CL510028RO
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 NO.CL510028RO
: DRO DOCKET NO.U3123256RT
MARK GREENBERG REAL ESTATE CO., INC. TENANT: ROSA FELIX
PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW IN
PART
On December 15, 1988, the above-named petitioner-owner filed a
Petition for Administrative Review against an order issued on
November 30, 1988, by the Rent Administrator, 10 Columbus Circle,New
York, New York, concerning the housing accommodations known as 500
West 111th Street, New York, New York, Apartment No. 1D, wherein the
Rent Administrator determined the fair market rent pursuant to the
special fair market rent guideline promulgated by the New York City
Rent Guidelines Board for use in calculating fair market rent
appeals.
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 Appeal is being determined pursuant to the
provisions of Section 26-513 of the Rent Stabilization Law.
The issue herein is whether the Rent Administrator's order was
warranted.
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 commenced by the tenant's filing of a fair
market rent adjustment application in February, 1984. In such
application, the tenant stated that she first moved to the subject
apartment in June, 1976 pursuant to a two year lease at a rental of
$300.00 per month.
The owner was served with a copy of the tenant's complaint and
afforded an opportunity to submit June 30, 1974 or post June 30,
1974 comparability data. In response, the owner submitted a rental
history for the subject apartment and advised that the tenant had
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purchased her apartment as a cooperative. The owner also submitted
June 30, 1974 comparability data for all apartments in the subject
line, but advised that all apartments in the line were either rent
controlled on June 30, 1974 or it did not know the rent for the said
apartments. No other comparability data was submitted.
During the course of the proceeding, evidence was submitted
showing that the tenant's daughter and son in law purchased the
subject apartment on February 22, 1988.
In Order Number CDR 34,307, the Rent Administrator adjusted the
initial legal regulated rent by establishing a fair market rent of
$259.75 effective June 15, 1976, the commencement date of the
initial rent stabilized lease. The Rent Administrator also
directed that the owner refund excess rent of $16,104.63 to the
tenant which concerned the period from June 15, 1976 through June
30, 1987.
In this petition, the owner alleges in substance that the
initial legal regulated rent should have been set at $300.00 as
provided in the initial lease since the owner provided all requested
and necessary documents relating to the fair market rent appeal;
that in the event that the initial legal regulated rent remains at
$259.75, the amount of excess rent was miscalculated in that the
Rent Administrator determined 82 months of excess rent during the
period from July 1, 1978 to June 30, 1981 whereas there are only 36
months during said period; that the Rent Administrator determined 51
months of excess rent during the period from July 1, 1982 to June
30, 1985 whereas there are only 36 months during said period; and
that the lawful rent effective July 1, 1981 should have been based
on the prior rent of $291.24 and not the prior rent of $281.83 as
was done by the Rent Administrator and that this affects future rent
calculations as well.
In response to the owner's petition, the tenant stated in
substance that apparently some months beyond the lease terms were
included in the calculations, but that the amount of the excess rent
payments should not be reduced but increased since treble damages
are warranted in that the owner willfully overcharged. Further the
tenant stated that the amount of excess rent should be updated up to
March 1988 when the subject apartment was purchased as a
cooperative.
In an answer to the tenant's response filed on March 1, 1989,
the owner stated in substance that the overcharge was not willful,
that any refund should be limited to four years in accordance with
Section 2526.1(a)(2) of the Rent Stabilization Code and that in any
event, the owner herein should not be held liable for any
overcharges occurring prior to its purchase of the subject premises.
The Commissioner is of the opinion that this petition should be
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granted in part.
Section 26-513 of the Rent Stabilization Law provides in
pertinent part that fair market rent adjustment applications are to
be determined by the use of special fair market rent guidelines
orders promulgated by the New York City Rent Guidelines Board and by
the rents generally prevailing in the same area for substantially
similar housing accommodations. In order to determine rents
generally prevailing in the same area for substantially similar
housing accommodations, it is DHCR's procedure for fair market rent
appeal cases filed prior to April 1, 1984 to allow owners to submit
June 30, 1974 fair market rent data for complete lines of
apartments, beginning with the subject line. The average of such
comparable rentals will then be updated by annual guidelines
increases. Alternatively, DHCR procedure allows owners to have
comparability determined on the basis of rents charged after June
30, 1974. In order to use this method, owners were required prior
to November 1, 1984 to submit rental history data for all stabilized
apartments in the subject premises and subsequent to November 1,
1984 to submit such data for complete lines of apartments beginning
with the subject line. Post June 30, 1974 rent data will be
utilized if the comparable apartment was rented to a first
stabilized tenant within one year of the renting of the subject
apartment and if the owner submits proof of service of a DC-2 Notice
or apartment registration form indicating that the rent is not
subject to challenge.
In the instant case, contrary to the owner's contention on
appeal, it did not submit any documentary evidence to establish a
fair market rent of $300.00. It did not submit usable comparability
data in that none of the apartments submitted listed a June 30, 1974
rent stabilized rent. The owner did not submit any post June 30.
