CG 410007-RO
CG 410039-RT

                        STATE OF NEW YORK
                           GERTZ PLAZA
                     92-31 UNION HALL STREET
                     JAMAICA, NEW YORK 11433
APPEAL OF                               DOCKET NOS.:
                                        CG 410007-RO
       DR. AARON WELLS,  Owner &        CG 410039-RT
       PATRICK CLAPP,    Tenant         DRO DOCKET NOS.:
                        PETITIONERS     CDR 33456

                       ADMINISTRATIVE REVIEW

On  July 1, 1988 the above named petitioner-owner, and on July 5,
1988  the  above-named  petitioner-tenant,  filed  Petitions  for
Administrative Review against an order issued on June 2, 1988  by
the District Rent Administrator 10 Columbus Circle, New York, New
York concerning the housing accommodations known as Apartment 4-F
at  130 West 87th Street, New York, New York wherein the District
Rent Administrator determined that the owner had overcharged  the

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  over-
charge  and  fair market rent proceedings provide that determina-
tion of these matters be based upon the law or code provision  in
effect on March 31, 1984.  Therefore, unless otherwise indicated,
reference to Sections of the Rent Stabilization Code (Code) con-
tained herein are to the Code in effect on April 30, 1987.

The   issue   in  this  appeal  is  whether  the  District   Rent
Adminis-trator's order was warranted.

The applicable sections of the Law are Section 26-516 of the Rent
Stabilization  Law  and Section 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 appeal.

This  proceeding was originally commenced by the filing in March,
1984  of  a rent overcharge complaint by the tenant, in which  he
stated that he had commenced occupancy on July 1, 1982 at a  rent
of $305.25 per month.

The  owner  was  served  with a copy of  the  complaint  and  was
re-quested to submit rent records to prove the lawfulness of  the
rent being charged.

In answer, the owner's attorney submitted a chart listing monthly
payments  from  1973  and showing an initial stabilized  rent  of
$150.00 per month as of June 1, 1975, and stated that the  owner,
while  setting  the rent "subjectively" in 1975 and  1976,  later
took  proper  increases, and that the tenant's  present  rent  of
$335.77  was  far  below the fair market value  of  approximately
$750.00  per month of similar apartments in the neighborhood.   A
subsequent  answer claimed a rent of $200.00 on a  base  date  of
September 1, 1976, and included leases from July 1, 1979  to  the
date the complainant's initial lease began.

On September 30, 1986 the owner was set a Final Notice of Pending
Default,  which stated in substance that unless leases  from  the
base  date were submitted within 20 days, certain DHCR procedures
would  be  used to establish the complainant's initial rent,  and
treble  damages would be imposed on willful overcharges occurring
on or after April 1, 1984.

On  March 24, 1988 the owner was requested to submit rent ledgers
or  leases  from June 30, 1974 to July 1, 1979.  By letter  dated
April  13,  1988  the  owner's  attorney  confirmed  a  telephone
conver-sation in which it was agreed that the DHCR and the  owner
would  arrange  by  telephone an appointment to  produce  diverse
books  for  a  reasonable period of time in order to confirm  the
rental history chart submitted earlier.  The Rent Examiner
Progress  Report in the file of the proceeding before the  Admin-
istrator noted on May 3, 1988 that "[o]wner was supposed to bring
rent  receipts to the office.  Owner and attorney state  receipts
were  not  what they thought.  Submitted leases but not from  the
base   date."   (The  leases  referred  to  are  apparently   the
previously-submitted ones from 1979.)

In an order issued on June 2, 1988 the Administrator, setting the
complainant's rent at the $140.00 stabilized rent registered  for
Apartment 3-F and imposing interest on overcharges occurring on

and after April 1, 1984, found an overcharge of $13,704.03 as  of
May 31, 1988, and directed the owner to refund such overcharge to
the tenant as well as to reduce the rent.

