CA410126RO
                             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 
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO. CA410126RO

          Ridge Development Inc.          :  DISTRICT RENT ADMINISTRATOR'S
                                             DOCKET NO. 38265
                                            
                                             TENANT: Barbara Abramson    

                            PETITIONER    : 
      ------------------------------------X                             

           ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW

      On January 15, 1988, the above-named petitioner-owner filed a petition 
      for administrative review of an order issued on December 16, 1987 by a 
      Rent Administrator, 92-31 Union Hall Street, Jamaica, New York, 
      concerning the housing accommodations known as 237 East 24th Street, New 
      York, New York, Apartment No. 2R, wherein the Rent Administrator 
      determined that the owner had overcharged the tenant.

      The Administrative Appeal is being determined pursuant to the provisions 
      of Section 2526.1 of the Rent Stabilization Code.

      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 an objection to 
      the initial apartment rent/services registration alleging overcharge.  
      The tenant stated that she first moved to the subject apartment in July, 
      1984 at a rental of $519.42 per month.

      The prior and current owners were sent copies of the tenant's complaint, 
      and were requested to provide all leases in effect on April 1, 1980 and 
      subsequent thereto.  In response, the current owner provided the 
      requested leases, plus a rental history from October 1, 1981 through 
      July 10, 1985.  The owner stated, among other things, that he was unable 
      to provide substantiating bills or cancelled checks for alleged 
      improvements made to the apartment, as the documents had not been 
      transferred to him upon his purchase of the building in October, 1986, 
      and the former landlord is now deceased.

      In Order Number 38265, the Rent Administrator determined that the owner 
      had collected an overcharge totalling $3,439.44, including excess 
      security and treble damages.

      In this petition, the owner contends in substance that treble damages 
      should not be assessed, alleging that; 








          CA410126RO


      -    the initial overcharge was committed by a prior landlord, now 
           deceased;

      -    the overcharges were not willful, by inadvertent miscalculations;

      -    a portion of the overcharge was error caused by the complexity of 
           Guidelines Order No. 15;

      -    a portion of the overcharge resulted from application of a 
           Guideline increase to the rent increased by a services adjustment;

      -    a portion of the overcharge was due to typographical errors in the 
           1978 lease.

      Lastly, the owner questions the constitutionality of Section 2526.1 of 
      the Rent stabilization Code, attacking the presumption of willfulness as 
      well as the placing of responsibility on the current owner for 
      overcharges collected by a prior owner.

      The tenant responds, among other things, that it is the duty of the 
      landlord to prove lack of willfulness; that a purchaser is imputed with 
      the knowledge of all claims and conditions affecting a building at the 
      time of taking (title); and that the original determination of the 
      Administrator should be allowed to stand.

      The  Commissioner is of the opinion that this petition for should be 
      denied.

      With regard to the owner's contention that the initial overcharge was 
      committed by a prior landlord, and that accordingly, it should not be 
      assessed treble damages, Section 2526.1 of the Rent Stabilization Code 
      provides, in pertinent part, that for the overcharge complaints filed or 
      overcharges collected on or after April 1, 1984, a current owner shall 
      be responsible for all overcharges collected by any prior owner, and 
      that an owner who is found to have overcharged is liable to the tenant 
      for three times the amount of the overcharge, unless the owner 
      establishes by a preponderance of the evidence that the overcharge was 
      not willful.  An owner who acquires a building has an independent duty 
      pursuant to Section 2523.7 of the Rent Stabilization Code to ascertain 
      that the rents it collects are lawful ones.  Thus it is incumbent upon 
      a new owner to obtain the requisite rental histories when taking title 
      to a building.  Because the owner has not presented adequate evidence to  
      justify the rents it charged the tenants, the Commissioner is of the 
      opinion that the owner has not rebutted the presumption that the 
      overcharges were willful, and that the Administrator was warranted in 
      applying the penalties for willful overcharges.  An owner is obligated 
      to maintain the required rental history.  Kama Associates v. DHCR, No. 
      1281/87 (N.Y Sup. Ct., April 14, 1987, Evans, J.), aff'd mem ., 43 
      A.D.2d 1075, 533 N.Y.S.2d 335 (N.Y. City Civ. Ct. 1987); Coronet 
      Properties v. DHCR, NYLJ, 11/26/86, at 11, col. 4, affd, 134 A.D.2d 697, 
      520 N.Y.S. 2d 692 (1st Dept. 1987); Endeavor Property Holdings, N.V. v. 
      C.A.B., 116 Misc. 2d 541, 455 N.Y.S. 2d 697.

