DOC. NO.: CJ 610076-RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          ------------------------------------X   ADMINISTRATIVE REVIEW
          APPEAL OF                           :   D.R.O. ORDER NO.
                    WALSEY MANAGEMENT CO.,    :        CDR # 20,331
                                 PETITIONER   :        AS AMENDED
          ------------------------------------X   D.R.O. DOCKET NOS.
                                                       BK 610021-RP
                                                  TENANTS: JAMES and 
                                                      MARIA MC CULLOUGH

                                ADMINISTRATOR'S ORDER

          On October 26, 1988, the above named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on 
          September 21, 1988, by the Rent Administrator at 10 Columbus 
          Circle, New York, New York, concerning housing accommodations known 
          as apartment number 3-A at 2965 Decatur Avenue, Bronx, New York, 
          wherein the Administrator established the stabilized rent and 
          directed the owner to refund $5,808.26, including interest from 
          April 1, 1984.

          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 
          Stabilization 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.

          This proceeding was originally commenced on March 30, 1984 by the 
          filing of a complaint of rent overcharge with the New York City 
          Conciliation and Appeals Board (CAB, the agency formerly charged 
          with enforcing the Rent Stabilization Law) by the tenants.

          DOC. NO.: CJ 610076-RO

          The owner answered the complaint but failed to submit a complete 
          rental history from the base date.  The owner alleged that the 
          tenants were the first stabilized tenants to occupy the apartment, 
          but submitted no proof of that fact although requested to submit 
          the same in the form of a DC-2 form, an R-42 form or a copy of rent 
          ledger entries for the period commencing two months prior to the 
          date of decontrol and ending two months after the date of 

          On August 1, 1986, the Administrator issued an order wherein he 
          employed a default procedure to determine the tenants' stabilized 
          rent and directed the owner to refund $4,207.80 in overcharges, 
          including interest from April 1, 1984.

          Thereafter, the owner filed a PAR (assigned Docket #ARL 13,309-B) 
          against the August 1, 1986 order.  In that PAR, the owner 
          reiterated its allegation that the tenants were the first 
          stabilized tenants after vacancy decontrol.

          By an order and opinion issued August 31, 1987, the matter was 
          remanded to the Administrator pursuant to V.R.Equities v C.A.B. 118 
          AD2d 459, 499 NYS2d 743 (1st Dept. 1986) so that the Administrator 
          might search the Division's records to see whether or not they 
          showed the date of decontrol.

          On remand, the owner submitted an answer dated June 30, 1988.  In 
          it, the owner alleged that it had reviewed its records and that 
          said review had indicated that one Winston Velez [and not the 
          complainants] had been the first stabilized tenant to take 
          occupancy (sometime in 1978) after the prior, rent controlled 
          tenant (David Perkins) had vacated (in 1978).

          The owner also stated that Winston Velez was charged a monthly 
          rental of $250.00, but the owner did not state whether it had 
          entered into a lease with Winston Velez.  The owner further alleged 
          that the complainants herein took occupancy after Winston Velez.  
          The owner asserted that in addition to Guidelines increases, it was 
          entitled to a rent increase based on more than $600.00 worth of 
          improvements it had installed in the apartment during a vacancy 
          period.   Based upon said allegations, the owner
          asserted that it had not collected any overcharges.  Among the 
          exhibits submitted, the owner included purported rent ledger pages 
          for the year 1977.  They showed a David Perkins residing at

          DOC. NO.: CJ 610076-RO

          Apartment 3A during that entire calendar year and paying a rent of 
          $210.95.  Also submitted was a purported lease between 2965 Decatur 
          Realty and David Perkins for a term which commenced on November 1, 
          1970 and expired on October 30, 1972 at a monthly rental of 

          In the appealed order, the Administrator found that the owner had 
          failed to submit a complete rental history on remand.  Using a 
          default procedure, the Administrator determined the tenants' 
          stabilized rent for the lease period which commenced on September 
          1, 1986 and (as explained herein below) ended on June 30, 1987 to 
          be $343.75, and directed the owner to refund $5,808.26.

