DHCR Decisions
CA 410062-RT, CB 410059-RO
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
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF : DOCKET NOS.: CA 410062-RT
CB 410059-RO
MURRAY SCHACTMAN (ARTICLE 7-A :
ADMINISTRATOR), AND : DRO DOCKET NO.: TC-076864-G
KENNETH WEINSTEIN (TENANT), : CDR 32281
: OWNER: Maurice Abelson
PETITIONERS :
-----------------------------------X
ORDER AND OPINION DENYING ARTICLE 7-A ADMINISTRATOR'S PETITION
FOR ADMINISTRATIVE REVIEW, AND GRANTING TENANT'S PETITION
FOR ADMINISTRATIVE REVIEW IN PART
On January 25, 1988 the above-named petitioner-tenant filed a
Petition for Administrative Review (Docket No. CA 410062-RT)
against an order issued on January 13, 1988 by the District Rent
Administrator, 10 Columbus Circle, New York, New York concerning
housing accommodations known as Apartment 25 at 68 West 10th
Street, New York, New York wherein the District Rent Administra
tor determined that the Article 7-A Administrator had overcharged
the tenant. On February 1 , 1988 the above-named petitioner-
Article 7-A Administrator filed a Petition for Administrative
Review (Docket No. CB 410059-RO) against the order. Since the
two petitions involve common grounds of law or fact, they are
herein decided in one order and opinion.
The Commissioner notes that this proceeding was initiated prior
to April 1, 1984. Sections 2526.1(a) 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 Stabiliza
tion Code (Code) contained herein are to the Code in effect on
April 30, 1987.
The issue in this appeal is whether the District Rent Administra
tor's order was warranted.
The applicable sections of the Law are Section 26-516 of the Rent
Stabilization Law and Sections 2520.6(i) and 2526.1(a) of the
current Rent Stabilization Code.
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 appeals.
This proceeding was originally commenced by the filing in
September, 1983 of a rent overcharge complaint by the tenant, in
CA 410062-RT, CB 410059-RO
which he stated that he had commenced occupancy on September 1,
1983 at a rent of $261.54 per month. The complaint named the
Article 7-A Administrator as the owner. The tenant also
mentioned C.A.B. Opinion No. 24518, which expelled the building
from the Rent Stabilization Association and made it subject to
rent-control.
The owner, Maurice Abelson, was served with a copy of the
complaint and was requested to submit rent records to prove the
lawfulness of the rent being charged. In answer to the com
plaint, the Article 7-A Administrator submitted leases only from
April 1, 1982, enclosed evidence of the purchase of a new
refrigerator for the subject apartment in August, 1983, and
stated that C.A.B. Opinion No. 24518 was being appealed. The
owner submitted an answer stating that the 7-A Administrator had
all the records.
On August 5, 1986 the owner was sent a Final Notice of Pending
Default, which stated the default procedures that would be used
to establish the lawful stabilization rent if a rental history
from the base date was not submitted.
In an order issued on January 13, 1988 the Administrator used
the default procedures to set the tenant's initial lawful
stabilization rent at $250.70, and found an overcharge of $436.43
as of August 31, 1986.
In this petition, the petitioner - Article 7-A Administrator
contends in substance that:
1) He was appointed as 7-A Administrator for the
subject building by a Housing Judge of the Civil Court
on May 2, 1983.
2) The Division has no jurisdiction to order the 7-A
Administrator to refund monies from his "administrative
fund" to the tenant, as he is not an "owner" under the
Rent Stabilization Code and as the Order and Judgment
of the Civil Court which resulted in the appointment of
such Administrator states, in pertinent part, that such
rental monies "shall be used, subject to the Court's
direction, ... to remedy... violations of record placed
by any Office of the Department of Housing Preservation
and Development (HPD) ... and any other conditions as
required or authorized by law". As a result, the only
proper authority to order rental overcharge payments to
the tenant is the judge who appointed the Administrato
or.
CA 410062-RT, CB 410059-RO
3) The purpose of the appointment of a 7-A Administra
tor is to assure that when the Court has found that
dangerous and hazardous conditions exist in a building
that all the income from the premises is used to abate
those serious conditions before funds are diverted for
other purposes, such as refunding monies pursuant to a
rent overcharge. The Division Order thus impermissibly
frustrates the 7-A Administrator's ability to preserve
the rental income of the subject building to make
court-ordered crucial repairs.
4) To compel the 7-A Administrator to pay thousands of
dollars as a consequence of complaints of rental
overcharges results in depleting and wasting the funds
allocated for maintenance and repair of the building -
a function which the Administrator is duty bound to
perform (see Real Property Action and Proceedings Law
Section 778). The Division's Order cripples the
activities of the 7-A Administrator by depriving him
of additional rent payments and, based thereon,
promotes the further deterioration of the subject
building.
