CB 410029-RO; CB 410031-RT
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 S.J.R. No. 5966
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEALS OF DOCKET NOS.:
CB 410029-RO;
ARGO REALTY CORP., Petitioner-Owner CB 410031-RT;
and
HENRY SIEGAL, Petitioner-Tenant DISTRICT RENT OFFICE
DOCKET NO.:
PETITIONERS L 3116185 R/T
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ORDER AND OPINION GRANTING PETITIONS FOR ADMINISTRATIVE REVIEW
IN PART
These petitions have been consolidated as they involve common
issues of law and fact.
The above-named petitioners filed timely Petitions for Adminis-
trative Review against an order issued on December 31, 1987 by
the Rent Administrator, 10 Columbus Circle, New York, New York,
concerning housing accommodations known as Apartment 14-H at 360
Central Park West, New York, New York, wherein the Rent Adminis-
trator determined that there had been an overcharge and ordered a
refund of $16,904.51, including interest on the overcharges
col-lected on or after April 1, 1984.
Subsequent to the filing of this petition, the tenant commenced
an Article 78 proceeding, seeking an order directing the Division
to expedite this proceeding. That proceeding is pending in
Supreme Court, Queens (sic) County, before Justice Lonschein, and
has Index No. 18869/91. However, the Division retains
jurisdic-tion to issue the order herein.
The Commissioner notes that this proceeding was initiated 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 Stabili-
zation Code (Code) contained herein are to the Code in effect on
April 30, 1987.
The Commissioner has reviewed all of the evidence in the record
and has carefully considered that portion of the record relevant
to the issues raised by the administrative appeal.
The tenant commenced this proceeding on March 31, 1984 by filing
an overcharge complaint with the New York City Conciliation and
Appeals Board (CAB), the agency formerly charged with enforcing
the Rent Stabilization Law, based in part on an alleged failure
by the owner to provide a complete rental history.
In answer to the complaint, the owner stated that it had
recalcu-lated the rents and discovered that the complaining
tenant's $887.46 rent for the two year lease commencing September
1, 1984 should have been $426.57. The record shows that the rent
was reduced to that figure on November 1, 1985.
The record further shows that the owner did not refund any over-
charges collected prior to that rent reduction and that on
December 1, 1985 the owner raised the rent from $426.57 to
$458.58 based on a sublet charge disputed by the tenant.
In Order No. CDR 32,215, herein under review, the Rent Adminis-
trator determined that the lawful rent for the 1984 - 1986 lease
was $526.64, i.e., $100.07 more than that found by the owner when
it reduced the rent to $426.57 on November 1, 1985, but $360.82
less than the rent charged prior to the reduction. The over-
charges were computed from a complete lease history submitted by
the owner.
In its petition, the owner contends that the Rent Administrator's
Order is incorrect and should be modified to reduce the
retroac-tive overcharge from $16,904.51 to $15,903.81 in order to
credit the owner for the above-stated additional $100.07 per
month which it was "entitled to collect" for the ten month period
from November 1, 1985 to August 31, 1986. (The Administrator's
order held that the lawful stabilized rent became $426.57 on
November 1, 1985, when the owner reduced the tenant's rent to
that figure. This finding was based on the Collingwood principal
that where the actual rent charged is less than the rent with the
maximum permitted increase, the lawful stabilized rent is limited
to the actual rent charged.)
In a supplement to its petition, the owner cites J.R.D. Manage-
ment v. Eimicke, 539 N.Y.S. 2d 667, for the proposition that,
although the tenant's complaint was filed before April 1, 1984,
since the Administrator's order was issued after that date, the
owner was only required by the current Code to submit leases from
December 31, 1983, i.e., from four years prior to the issu-
ance of the Administrator's order. Accordingly, even though the
owner submitted a lease history from June 30, 1974, pursuant to
the former Code, the Administrator should have considered only
the leases from December 31, 1983.
In his petition, the tenant seeks (a) treble damages for those
overcharges collected on or after April 1, 1984, (b) reasonable
costs and attorney fees in the amount of $3,000.00 and (c)
interest of 9% on the overcharge until such time as the owner
repays the total overcharge. The tenant cites Chapter 403 of the
Laws of 1983 (the Omnibus Housing Act) in support of his claims.
The tenant further contends that the 1980 rent increase from
$282.20 to $600.00, coupled with the fact that the owner waited
eighteen months from the filing of the tenant's complaint before
admitting the overcharge and reducing the rent, shows that the
overcharge was willful and therefore subject to treble damages.
Neither party answered the petition of the other party, although
each was given the opportunity to do so.
The Commissioner is of the opinion that these petitions should be
granted in part.
At the outset the Commissioner notes that the owner's reliance on
the JRD case is misplaced. JRD was decided in the Second Judi-
cial Department. However, 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
Dep't 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.
Because the subject building is located in the First Department,
Lavanant rather than JRD is applicable. Parenthetically, the
Commissioner notes that under JRD the base date would be April 1,
1980, not December 31, 1983 as argued by the owner. Had the owner
only submitted leases from April 1, 1980, the October, 1980 rent
increase of over 100% would have resulted in the same overcharge
as found by the Administrator, subject to the modifications to be
discussed below.
