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
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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 :
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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;
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- 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
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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,
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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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