Order Number CDR 30,720, the Rent Administrator, based on
the owner's failure to submit a complete rental history, determined
that a rent overcharge of $5667.80 had occurred including interest
on that portion of the overcharge occurring on and after April 1,
1984. No apportionment of the overcharge between the current and
prior owners was made.
In this petition, the current owner alleges in substance that
the owner was never given an opportunity to submit a complete rental
history; that the Rent Administrator had no basis for converting the
tenant's fair market rent appeal to a rent overcharge complaint;
that the Rent Administrator failed to serve the prior owner with a
copy of the tenant's complaint with an opportunity to submit an
answer; that the Rent Administrator failed to apportion the
overcharge between the current and prior owner; and that in any
event, in a default situation, the Rent Administrator should have
utilized the rent control maximum base rent in determining the
stabilized rent rather than using the complaining tenant's initial
rent minus the initial guidelines adjustment and vacancy allowance
as was done herein.
In answer to the owner's petition, the tenant stated in
substance that the Rent Administrator's order was warranted.
The Commissioner is of the opinion that this petition should be
granted in part.
Section 42A of the Rent Stabilization Code requires that an
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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.
In the instant case, contrary to the owner's contentions on
appeal, both the current and prior owners were served with a copy of
the tenant's application and afforded an opportunity to submit a
complete rental history, but were unable to do so. Accordingly, the
Rent Administrator correctly used DHCR default procedures as
enunciated in the final notice of pending default to set the lawful
stabilized rent. The DHCR was not required to use the maximum base
rent to set the lawful stabilized rent as urged by the owner in its
petition merely because the Conciliation and Appeals Board, the
agency formerly charged with enforcing the rent stabilization law
once used such method. Further, due to the owner's failure to
submit a rental history needed to establish whether or not the
tenant herein was entitled to file a fair market rent appeal, it was
proper to convert the proceeding to a rent overcharge proceeding.
The owner was not prejudiced by such conversion as it was given an
additional opportunity to submit the complete rental history.
Accordingly, the determination of the lawful stabilized rent
utilizing DHCR default procedures was warranted.
However, the owner is correct in its contention that it should
not have to pay any portion of the overcharge prior to its purchase
of the subject premises in August, 1977 since the tenant's complaint
was filed prior to April 1, 1984. Accordingly, the owner is
responsible only for all overcharges occurring from September 1,
1977 onwards or $5040.95. This order is issued without prejudice to
any action the tenant may have against the prior owner for the
refund of the overcharge which occurred prior to September 1, 1977
or $626.85. The Rent Administrator's order is hereby amended to
reflect the above.
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
increases.
This order may, upon the expiration of the period in which the
owner may institute a proceeding pursuant to Article 78 of the Civil
Practice Law and Rules, be filed and enforced in the same manner as
a judgment or not in excess of twenty percent per month thereof may
be offset against any rent thereafter due the owner.
THEREFORE, in accordance with the provisions of the Rent
Stabilization Law and Code, it is
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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 to show that the
owner herein is responsible for a total overcharge of $5040.95 - the
overcharge occurring from September 1, 1977 onwards. In all other
respects, the Rent Administrator's order is affirmed.
ISSUED
JOSEPH A. D'AGOSTA
Deputy Commissioner
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