          In its Petition, the owner contends that the Administrator erred on 
          the rent calculation chart attached to the order by failing to 
          acknowledge the following:

          1.   The complaint is signed by a person [Emilio Mateo,] who 
               is unknown to the owner and who is not a tenant of the 
               subject apartment.  The proceeding below was, therefore, 
               jurisdictionally defective.

          2.   The tenants' vacancy lease rent should not have been 
               calculated using a default procedure.  It should have 
               been calculated on the basis of the rent paid by the 
               prior tenant, Winston Velez: $250.00.  If the 
               Administrator had done so, he would have arrived at a 
               rent of $300.00.  The owner further increased the 
               tenants' rent to $315.00 based on "repairs and 
               improvements" made during the vacancy that preceded the 
               tenants' occupancy of this Apartment.  The owner recalls 
               installation of a sink (at a cost which exceeded $300.00) 
               and a double-door refrigerator ("then costing in excess 
               of $300.00").  The owner also alleges that "there were 
               other repairs and improvements made to this apartment at 
               that time."  The owner asserts that the repair bills, 
               which are over nine years old, were destroyed in the 
               normal course of its business; that the Division should 
               take note of the fact that it is not the norm in the real 
               estate industry to keep repair records for such an 
               extended period of time and thus the owner should not be 
               penalized for its failure to produce said bills at this 

          3.   The vacancy lease rent charged the tenants was the 
               correct, legal rent.  Likewise, all subsequent rents, 

          DOC. NO.: CJ 610076-RO

          which were calculated in accordance with the applicable 
               Guidelines, were the correct, legal rents due under each 
               of the tenants' renewal leases.

          4.   The tenants vacated in 1987.  The last month for which 
               they paid rent was June of 1987.

          The tenant's answer opposing the Petition asks that the order of 
          the Rent Administrator be affirmed, and that the Petition be 
          denied.  The tenants also assert that one of them signed the 
          complaint below.  The tenants deny the owner's allegations 
          concerning the installation of improvements in the subject 
          apartment.  The tenants claim that the owner failed to raise the 
          issue of these improvements prior to this appeal.  The tenants 
          further state that the owner has never complied with the Division's 
          request to submit copies of forms DC-2 or R-42.  The tenants claim 
          that a letter dated February 6, 1986, from Walsey Management states 
          that prior to the tenants's occupancy, the apartment was rent 
          controlled and no prior leases exist for it.  The tenants claim 
          that Irving Walsey reiterated that contention and also asserted 
          that the owner could not find any proof of decontrol in the owner's 
          Petition for Administrative Review dated September 2, 1986.  The 
          tenants also cite the owner's June 30, 1988 answer, by its 
          attorneys, and claim that in said answer the owner alleged that the 
          apartment had been occupied by a rent controlled tenant named David 
          Perkins and that it was subsequently occupied by Winston Velez as 
          the first stabilized tenant.  The tenants claim that throughout 
          these proceedings, the owners factual contentions have remained 
          unsubstantiated by documentary evidence.

          The Commissioner is of the opinion that the Petition should be 
          granted in part and the Administrator's order should be modified.

          Section 42A of the former Rent Stabilization Code requires that an 
          owner retain complete records for each stabilized apartment in 
          effect from June 30, 1974 (or the date the apartment became subject 
          to rent stabilization, if later) to date and to produce such 
          records to the DHCR upon demand.

          Section 26-516 of Rent Stabilization Law, effective April 1, 1984, 
          limited an owner's obligation to provide rent records by providing 
          that an owner may not be required to maintain or produce rent 
          records for more than 4 years prior to the most recent 

          DOC. NO.: CJ 610076-RO

          registration, and concomitantly, established a 4 year limitation on 
          the calculation of rent overcharges.

