CC 410047 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
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IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: CC 410047-RT
(REOPENED)
CYNTHIA WILSON,
DRO DOCKET NOS.: L-3117811-RT
CDR 32726
OWNER: ABC PROPERTIES
PETITIONER
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART
AFTER REOPENING UPON RECONSIDERATION
On February 26, 1992 the Commissioner granted the owner's request
for reconsideration and reopening of a proceeding wherein the
tenant's Petition for Administrative Review No. CC 410047-RT,
regarding Apartment 7G at 2020 Broadway, New York, New York was
granted on January 10, 1992 to the extent of granting treble
damages for a willful overcharge, based upon the owner's failure to
submit a full rental history to justify the rents charged, but
wherein the tenant's request for attorney's fees was denied. In
that order, it was stated that the owner had not submitted an
answer to the tenant's petition. In the request for
reconsideration the owner submitted an answer dated May 20, 1988,
as well as a mailing receipt and proof of the Division of Housing
and Community Renewal's (DHCR's) receipt of the answer. In the
answer the owner contended that the subject building was previously
in receivership, that the records transferred were inadequate to
establish a complete rental history for the subject apartment, and
that both Section 2526.1(f) of the current Rent Stabilization Code
as well as a recent Appellate Division, 1st Department decision
provide that treble damages will not be imposed on overcharges
occurring because of a lack of rent records as the result of
foreclosure and judicial sale.
On March 17, 1992 the owner was requested to submit evidence that
the subject building went through receivership. In response, the
owner submitted a December 14, 1976 deed in foreclosure granted by
a referee to GIT Industries, a predecessor-in-interest to the
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current owner.
The owner sent a copy of this submission to the tenant on April 3,
1992. No reply has been received from her to date.
The Commissioner is of the opinion that the tenant's petition
should be granted in part after reopening the appeal proceeding
upon reconsideration.
Section 2526.1(f)(2) of the Rent Stabilization Code provides that:
For overcharge complaints filed or overcharges collected
on or after April 1, 1984, a current owner shall be
responsible for all overcharge penalties, including
penalties based upon overcharges collected by any prior
owner. However, in the absence of collusion or any
relationship between such owner and any prior owner,
where no records sufficient to establish the legal
regulated rent were provided at a judicial sale, a
current owner who purchases upon such judicial sale shall
be liable only for his or her portion of the overcharges,
and shall not be liable for treble damages upon such
portion resulting from overcharges caused by any prior
owner. Such penalties shall be subject to the time
limitations set forth in paragraph (a)(2) of this
section.
The owner has submitted a copy of a decision wherein the Appellate
Division, First Department in Matter of Round Hill Management Co.,
NYLJ November 12, 1991, p. 25, col.6 upheld a lower court opinion
annulling treble damages imposed where there was a lack of rent
records due to the building having gone through foreclosure.
However, one of the reasons for the finding of a lack of
willfulness [i.e., the fact that the $200.00 rent in effect at the
time of purchase was equal to or lower than the rent charged for
any other identical apartments in the building gave that owner
reason to believe that the rent being charged was not unlawfully
high] does not apply to the present case where the complainant's
April 1, 1984 rent of $442.41 was higher than 22 of the other 39 3-
room apartments in the subject building, and where the lowest
stabilized rent was $298.41. Further, while the DHCR might
consider that treble damages would not apply to overcharges
collected by a current owner who purchased at a judicial sale and
did not receive rent records sufficient to prove the lawfulness of
the rent charged, and who charged only lawful Guidelines
percentages of increase and other lawful increases above the rent
in effect at the time of the judicial sale, Section 2526.1(f)(2)
does not let the owner escape treble damages in the present case,
since it was not the one that purchased at judicial sale. The
owner has stated that it acquired a leasehold estate by an
assignment dated October 16, 1980, and that there were at least two
interim conveyances between that time and the December 14, 1976
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date of the court-appointed referee's deed conveying a leasehold
estate to GIT Industries, Inc. The earliest lease submitted by the
owner was one commencing December 1, 1980. While GIT Industries
might have been able to successfully argue that its lack of rent
records did not indicate a willful overcharge, the current owner
does not have an equivalent excuse to explain its failure to
produce rent records for the period of nearly four years after the
judicial sale, until it signed its own vacancy lease with Patricia
Tully shortly after acquiring its rights to the subject premises.
This is not significantly different from the situation where a new
owner fails to require rent records from a seller (and where the
price paid may or may not reflect a reduction for potential
liability due to inability to prove the lawfulness of rents
charged), and where treble damages are imposed due to the
presumption of willfulness. Treble damages are therefore imposed
in the present case on overcharges occurring on and after April 1,
1984. The resulting overcharges and penalties are as follows:
$1,380.72 ($115.06 X 12) from November 1, 1982 to
October 31, 1983;
$ 615.55 ($123.11 X 5) from November 1, 1983 to
March 31, 1984;
$7,017.27 ($123.11 X 19 X 3) from April 1, 1984 to
October 31, 1985;
$8,908.56 ($123.73 X 24 X 3) from November 1, 1985 to
October 31, 1987;
plus excess security of $123.73 for a total of $18,045.83 as
of October 31, 1987.
As was done in the Commissioner's order of January 10, 1992, the
tenant's request for attorneys fees is denied.
Because of the possibility that the rents charged were not reduced
after the Administrator's or the Commissioner's orders, the owner
is cautioned to adjust the rent, in leases after those considered
by the Administrator, to amounts no greater than that determined by
the Administrator's order plus any lawful increases, and to
register any adjusted rents with the Administrator's order being
given as the reason for the adjustment.
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.
THEREFORE, in accordance with the Rent Stabilization Law and Code,
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it is
ORDERED, that this petition be, and the same hereby is, granted in
part and that the District Rent Administrator's order be, and the
same hereby is, modified in accordance with this Order and Opinion.
The total overcharge, including excess security of $123.73, is
$18,045.83 as of October 31, 1987. The lawful stabilization rent
is $348.04 per month in the lease from November 1, 1985 to October
31, 1987.
ISSUED:
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JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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