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                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          APPEALS OF                             DOCKET NO. CK410196RT
                                              :             CK410045RO
          RICHARD & ELLEN BROWN AND              DRO DOCKET NO.L3110617RT
          OMNI MANAGEMENT                        

                                PETITIONERS   : 

               On November 21, 1988 and November 23, 1988, the above-named 
          petitioner-tenant and owner respectively filed Petitions for 
          Administrative Review against an order issued on October 18, 1988, 
          by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New 
          York, concerning the housing accommodations known as 460 East 79th 
          Street, New York, New York, Apartment No. 14B, wherein the Rent 
          Administrator determined that the owner had overcharged the tenant.  
          These petitions are being consolidated for disposition herein.
               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 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 Administrative Appeals are being determined pursuant to the 
          provisions of Section 42A of the Rent Stabilization Code.

               The issue herein is whether the Rent Administrator's order was 

               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 appeals.  

               This proceeding was originally commenced in March, 1984, by the 
          tenants' filing of a rent overcharge and a fair market rent appeal 
          in which the tenants stated that they had first moved to the subject 
          apartment on July 1, 1978 pursuant to a three year lease at a rental 
          of $900.00 per month.

               During the course of the proceeding before the Rent 
          Administrator there were several changes of ownership of the subject 

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          premises.  The prior owners and the owner herein who acquired its 
          interest in the subject premises as managing agent in October, 1987, 
          were served with copies of the tenants' complaint and fair market 
          rent appeal and afforded an opportunity to submit a complete rental 
          history and/or show that the tenants herein were the first rent 
          stabilized tenants.  None of the prior owners nor the owner herein 
          submitted any rental history or other evidence for any rental period 
          prior to July 1, 1978 - the initial occupancy of the tenants herein.  
          In addition, no evidence or contention was made that the tenants 
          herein were in fact the first rent stabilized tenants of the subject 

               In Order Number CDR 34,115, the Rent Administrator determined 
          that due to the owner's failure to submit a complete rental history, 
          a rent overcharge of $39,490.34 had occurred including interest on 
          that portion of the overcharge occurring on and after April 1, 1984.  
          The Rent Administrator further determined that the refund of any 
          overcharge which was collected on or after April 1, 1984 should be 
          the obligation of the present owner.

               In the tenants' petition, the tenants allege in substance that 
          treble damages should have been imposed due to the willful nature of 
          the overcharge and that the current owner should be held liable for 
          the entire overcharge in that said owner did not establish a lack of 
          collusion between it and the former owners.  The tenants also cite 
          the case of Turner v. Spear, N.Y. Law Journal, March 4, 1987 p.3 
          col. 5 (Civ. Ct., N.Y. Co.) in which the court held that a current 
          owner was responsible for refunding overcharges collected before 
          April 1, 1984 by a prior owner.

               In response to the tenants' petition, the owner stated in 
          substance that it did not believe that the tenants' petition was 
          timely filed; that had the DHCR handled the tenants' complaint 
          expeditiously it would have been resolved prior to the owner's 
          acquisition of an interest in the subject premises; and that treble 
          damages should not be imposed against the owner herein because the 
          owner herein made every effort to obtain the rental history from the 
          prior owners but to no avail.

               In the owner's petition, the owner alleges in substance that 
          pursuant to Section 2526.1(a)(2) of the current Rent Stabilization 
          Code, no award of an overcharge may be based upon an overcharge 
          having occurred more than four years before the complaint is filed 
          and that the tenants' overcharge complaint was filed in March, 1984 
          - more than four years after the tenants entered into occupancy in 
          July 1978; that the owner is being punished for DHCR's failure to 
          act on the tenants' complaint in a timely fashion so that it is 
          unjust to impose liability on the owner for any period prior to the 
          time the owner acquired its interest in the subject premises in 
          October, 1987; that since the owner herein did its best to produce 
          a rental history it cannot be said that the owner herein defaulted; 