          It has been the DHCR's policy that overcharge complaints filed 
          prior to April 1, 1984 are to be processed pursuant to the law or 
          Code in effect on March 31, 1984.  (See Section 2526.1(a)(4) of the 
          current Rent Stabilization Code.)  The DHCR has therefore applied 
          Section 42A of the former Code to overcharge complaints filed prior 
          to April 1, 1984, requiring complete rent records in these cases.  
          In following this policy, the DHCR has sought to be consistent with 
          the legislative intent of the Omnibus Housing Act (Chapter 403, 
          Laws of 1983), as implemented by the New York City Conciliation and 
          Appeals Board (CAB), the predecessor agency to the DHCR, to 
          determine rent overcharge complaints filed with the CAB prior to 
          April 1, 1984 by applying the law in effect at the time such 
          complaints were filed so as not to deprive such tenants of their 
          right to have the lawful stabilized rent determined from the June 
          30, 1974 base date and so as not to deprive tenants whose 
          overcharge claims accrued more than 4 years prior to April 1, 1984 
          of their right to recover such overcharges.  In such cases, if the 
          owner failed to produce the required rent records, the lawful 
          stabilized rent would be determined pursuant to the default 
          procedure approved by the Court of Appeals in 61 Jane Street 
          Associates v. CAB, 65 N.Y.2d 898, 493 N.Y.S.2d 455 (1985).

          However, it has recently been held in the case of J.R.D. Mgt. v. 
          Eimicke, 148 A.D.2d 610, 539 N.Y.S2d 667 (App. Div. 2d Dep't 1989), 
          motion for leave to reargue or for leave to appeal to the Court of 
          Appeals denied (App. Div. 2d Dep't N.Y.L.J., June 28, 1989, p.25, 
          col.1), motion for leave to appeal to the Court of Appeals denied 
          (Court of Appeals, N.Y.L.J., Nov. 24, col. 4)., motion for leave to 
          reargue denied (Court of Appeals, N.Y.L.J., Feb. 15, 1990, p. 25, 
          col. 1), that the law in effect at the time of the determination of 
          the administrative complaint rather than the law in effect at the 
          time of the filing of the complaint must be applied and that the 
          DHCR could not require an owner to produce more than 4 years of 
          rent records.

          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 

          DOC. NO.: CJ 610076-RO

          of the Omnibus Housing Act.

          Since in the instant case the subject dwelling unit is located in 
          the First Department, the DHCR is not constrained to follow the JRD 
          decision in determining the tenant's overcharge complaint, limiting 
          the requirement for rent records to April 1, 1980.

          As to the owner's contention that the complaint was 
          jurisdictionally defective, the Commissioner notes that the owner's 
          original answer was dated more than four years prior to the date of 
          the instant Petition.  Neither in that answer, nor in the PAR 
          assigned Docket #ARL 13,309-B nor on remand did the owner raise 
          this objection.  Were this indeed a question of jurisdiction, the 
          owner might properly raise it, as it has, for the first time on 
          appeal; but the owner has not really raised a jurisdictional 
          question.  There is no doubt that the CAB and the DHCR had and 
          have, respectively, jurisdiction over the subject matter herein.  
          There is no issue herein but that the complaint was served on the 
          owner; therefore, there is no question of personal jurisdiction.  
          What, in fact, the owner raises is a minor procedural defect.

          What apparently happened was that a clerk, using a two-sided 
          photocopying process, produced a single sheet of paper with a copy 
          of the first page of the subject tenants' complaint on one side and 
          the second page of another tenant's (Emilio Mateo, who apparently 
          has had no connection with the subject building) complaint on the 
          other side.

          This same single sheet was served on the owner as the tenant's 

          The Commissioner finds that this mishap resulted in no prejudice to 
          the owner since the substance of the tenants' complaint and that of 
          Emilio Mateo's were the same: they are both complaints as to a 
          general rent overcharge.   The Commissioner finds that the language 
          in each document was virtually identical to the language in the 

          The Commissioner therefore finds that the owner's objection as to 
          the signature on the document served on it as the tenants' 
          complaint is not within the scope of review on appeal.  Further, 
          the Commissioner finds that were said objection within the scope
          of review, it would be found to be based on a minor procedural 
          defect that in no way prejudiced the owner's right to be apprised 
          of the nature and extent of the claim asserted against it.

