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

          APPEAL OF                              DOCKET NO.CL510028RO
                                              :  DRO DOCKET NO.U3123256RT
                                PETITIONER    : 

               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 
               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 

               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 


          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 

               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 


          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 


          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 


          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.


                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner




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