5) The owner of the subject building, not the 7-A
Administrator, is responsible for all rent overcharges
in the subject building. The proper procedure in the
instant matter would be to defer payment of the rent
overcharge amount until the period of administration
ends and the owner has possession of the building. Or,
in the alternative, the affected tenant or the Division
could make an application to the Civil Court for a
determination by the judge who appointed the 7-A
Administrator to ascertain whether the Administrator's
funds are presently adequate to make such payment,
without conflicting with the very purpose of RPAPL
Section 778, the preservation and rehabilitation of the
building.
The tenant did not submit an answer to the 7-A Administrator's
petition, although given an opportunity to do so.
In his petition, the tenant contends in substance that the
Administrator did not consider C.A.B. Opinion No. 24518, which
set the prior tenant's rent at $200.00 per month.
Neither the owner nor the 7-A Administrator submitted an answer
to the tenant's petition, although given an opportunity to do so.
The Commissioner is of the opinion that the Article 7-A Ad
ministrator's petition should be denied, and that the tenant's
petition should be granted in part.
CA 410062-RT, CB 410059-RO
Section 2520.6(i) of the Rent Stabilization Code defines an
owner, in pertinent part, as a "person or entity receiving or
entitled to receive rent for the use or occupation of any housing
accommodation, or an agent" of the owner. In the instant matter,
it is uncontroverted that the 7-A Administrator receives the
monthly rents from the tenants of the subject building. In
addition, such Administrator by law must remit to the owner H.O.
Realty (of which Maurice Abelson is President) any monies
received from the tenants that exceed the cost of building-wide
rehabilitative and repair work, real property tax liens and
payment for the Administrator's services [see RPAPL Sect. 778,
subd. 1(e)]. The Commissioner also notes that the 7-A Ad
ministrator has an interest in the rents that he receives in the
form of the fee he collects which is based on the monthly rent
roll. Therefore the Commissioner finds that the petitioner-7A
Administrator is considered the owner of the subject building as
that term is defined in Section 2520.6(i) of the Code. Based
thereon, the Commissioner further finds without merit the 7-A
Administrator's contention that the Agency is without jurisdic
tion in this matter.
The Commissioner finds without merit the petitioner's assertion
that all income from the subject building must be used to
rehabilitate the existing structure before such funds may be
"diverted" to, for example, rent overcharge refunds to tenants
who have been remitting a rent in excess of stabilized guide-
lines. The Commissioner notes that this position in effect
discriminates against tenants by forcing them to subsidize the
cost of their own housing (see Dept. of Housing Preserv. Dev. v.
Sartor, 487 N.Y.S.2nd 1 [A.D. 1st Dept. 1985]) by compelling
tenants to pay for housing at a rent that is unlawful.
Concerning the petitioner's contention that deprivation of the
additional rental payments cripples the activities of the 7-A
Administrator the Commissioner finds that a tenant, pursuant to
the Rent Stabilization Code and the Emergency Tenant Protection
Act, is not required to remit rent in excess of lawful stabilized
amounts even if the 7-A Administrator funds would thereby be
reduced. To determine otherwise would destroy the very founda
tion of the stabilization system which was created "to insure
that the level of rent adjustments authorized under (the EPTA)
will not be subverted and made ineffective" [see Century
Operating Corp. v. Marrero, 425 N.Y.S. 2d 464, 465; Section 10 of
Chapter 576 of the Laws of 1974 (ETPA)].
Finally, the Commissioner rejects the petitioner's suggestion
that the payment of rent overcharge amounts to the tenant should
be deferred until the owner reassumes control over the subject
building or in the alternative, that the Division should make
application to the Civil Court for permission to attach the 7-A
Administrator's funds. As hereinabove stated, a tenant is not
CA 410062-RT, CB 410059-RO
required to remit an unlawful rent. Moreover, as the condition
of the subject building is in no way the fault of the tenant,
such tenant should not be required to subsidize the rehabilita
tion of this building at an illegal rent.
While the petitioner has cited a number of court cases in support
of his contentions, he has neglected to mention Schactman v.
State Division of Housing and Community Renewal, 531 N.Y.S. 2d
804 (App. Div. 1st Dept., 1988), motion for leave to appeal to
the Court of Appeals denied, 540 N.Y.S. 2d 238. That case,
significantly, involved the petitioner and concerned the same
issue of rent overcharge at another apartment in the subject
building. [While that case actually involved 66 West 10th
Street, the 7-A Administrator has stated in other proceedings
that 66 and 68 West 10th Street function as one building.] The
Commissioner's order in the proceeding (Docket No. ARL 01824-K)
had found that the 7-A Administrator was an "owner" under the
Rent Stabilization Code; that the tenant was not required to
remit a rent in excess of the lawful rent; and that the tenant
should not have to wait and collect the refund of overcharges
from the actual owner, although the refund she could collect from
the 7-A Administrator was limited to the overcharges actually
collected by him. The trial court upheld the order except to the
extent that it remanded the matter for a determination as to
whether the building owner was financially able to refund the
overcharges and as to whether the amount of overcharge should be
offset against future rents in the event that the building owner
was not financially sound. The Appellate Division reversed the
trial court and upheld the Commissioner's order as having a
rational basis.