1974 comparability data. Accordingly, the initial legal regulated
rent was correctly set at $259.75 - the 1974 maximum base rent of
$212.04 increased by 22 1/2% pursuant to Special Guidelines Order
Number 7.
Further, the owner is not correct in its contention that the
July 1, 1981 rent should have been based on a prior rent of $291.24.
Such prior rent included temporary fuel surcharges of $1.41 and
$8.00 which do not become part of the base rent and were terminated
at the expiration of the last lease - that is as of June 30, 1981.
Subtracting out these temporary fuel surcharges gives the figure of
$281.83 which the Rent Administrator correctly used as the prior
rent on which to base the July 1, 1981 lawful stabilization rent.
The owner is correct in its contentions that the amount of
excess rent was miscalculated as 82 months rather than 36 months
during the period from July 1, 1978 to June 30, 1981 and
miscalculated as 51 months rather than 36 months during the period
from July 1, 1982 to June 30, 1985. Recalculating these periods of
excess rent correctly gives a total excess rent during the period
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from June 15, 1976 through June 30, 1987 of $10,766.76 (excluding
excess security since the subject apartment was purchased by the
tenant's family) rather than the total amount of $16,104.63 as
determined by the Rent Administrator. The Rent Administrator's
order is hereby modified to reflect this finding.
With regard to the owner's contention that the excess rent
awarded should have been limited to four years, it is noted that the
section of the Rent Stabilization Code cited by the owner is
applicable only to overcharge proceedings and not to fair market
rent appeals. Section 26-513 of the Rent Stabilization Law, which
deals with fair market rent appeals, continues to provide for
determination of the fair market rent from the date of the initial
stabilized tenancy. With regard to the owner's contention made for
the first time in its reply to the tenant's answer that the amount
of the excess rent it has to repay should be limited to the time it
owned the subject premises, it is noted that this was not part of
the owner's original petition and cannot properly be considered on
the merits. Moreover, the owner has submitted no evidence showing
exactly when it acquired the subject premises. However, this order
is issued without prejudice to any action the owner may have against
any prior owner for the return of excess rent the tenant may have
paid to said prior owner.
The tenant's contention that the imposition of treble damages
was warranted cannot properly be considered since the tenant did not
file a petition for administrative review of her own. In addition
such relief would not be warranted. Section 2526.1 of the current
Rent Stabilization Code provides that any owner found to have
collected an overcharge above the authorized rent shall be liable
for a penalty equal to three times the amount of such overcharge but
that if the owner established 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. Further
treble damages may not be based upon an overcharge having occurred
more than two years before the complaint is filed or upon an
overcharge which occurred prior to April 1, 1984. This section does
not apply to fair market rent appeals. Pursuant to Section 26-
512(b)(2) of the Rent Stabilization Law, for apartments which are
removed from rent control and become subject to the Rent
Stabilization Law by virtue of a vacancy occurring after June 30,
1974, the owner is permitted to charge an initial fair market rent
as "agreed to by the landlord and the tenant", subject to the
tenant's right to challenge the initial rent as exceeding the fair
market rent. If the tenant does not challenge the initial rent, it
becomes the legal base rent. If the tenant challenges the initial
rent, a determination may be made that the tenant's initial rent
exceeds the proper fair market rent for the apartment. In such
case, the owner is required to give the tenant a refund or credit
for the amount collected in excess of the fair market rent.
However, such determination that the initial rent exceeds the fair
market rent is considered in the nature of a rent adjustment rather
than a rent overcharge and thus the imposition of treble damages
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and/or interest is not warranted. It is noted that rent overcharge
proceedings where treble damages may be imposed generally involve
cases where an initial legal regulated rent (fair market rent) is
already established and an owner willfully charges rents higher than
permitted by the Rent Guidelines Board upon subsequent renewal
leases or refuses to submit a complete rental history thus leading
to the conclusion that rent overcharges occurred. In addition
Section 2526.1(g) of the current Rent Stabilization Code provides
that "[t]he provisions of this section [Section 2526.1, concerning
overcharge penalties and assessment of costs] shall not apply to a
proceeding pursuant to Section 2522.3 of this Title (Fair Market
Rent Appeal)."
With regard to the tenant's contention in her answer that the
amount of excess rent should be updated up to March, 1988, when the
subject apartment was purchased, it is noted that this contention
cannot properly be considered since the tenant did not file a
petition for administrative review of her own.
In the event the owner does not take appropriate action to
comply with this order within sixty (60) days from the date of
issuance of this order, the tenant may seek to enforce this order by
filing an appropriate action in a court of competent jurisdiction.
THEREFORE, in accordance with the provisions of the Rent
Stabilization Law and Code, it is
ORDERED, that this petition for administrative review be, and
the same hereby is, granted in part, and, that the order of the Rent
Administrator be, and the same hereby is, modified in accordance
with this order and opinion. The total excess rent owed to the
tenant is $10,766.76.
ISSUED
JOSEPH A. D'AGOSTA
Deputy Commissioner
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