      Further, the Commissioner notes that a new owner steps into the shoes of 
      the prior owner and is bound by the misfeasance of its predecessor-in- 
      interest.  Charles H. Greenthal Co. v. DHCR, 484 N.Y.S. 2d 445 (Sup. 
      1984), Turner v. Spear, 134 misc. 2d 733, 512 N.Y.S.2d 335 (N.Y. City 


          CA410126RO


      Civ. Ct. 1987); Simon v. Elkson, NYLJ, 4/26/76, at 6, col. 1 (App. Term, 
      1st Jud. Dept.).

      Concerning the contentions of the owner that portions of the overcharge 
      resulted from the complexity of Guidelines Order No. 15, and the 
      Akselrad case offered in support of the assessment of interest, rather 
      than treble damages, the Division follows the policies enumerated in 
      Policy Statement No. 89-2, issued February 27, 1989, which lists the 
      specific errors that may be termed "hypertechnical", and which justify 
      relief from treble damages.  Errors in calculations under Guidelines 
      Order No. 15, while very specific and requiring care in computing do not 
      fall within the purview of hypertechnical errors; therefore, treble 
      damages are assessable.

      The owner is correct in its assertion that a hypertechnical error 
      occurred when it computed the rent guidelines increase for the lease 
      commencing July 11, 1984, including in the September 30, 1984 base rent 
      the supplementary adjustment for new equipment.  However, the resultant 
      overcharge stemming from this hypertechnical error represents a small 
      fraction of the total overcharge; accordingly, the assessment of the 
      treble damages penalty was not improper.

      Regarding the owner's contention that the overcharges were not willful, 
      but inadvertent miscalculations, the above-cited policy statement, No. 
      89-2 states, in pertinent part, that the Rent Stabilization Law creates 
      a presumption of willfulness subject to rebuttal by the owner showing 
      non-willfulness of the overcharge by a preponderance of the evidence.  
      The Commissioner is of the opinion that the burden of proof has not been 
      met by the owner, and that accordingly, treble damages should be 
      assessed.

      Regarding the owner's assertion that Section 2526.1 of the Rent 
      Stabilization Code is unconstitutional, and constitutes illegal taking, 
      the general constitutionality of rent regulatory schemes has been upheld 
      by the courts on numerous occasions.  In teeval co. v. Stern, 301 NY 
      346, cert, den., 340 U.S. 876 (1950), the Court held that rent control 
      (a stricter form of rent regulation than rent stabilization) was not a 
      taking and not an arbitrary use of the police power, even if it might 
      sometimes compel an owner to operate his real property at a loss.  See 
      also Bowles v. Willingham, 321 U.S. 503 (1944).

      Although notice of the tenants' complaint may not have been served on 
      the landlord until approximately three years after the complaint was 
      filed, this does not alter the fact that the landlord should have been 
      aware when it acquired the subject building that it might be called upon 
      at some point to produce rental histories for various apartments.  In 
      the instant proceeding this is especially true, since the open 
      proceeding had been under consideration since October, 1984, and the 
      owner purchased the building in November, 1986.

      This Order and Opinion is issued without prejudice to any rights that 
      the present owner may have against previous owners.

      The owner is directed to reflect the findings and determinations made in 
      this order on all future registration statements, including those for 
      the current year if not already filed, citing this order as the basis 
      for the change.  Registration statements already on file, however, 







          CA410126RO


      should not be amended to reflect the findings and determinations made in 
      this order.  The owner is further directed to adjust subsequent rents to 
      an amount no greater than that determined by this order plus any lawful 
      increases.
           
      The Commissioner has determined in this Order and Opinion that the owner 
      collected overcharges of $3,439.44.  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 or not in excess of twenty percent per month of 
      the overcharge may be offset against any rent thereafter due the owner.  
      Where the tenant credits the overcharge, the tenant may add to the 
      overcharge, or 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 this petition for administrative review be, and the same 
      hereby is, denied, and, that the order of the Rent Administrator's order 
      be, and the same hereby is, affirmed.

      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner
    

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