In  his petition (Docket No. CG 410074-RO), the owner contends in
substance  that  Apartment  3-F  was  rent-controlled,   although
incor-rectly registered as rent-stabilized, and should  not  have
been used in the default calculations; that the subject apartment
was   rent-controlled  until  1975;  that  recently-located  rent
receipts now show the rents paid from 1974 to 1979; that  several
of  the  rent increases through the years, including the  initial
decon-trolled  rent  of  $150.00 in  1975,  were  less  than  the
allowable  amounts  and  show that the owner  had  no  intent  to
overcharge any tenants; that comparable studio apartments in  the
area  rent  for  $650.00 to $950.00; and that the Administrator's
order  violates the owner's rights under the New York  State  and
United  States  Constitutions by virtue of  being  arbitrary  and
capricious.  With his petition the owner has enclosed among other
things rent receipts for the subject apartment from 1974 to 1980;
an  appli-cation by the owner in 1976 for late enrollment in  the
Rent Stabilization Association, listing the tenant of Apartment 3-
F as paying a rent of $107.00 and as having been paying that rent
in 1968 [such tenant is listed on the 1984 registration as paying
a  rent  of  $140.00]; a 1987 DHCR order terminating a proceeding
initiated  by  that  tenant because the owner  had  submitted  an
amended   rent   registration  designating  that   apartment   as
rent-controlled;  and a notice from the Office  of  Rent  Control
indicating  that  the  tenant  who  vacated  in  1975  was  rent-
con-trolled as of 1973.

In answer, the tenant asserts in substance that the owner may not
submit new evidence on appeal; that in any event the increases in
the stabilized rents from $150.00 to $200.00 and from $200.00  to
$250.00  were excessive; that treble damages should  be  imposed;
and  that he has Con Ed bills to prove that the owner was  incor-
rect in claiming on the RS-1 Form that electricity is included in
the rent.

In  response,  the  owner contends in substance  that,  while  he
over-charged earlier tenants, he has undercharged the complainant
by  over  $1,300.00  as a result of not having  charged  him  the
maximum  permitted percentages of  increase.  With this  response
the  owner  has enclosed an advice letter and chart from  a  real
estate  man-agement  company (also submitted  in  the  proceeding
before  the Administrator), calculating a 28.8% increase  in  the
second stabi-lized lease and a further 20% increase in the  third
stabilized  lease, both done in large part because of  using  the
Guidelines  to Update Special Guideline 6b, contained  in  Guide-
lines  Orders  8 and 11 (even though the Special Guidelines  were
designed  for  use in a Fair Market Rent Appeal to determine  the
lawful  rent  of the first stabilized tenant as an increase  over
the prior rent-controlled rent, and not for calculating increases
over already-stabilized rents).

In his petition (Docket No. CG 410039-RT), the tenant contends in
substance that treble damages should be imposed.

In  answer,  the owner asserts in substance that any  overcharges
were  unintentional,  as he set the initial  stabilized  rent  at
$150.00 even though allowed to charge a fair market rent; that he
also  did  not take full advantage of later permitted  increases;
that the fair market value of comparable apartments would be over
$750.00; and that the complainant's rent is approximately  appro-

The  Commissioner  is  of the opinion that the  owner's  petition
should  be granted in part, and that the tenant's petition should
be granted.

Section  42A of the former Rent Stabilization Code requires  that
an  owner retain complete rent records for each stabilized apart-
ment in effect from June 30, 1974 to date and produce them to
the DHCR upon demand.  If the apartment was decontrolled from the
Rent Control law after June 30, 1974 the owner must provide
satisfactory  documentary evidence of  the  apartment's  date  of
decontrol, and produce a rental history from that date.

In  1982,  the DHCR predecessor N.Y.C. Conciliation  and  Appeals
Board  adopted  procedures to be used to determine  an  apartment
rent  where the owner did not provide a complete rent history  of
the  apartment.  In such cases the rent is calculated to  be  the
lowest of the following amounts:

          1)The  lowest rent for an apartment with the  same
          number of rooms as the complainant's apartment,
          in  the  same  building,  without  any  Guidelines
          adjustment for the complainant's vacancy lease  or
          for  any subsequent lease commencing prior to  the
          date of the agency's order.
          2)the current tenant's initial rent minus any  al-
          lowance  for  the tenant's initial lease,  without
          any Guidelines adjustment for any subsequent lease
          commencing  prior  to  the date  of  the  agency's
          3)the  prior  tenant's  last  rent,  without   any
          Guide-lines  adjustment for any  subsequent  lease
          com-mencing  prior  to the date  of  the  agency's
These procedures have been adopted by the DHCR and upheld by  the
Courts (61 Jane Street Associates vs. CAB, NYLJ, May 8, 1984,  p.
11,  col. 4 [Sup. Ct. N.Y.Co., Greenfield, J.], 108 A.D. 2d  636,
486 NYS2d 694, affirmed 65 NY2d 898, 493 NYS2d 455 [C.A., 1985]).

