CG 410007-RO
CG 410039-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 NOS.:
CG 410007-RO
DR. AARON WELLS, Owner & CG 410039-RT
PATRICK CLAPP, Tenant DRO DOCKET NOS.:
L-3111150-R/T
PETITIONERS CDR 33456
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ORDER AND OPINION GRANTING OWNER'S PETITION FOR ADMINISTRATIVE
REVIEW IN PART AND GRANTING TENANT'S PETITION FOR
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
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 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
receipt
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
Special
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-
priate.
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
order.
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
order.
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
over-
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
$16,975.56.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
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