The owner contends in its petition that it should have been able,
in effect, to retroactively charge $526.64, which the Adminis-
trator determined to be the lawful rent for the September 1, 1984
- August 31, 1986 lease, for the period November 1, 1985 to
August 31, 1986, even though the owner had voluntarily reduced
the rent to $426.57 for that period.
As noted above, under the Collingwood principle an owner is
deemed to have waived any lawful rent in excess of the amount
actually charged. However, the Commissioner finds, based on the
special circumstances of this proceeding, that the owner should
not be deemed to have waived the $100.07 difference between the
$426.57 charged and the $526.64 which it could lawfully have
charged from November 1, 1985 to August 31, 1986.
The owner submitted a rent calculation chart with its answer to
the tenant's complaint, wherein the owner attempted to recompute
the rents so as to eliminate the overcharge which commenced in
October of 1980. The Administrator's chart shows the same
calcu-lations as the owner through the 1980-1981 lease for which
both calculated a lawful rent of $341.46 pursuant to Rent
Guidelines Board Order No. 12. However, for the next lease, a
vacancy lease commencing September 1, 1981, the owner incorrectly
used Guide-lines Order 12 again. In an apparent attempt to avoid
"piggy-backing" (the unlawful compounding of Guidelines increases
during a single Guidelines period) the owner merely added a 5%
vacancy allowance. The Administrator, on the other hand,
computed the increase under Guideline Order 12a, which governs a
distinct Guidelines period and therefore the "piggybacking"
problem does not arise, and correctly used the 26% increase
allowed thereunder (11% Guidelines plus 15% vacancy allowance)
for a lawful September 1, 1981 rent of $430.24, rather than the
$358.53 recom-puted by the owner. (The owner had charged $725.00
for that lease.) This error led to the $426.57 - $526.64
discrepancy for the 1984 - 1986 lease.
The Commissioner hereby finds, because the owner recalculated the
rent solely in contemplation this DHCR proceeding, because the
owner made a mistake of law in doing so, and because that mistake
was obvious on the face of the owner's answer, that the owner
should not be deemed to have waived the $526.64 rent when it
incorrectly reduced the rent to $426.57 on November 1, 1985.
Accordingly, the Commissioner hereby finds that the owner was
entitled to have charged $526.64 for the duration of the 1984 -
1986 lease. However, this figure should be increased to $551.25
as of December 1, 1985 because of a sublet allowance. Therefore,
the lawful base rent for the September 1, 1986 lease is hereby
recomputed to be $560.87, increased by a sublet allowance to
$600.37. The sublet allowances are not part of the base rent.
Subsequent increases should be computed from $560.87. (The
sublet allowances, using vacancy allowances of 5% and 7.5%
respectively, were recomputing the respective renewal lease rents
as if those leases had been vacancy leases. See Section 21(b) of
the former Code. Accordingly, the then-current base
rents were increased by 5%, and 7 1/2% of their respective prior
rents. The owner apparently used the current rents to compute
the sublet allowances.)
The Commissioner hereby finds that the tenant is correct that
treble damages should have been imposed. The owner admits the
1980 rent increase of over 100% was an overcharge and has offered
no excuse therefore. The fact that the record indicates that
ownership and/or management of the building may have changed
since that overcharge is irrelevant. See Administrative Review
Docket No. ARL 13024-K. The Rent Stabilization Law and Code
require the imposition of treble damages unless the owner proves
by a preponderance of the evidence that the overcharge was not
willful. The owner has clearly failed to meet that burden.
The fact that the owner lowered the rent does not preclude the
imposition of treble damages because the rent reduction was not
accompanied by a refund of all the overcharges. Accord: ARL
05516-L. Compare: Policy Statement 89-2.
The tenant's undocumented request on appeal for reasonable costs
and attorney fees was not previously made to the Administrator
and is therefore beyond the scope of review. See Code Section
2529.6. Accordingly, that request is hereby denied.
Code Section 2526.1(a)(1) provides for interest only when treble
damages are not imposed. Accordingly, the tenant's request for
interest is also hereby denied.
Based on the foregoing, the overcharges are hereby recomputed as
follows:
Overcharges prior to April 1, 1984
remains the same:
$3,537.12 + $3,890.88 + $2,360.47 = $ 9,788.47
Overcharges on or after April 1, 1984,
without interest, are trebled:
$ 337.21 x 5 mos. x 3 = $
5,058.15
$ 360.82 x 13 mos. x 3 = 14,071.98
Sub Total = $ 28,918.60
Minus amount improperly deemed waived = -1,000.70
TOTAL = $ 27,917.90
=========
This order may, upon the expiration of the period in which the
owner may institute a proceeding pursuant to Article
seventy-eight of the civil practice law and rules, be filed and
enforced by the tenant in the same manner as a judgment or not in
excess of twenty percent thereof per month may be offset against
any rent thereafter due the owner.
The record indicates that no arrears other than those
specific-ally requested herein by the owner (the $1,000.70
deducted above) are now due. However, if as a result of the
instant determina-tion, there are arrears due to the owner, these
may be deducted from the overcharge.
THEREFORE, in accordance with the Rent Stabilization Law and
Code, it is
ORDERED, that these petitions be, and the same hereby are,
granted in part and the Rent Administrator's order be, and the
same hereby is, modified in accordance with this Order and
Opinion.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
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