In  the present case, the owner was directed to submit a complete
rental  history, but did not do so in the proceeding  before  the
administrator, even though given another opportunity on March 24,
1988,  one and one-half years after being sent a Final Notice  of
Pending Default which outlined the consequences if the owner  did
not  submit  a  full rental history.  The chart  that  the  owner
sub-mitted to the Rent Administrator was prepared in response  to
the  tenant's  complaint  and was not a contemporaneous  business
record.  The Administrator advised the owner that such chart  was
insuf-ficient.   While  the  owner has now  submitted  additional
evidence  from his records, it is well-settled that, absent  good
cause  being  shown, an Administrative Review is not  a  de  novo
proceeding  but is limited to the issues and evidence which  were
before   the  Administrator.   The  petitioner  has  offered   no
justification  for  the  late submission of  the  rent  receipts.
Accordingly, they are not accepted for the first time on appeal.

The  owner is correct that the Administrator should not have used
the  rent of Apartment 3-F in setting the default rent; the  DHCR
had,  prior to the Administrator's order, issued an order acknow-
ledging  that  Apartment  3-F  was  rent-controlled.  The  lowest
stabilized  rent  in  the  initial registration  for  a  one-room
apart-ment was actually the $242.00 rent of Apartment 2-F.  Using
this   rent   in  the  default  formula,  the  Commissioner   has
recalculated  the lawful stabilization rents and  the  amount  of
overcharge.  They  are set forth on the amended rent  calculation
chart attached hereto and made a part hereof.  In accordance with
the  DHCR's default procedure, which was set forth in  the  Final
Notice  of  Pending Default sent to the owner  on  September  30,
1986,   no  Guidelines  increases  are  allowed  for  any  leases
commencing prior to the time of the Administrator's order.

Section  2526.1(a)(1)  of  the current  Rent  Stabilization  Code
pro-vides in pertinent part that treble damages shall be  imposed
on  overcharges  occurring on or after April 1, 1984  unless  the
owner  can establish by a preponderance of the evidence that  the
charges were not willful. The owner failed to submit a complete

rental  history before the Administrator.  Furthermore, an  owner
of  rent-regulated apartments is obligated to  ensure  that  only
lawful  rents  are  charged.  The 67% increase (from  $150.00  to
$250.00) between the first and third stabilized leases evinces  a
disregard  of the rent laws.  The Commissioner does not  consider
that  the owner has rebutted the presumption of willfulness  that
arises  when  there  is an overcharge.  In  addition,  while  bad
advice  on rents from a real estate management company would  not
lessen  the willfulness of an overcharge, the Commissioner  notes
that such advice was not even obtained until after the tenant had
filed  his complaint, several years after the owner had increased
the rent from $150.00 to $200.00 and then to $250.00.

Regarding  the  owner's contention that comparable apartments  in
the  area  rent for much more, the Commissioner notes that  while
the  rents  of  comparable rent-stabilized  apartments  might  be
relevant  to  the  determination of a  Fair  Market  Rent  Appeal
challenging  the  initial stabilized rent, the rent  of  a  given
apartment  after  the initial stabilized rent is  based  on  rent
increases  determined  by that apartment's subsequent  individual
history  of  tenancies, improvements, et cetera and  not  on  the
rents of other apartments.

Regarding the owner's constitutional arguments, the owner has not
made any allegations specific enough to be considered.

Because  this  order, like the Administrator's order,  determines
lawful  rents only as of May 31, 1988, the owner is cautioned  to
adjust  the rent in leases after that date 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.

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 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  there-
after due the owner.

THEREFORE,  in  accordance with the Rent  Stabilization  Law  and
Code, it is

ORDERED,  that the owner's petition be, and the same  hereby  is,
granted  in  part; that the tenant's petition be,  and  the  same
hereby  is,  granted; and that the District Rent  Administrator's
order  be,  and  the same hereby is, modified in accordance  with
this  Order  and  Opinion.  The amount  of  the  rent  overcharge
through  May  31, 1988, including excess security of $115.59,  is


                                         Deputy Commissioner

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