DOC. NO.: CJ 610076-RO
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 ADMINISTRATIVE REVIEW
IN THE MATTER OF THE ADMINISTRATIVE : DOCKET NO. CJ 610076-RO
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
(B-3101166-R)
TENANTS: JAMES and
MARIA MC CULLOUGH
ORDER AND OPINION GRANTING PETITION FOR
ADMINISTRATIVE REVIEW IN PART AND MODIFYING THE
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
decontrol.
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
$146.94.
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
time.
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
complaint.
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
other.
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
$5,734.18.
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.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
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