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          that the default formula should not have utilized the rent of 
          apartment 7B (the lowest rent for similar size apartments) in 
          determining the rent of the subject apartment since the rent for 
          apartment 7B is significantly lower than the rents of any other "B" 
          line apartments although "it would be pure speculation to theorize 
          as to the reason for this variance"; that the removal of a wall in 
          one of the bedrooms of the subject apartment should have been taken 
          into account; that the fair market rent of the subject apartment 
          should have been calculated since the tenant filed a fair market 
          rent appeal; that the owner herein is merely the managing agent and 
          not the owner in fact and that there is no evidence that the owner 
          in fact was ever served with a copy of the tenants' complaint.

               In answer to the owner's petition, the tenants restated the 
          allegations made in their own petition; and further stated that the 
          owner produced no evidence to show it had no relationship with any 
          prior owner; that the owner should have realized that the rent 
          collected from the tenants herein was excessive because it 
          substantially exceeded the rents of all other "B" line apartments 
          and because when it acquired ownership, the tenants had long since 
          filed their overcharge complaint; and that the rent of apartment 7B 
          was correctly utilized to set the rent of the subject apartment.  
          The tenants further stated that they now had purchased the subject 
          apartment as a condominium.

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

               At the outset, the evidence of record does not establish that 
          the tenants' petition was not timely filed.  The tenants' petition 
          is dated November 21, 1988 (timely) and there is no DHCR date stamp 
          or postmarked envelope showing a later date. Accordingly, the 
          petition is accepted as timely filed.

               Turning to the merits, Section 42A of the Rent Stabilization 
          Code requires that an owner retain complete records for each 
          stabilized apartment 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 evidence of the apartment's date of decontrol and 
          submit a rental history from that date.

               Section 2526.1(f) of the current Rent Stabilization Code 
          provides in pertinent part that for overcharges collected prior to 
          April 1, 1984, an owner will be held responsible only for his or her 
          portion of the overcharge, in the absence of collusion or any 
          relationship between such owner and any prior owners, and 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 collected by any prior 


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               Section 2526.1 of the current Rent Stabilization Code provides 
          in pertinent part that any owner who is found by the DHCR to have 
          collected a rent or other consideration in excess of the legal 
          regulated rent on and after April 1, 1984 shall be ordered to pay to 
          the tenant a penalty equal to three times the amount of such excess.  
          If the owner establishes by a preponderance of the evidence that the 
          overcharge was not willful, the DHCR shall establish the penalty as 
          the amount of the overcharge plus interest from the date of the 
          first overcharge on or after April 1, 1984.

               In the instant case, the tenants' contention on appeal that 
          treble damages are warranted is correct.  An owner is responsible 
          for obtaining an accurate rental history upon acquiring an interest 
          in a building.  The owner herein has not submitted any evidence to 
          show that the overcharge was not willful in accordance with Section 
          2526.1 of the Rent Stabilization Code.  The tenants' contention that 
          the owner herein should be responsible for the entire overcharge is 
          without merit.  Pursuant to Section 2526.1(f) of the current Rent 
          Stabilization Code, the owner herein is not responsible for 
          overcharges prior to April 1, 1984.  It is noted that the tenants 
          have submitted no evidence to show that there was any relationship 
          between the owner herein and any prior owners.  The  Turner case 
          cited by the tenants in their petition was applicable to a case 
          involving an owner who took title to a building after a Rent 
          Administrator's order had already been issued finding a rent 
          overcharge and can clearly be distinguished from the instant 
          proceeding where the owner herein acquired its interest as managing 
          agent before any order had been issued finding a rent overcharge.