          DOC. NO.: CJ 610076-RO

          The Commissioner notes that the Division's records show that the 
          Maximum Base Rent (MBR) order issued January 17, 1974 indicated 
          that the owner had reported that a D. Perkins resided at the 
          subject building as a rent controlled tenant in 1971.  Those 
          records do not contradict, nor do they substantiate, the owner's 
          allegations.  The Commissioner notes that the 1977 rent ledger the 
          owner submitted below does not indicate that D. Perkins vacated in 
          1977.  The Commissioner finds that the owner has failed to specify, 
          let alone establish, the date of decontrol.

          In addition to that deficiency, the rental history herein is 
          incomplete because the owner has failed to substantiate the 
          allegation that Winston Velez took occupancy in 1978.  The owner 
          has submitted neither a lease nor a rent ledger, nor any other 
          evidence, that indicates that Winston Velez took occupancy prior to 
          January 1, 1979.  Having failed to establish the date of decontrol 
          and the date Winston Velez took occupancy, the owner has failed to 
          establish that Winston Velez was the first stabilized tenant to 
          take occupancy following vacancy decontrol.

          The Commissioner therefore finds that an incomplete rental history 
          is all that exists in this record despite the many opportunities 
          afforded this owner to submit a complete rental history.

          Moreover, the Commissioner finds that the allegation that the owner 
          was entitled to a $15.00 rent increase based on improvements 
          installed in the apartment was raised below, on remand, but it has 
          never been substantiated by any evidence throughout these 
          proceedings.  The Commissioner is not aware of any norm in the real 
          estate industry relating to the length of time repair records are 
          kept.  Further, the Commissioner finds that the length of time 
          these proceedings have taken is in good measure due to the owner's 
          lack of diligence in consulting its own records before filing its 
          1984 answer to the complaint; an answer which, in pertinent part, 
          the owner contradicted on remand

          and an answer in which there was no reference to the cost of 
          alleged improvements or a prior stabilized tenant.  The 
          Commissioner finds that the owner may not now seek to be protected 
          from the natural consequencies of its inability to document its 
          allegations when it itself destroyed the alleged records needed to 
          substantiate matters at issue in a pending proceeding.  The 
          Commissioner therefore finds that the owner cannot be credited with 
          an increase for the alleged improvements.

          The Commissioner finds that there is no evidence in the record 

          DOC. NO.: CJ 610076-RO

          below which supports the Administrator's fixing the time the 
          tenants vacated as sometime in July of 1987.  The Commissioner 
          notes that in their answer to the Petition, the tenants did not 
          refute the owner's assertion that the last month for which the 
          tenants paid rent was June of 1987.  Therefore, the Commissioner 
          finds that the order below is incorrect in that the refund the 
          owner is directed to make is excessive to the extent of the 
          overcharges for .95 months plus interest:  $74.08.  The 
          Commissioner thus finds that the order below should be modified
          by reducing the total overcharge to be refunded from $5,808.26 to 

          The Commissioner notes that the Administrator's order, as amended 
          by this order and opinion 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 tenants in the same manner as a judgment.  
          Moreover, in light of the fact that the record herein indicates 
          that the tenants no longer occupy the subject accommodation, a copy 
          of this Order and Opinion is being sent to the present occupant of 
          the subject accommodation.  The Commissioner advises the owner to 
          update the registration statement for the subject accommodation (if 
          it has not already done so) to reflect the change in occupancy and 
          the stabilized rent determined by the Administrator and set forth 
          in this Order and Opinion.

          The Commissioner notes that as a result of this order, the tenants 
          may have received a refund greater than was due to them.  Since the 
          record shows that the tenants have vacated the subject apartment, 
          if there are any arrears due to the owner, these arrears are due 
          and payable upon the owner's billing the tenants therefor following 
          the issuance of this Order and Opinion.


          THEREFORE, pursuant to the Rent Stabilization Law and Code, it is

          ORDERED, that this petition be, and the same hereby is, granted in 
          part, and the Rent Administrator's order be, and the same hereby is 
          amended in accordance with this Order and Opinion.


                                             ELLIOT SANDER
                                             Deputy Commissioner

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