The Commissioner notes that the Appellate Division proceeding in
Schactman involved an apartment in the subject building whose
tenants had been in occupancy prior to the time the 7-A Ad
ministrator took over management responsibilities. A default
rent was set by the Rent Administrator, and the 7-A Administrator
was held liable for those overcharges which he had collected. In
the present case the complainant's initial rent was set by the
7-A Administrator, and the complainant paid all of his rent
monies to the 7-A Administrator, so the 7-A Administrator is
responsible for all overcharges.
On January 27, 1983 the DHCR predecessor New York City Concilia
tion and Appeals Board (C.A.B.) issued Opinion No. 24518
(Expulsion Order No. 689, Docket Nos. 50973-H, 50974-H and
50975-H), which expelled the building at 68 West 10th Street
from the Rent Stabilization Association. The opinion referred
the matter to the city rent agency (N.Y.C. Department of Housing
Preservation and Development) for appropriate action. The
opinion stated that all of the apartments would be subject to
rent-control, and that upon vacancies occurring the owner could
CA 410062-RT, CB 410059-RO
apply to have individual apartments become subject to rent
stabilization, with the initial lawful stabilization rent to be
not in excess of the Maximum Rent (Maximum Base Rent or Maximum
Collectible Rent, whichever is greater) as increased by lawful
guidelines increases for the new tenancy. Pending the establish
ment of a rent-controlled rent, the opinion established a
stabilization rent of $200.00 for the tenant then in occupancy of
the subject apartment. On March 26, 1984 orders were issued
setting the controlled rents of various apartments, effective
February 1, 1983. By the time that the controlled rents were
set, the tenant named in the opinion had vacated, and the
complainant had commenced occupancy, so no controlled rent was
set for the subject apartment. DHCR records indicate that the
subject apartment was registered with the Rent Stabilization
Association as a result of the change in tenancies, and was
therefore subject to rent stabilization. While the District Rent
Administrator established a default rent by removing a guideline
increase from the complainant's initial rent, the Commissioner
considers it appropriate to set the rent of the subject apartment
as if an order setting a rent controlled rent effective February
1, 1983, prior to the time that the complainant commenced
occupancy on September 1, 1983, had been issued prior to the time
he moved in. Treating the complainant as the initial stabilized
tenant, there is no default in furnishing a rental history from
the base date, and there is no reason to use the default
procedure to establish a lawful stabilized rent.
DHCR records contain the newly-set rent controlled rents of ten
other 2-room apartments in the subject building. Those rents,
and the 1982-83 Maximum Base Rents, are as follows:
Controlled rent 1982-83
Apt. No. effective 2/1/83 MBR
22 $209.67 $203.80
26 $205.30 $199.36
28 $205.30 $199.36
29 $200.93 $194.93
30 $200.93 $194.93
32 $200.93 $194.93
33 $196.56 $190.49
34 $196.56 $190.49
37 $192.19 $186.06
38 $192.19 $186.06
Because Apartment 25 is on the same floor as Apartment 26, and
because the Maximum Rent for Apartment 26 was $205.30, the
Commissioner is setting the Maximum Rent of the subject apartment
at $205.30 and, using the procedure specified in the expulsion
order, calculating the lawful stabilization rent of the first
CA 410062-RT, CB 410059-RO
stabilized tenant after February 1, 1983 (the complainant) as a
10% increase to $225.83 for a 3-year vacancy lease, plus $12.94
for new equipment for a lawful rent of $238.77. Since the
complainant paid a rent of $261.54, the overcharge was $22.77 per
month for 36 months, which equals $819.72 through August 31,
1986. Interest on the $660.33 of overcharges occurring on and
after April 1, 1984 is $74.28 as of August 31, 1986. The total
overcharge for the tenant's initial 3-year lease is therefore
$894.00 as of August 31, 1986, not including any excess security.
The Article 7-A Administrator is cautioned to adjust the rent, in
leases after those considered in this order, to amounts no
greater than that determined by this order plus any lawful
increases, and to register any adjusted rents, with this order
being given as the reason for the adjustment.
THEREFORE, in accordance with the Rent Stabilization Law and
Code, it is
ORDERED, that the Article 7-A Administrator's petition be, and
the same hereby is, denied; that the tenant's petition be, and
the same hereby is , granted; and that the District Rent Ad
ministrator's order be, and the same hereby is, modified in
accordance with this Order and Opinion. The lawful stabilization
rent is $238.77 per month in the lease from September 1, 1983 to
August 31, 1986. The total overcharge in that lease, including
interest through August 31, 1986, and excess security of $22.77,
is $916.77.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
|