               Taking the above factors into account, the Commissioner has 
          recalculated the amount of the overcharge including treble damages 
          on the overcharge occurring on and after April 1, 1984.  The total 
          overcharge including treble damages but excluding excess security 
          since the tenants have purchased the subject apartment as a 
          condominium, is $73,783.44.  The prior owner who owned the subject 
          premises from July 1, 1978 to April 1, 1984 is individually 
          responsible for overcharges totalling $19,561.32; the prior owners 
          and the owner herein are jointly and severally liable for 
          overcharges collected between April 1, 1984 and October 30, 1987 or 
          $42,875.76; and the owner herein is individually responsible for 
          overcharges collected between November 1, 1987 and September 30, 
          1988 or $11,346.36.  Thus the owner herein is responsible for a 
          total overcharge of $54,222.12 ($42,875.76 plus $11,346.36).  This 
          order is issued without prejudice to any action the owner herein may 
          have against any prior owner for the refund of overcharges paid by 
          the tenants to said prior owner.

               With regard to the owner's contention that pursuant to Section 
          2526.1(a)(2) of the current Rent Stabilization Code that no award of 

          an overcharge may be based upon an overcharge occurring more than 
          four years before the complaint is filed, it is noted that such 
          section deals only with complaints filed on and after April 1, 1984 

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          whereas the complaint herein was filed prior to April 1, 1984.  
          Moreover pursuant to the decision in Lavanant v. DHCR, 148 A.D.2d 
          185, 544 N.Y.S. 2d 331 (App. Div. 1st Dept. 1989), for complaints 
          filed in the First Department prior to April 1, 1984 such as the 
          proceeding herein, the DHCR may properly require an owner to submit 
          complete rent records rather than records for just four years.

               The owner's contention that it is being punished for the DHCR's 
          failure to act in a timely fashion is without merit.  There is no 
          time limitation for the processing of complaints before the Rent 
          Administrator.  Moreover in this proceeding a significant amount of 
          time was needed for processing due to the several changes in 
          ownership which occurred and the need to ensure adequate due process 
          for all owners.  Also the owner herein received adequate notice of 
          the proceeding and a chance to secure the rental history from prior 
          owners.  Further it was proper for the Rent Administrator in 
          accordance with established default procedures to utilize the lowest 
          rent of the same size apartment in the subject premises to establish 
          the lawful stabilized rent of the subject apartment.  The owner has 
          not submitted any evidence to show that the rent of the apartment 
          used was a preferential rent or should not have been used for some 
          other reason.  The fact that a wall was removed from a bedroom of 
          the subject apartment does not significantly change the subject 
          apartment so that another method of determining the rent should have 
          been utilized.  Further neither the owner herein nor any of the 
          prior owners submitted any evidence, although given an opportunity 
          to do so, to show that the tenants herein were the first stabilized 
          tenants or that a prior tenant had not received the required initial 
          legal regulated rent notice entitling the tenants herein to file a 
          fair market rent appeal.  Rather all owners defaulted so it was 
          proper to process the tenants' complaint as one of rent overcharge 
          rather than to determine a fair market rent.  Finally, it is noted 
          that a managing agent as one to whom rent payments are made is 
          considered an owner responsible for the refund of rent overcharges 
          pursuant to the Rent Stabilization Law and Code.  There is no 
          requirement that the actual fee owner be served with a copy of the 
          tenants' complaint.

               The Commissioner has determined in this Order and Opinion that 
          the owner herein collected overcharges of $54,222.12.  This Order 
          may, upon expiration of the period for seeking review of this Order 
          and Opinion pursuant to Article Seventy-eight of the Civil Practice 
          Law and Rules, be filed and enforced as a judgment  Where the tenant 
          files this Order as a judgment, the County Clerk may add to the 
          overcharge, interest at the rate payable on a judgment pursuant to 
          Section 5004 of the Civil Practice Law and Rules from the issuance 
          date of the Rent Administrator's Order to the issuance date of the 
          Commissioner's Order.

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

               ORDERED, that the tenants' petition for administrative review 

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          be, and the same hereby is, granted in part, that the owner's 
          petition for administrative review be, and the same hereby is, 
          denied and, that the order of the Rent Administrator be, and the 
          same hereby is, modified in accordance with this order and opinion.


                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner



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