Docket No.: DA 410104-RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          APPEAL OF                              DOCKET NO.: DA 410104-RO
            MURRAY SCHACTMAN,                    DRO DOCKET NO.: TC-081124-G  
            ARTICLE 7-A ADMINISTRATOR,                           CDR 34375

                                                 TENANT: Roger Friedman

                                                 OWNER:  H.O. Realty Corp.,
                              PETITIONER          c/o Maurice Abelson


          On January 11, 1989 the above-named petitioner filed a Petition for 
          Administrative Review against an order issued on December 16,  1988
          by the Rent Administrator, 10 Columbus Circle, New York,  New  York
          concerning housing accommodations known as Apartment 19 at 66  West
          10th  Street,  New  York,  New  York  wherein  the  District   Rent
          Administrator determined that the tenant had been overcharged.

          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
          provision  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  issue  in  this  appeal   is   whether   the   District   Rent
          Administrator's order was warranted.

          The applicable sections of the Law are Section 26-516 of  the  Rent
          Stabilization Law and  Sections  2520.6(i)  and  2526.1(a)  of  the
          current Rent Stabilization Code.

          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 originally commenced by the filing in  January,
          1984 of a rent overcharge complaint by  the  tenant,  in  which  he
          stated that he had commenced occupancy on September 1, 1983 at a 

          Docket No.: DA 410104-RO

          rent of $350.00 per month.  While he named Maurice Abelson  as  the
          owner, his lease was made with Murray Schactman, 7-A Administrator.

          Mr. Schactman was served with a  copy  of  the  complaint  and  was
          requested to submit rent records to prove  the  lawfulness  of  the
          rent being charged.  In answer to the complaint, he stated that the 
          base date was May 1, 1975, but submitted leases only from 1980.  

          In  an  order  issued  on  December  16,  1988  the  District  Rent
          Administrator, using DHCR default procedures, determined  that  the
          tenant had been overcharged in the amount of $861.43 as of December 
          31, 1988, and directed the owner to refund such overcharge  to  the
          tenant as well as to reduce the rent.  The order named  H-O  Realty
          Corp. c/o Maurice Ableson as owner  and  Murray  Schactman  as  7-A

          In this  petition,  the  petitioner  -  Article  7-A  Administrator
          contends in substance that:

               1)  He was appointed as 7-A Administrator for the  subject
               building by a Housing Judge of the Civil Court on  May  2,

               2)  The Division has no  jurisdiction  to  order  the  7-A
               Administrator to refund monies  from  his  "administrative
               fund" to the tenant, as he is not  an  "owner"  under  the
               Rent Stabilization Code and as the Order and  Judgment  of
               the Civil Court which resulted in the appointment of  such
               Administrator states, in pertinent part, that such  rental
               monies "shall be used, subject to the  Court's  direction,
               ... to  remedy...  violations  of  record  placed  by  any
               Office of  the  Department  of  Housing  Preservation  and
               Development (HPD)... and any other conditions as  required
               or authorized by law".   As  a  result,  the  only  proper
               authority to  order  rental  overcharge  payments  to  the
               tenant is the judge who appointed the Administrator.

               3)  The purpose of the appointment of a 7-A  Administrator
               is to assure that when the Court has found that  dangerous
               and hazardous conditions exist in a building that all  the
               income from the premises is used to  abate  those  serious
               conditions before funds are diverted for  other  purposes,
               such as refunding monies pursuant to  a  rent  overcharge.
               The Division Order thus impermissibly frustrates  the  7-A
               Administrator's ability to preserve the rental  income  of
               the  subject  building  to  make   court-ordered   crucial

               4)  To compel the 7-A Administrator to  pay  thousands  of
               dollars  as  a  consequence  of   complaints   of   rental
               overcharges results in depleting  and  wasting  the  funds
               allocated for maintenance and repair of the building  -  a


          Docket No.: DA 410104-RO

               function which the Administrator is duty bound to  perform
               (see Real Property  Action  and  Proceedings  Law  Section
               778).  The Division's Order  cripples  the  activities  of
               the 7-A Administrator by depriving him of additional  rent
               payments  and,  based  thereon,   promotes   the   further
               deterioration of the subject building.

               5)  The  owner  of  the  subject  building,  not  the  7-A
               Administrator, is responsible for all rent overcharges  in
               the  subject  building.   The  proper  procedure  in   the
               instant matter would be  to  defer  payment  of  the  rent
               overcharge amount until the period of administration  ends
               and the owner has possession of the building.  Or, in  the
               alternative, the affected tenant  or  the  Division  could
               make  an  application   to   the   Civil   Court   for   a
               determination  by  the  judge  who   appointed   the   7-A
               Administrator to  ascertain  whether  the  Administrator's
               funds  are  presently  adequate  to  make  such   payment,
               without  conflicting  with  the  very  purpose  of   RPAPL
               Section 778, the preservation and  rehabilitation  of  the

          In  answer,  the  tenant  asserts  in  substance   that   the   7-A
          Administrator set his original  rent  and  should  have  to  refund
          overcharges, and that the 7-A Administrator has not been making any 
          major improvements with the rent money he has collected.

          The Commissioner is of the opinion that  this  petition  should  be
          denied, and that the District Rent Administrator's order should  be

          Section 2520.6(i) of the Rent Stabilization Code defines an  owner,
          in pertinent part, as a "person or entity receiving or entitled  to
          receive  rent  for  the  use   or   occupation   of   any   housing
          accommodation, or an agent" of the owner.  In the  instant  matter,
          it is  uncontroverted  that  the  7-A  Administrator  receives  the
          monthly rents  from  the  tenants  of  the  subject  building.   In
          addition, such Administrator by law must remit to  the  owner  H.O.
          Realty any monies received from the tenants that exceed the cost of 
          building-wide rehabilitative and repair  work,  real  property  tax
          liens and payment for the Administrator's services [see RPAPL Sect. 
          778, subd.  1(e)].   The  Commissioner  also  notes  that  the  7-A
          Administrator has an interest in the rents that he receives in  the
          form of the fee he collects which is  based  on  the  monthly  rent
          roll.  Therefore the  Commissioner  finds  that  the  petitioner-7A
          Administrator is considered the owner of the  subject  building  as
          that term is defined in  Section  2520.6(i)  of  the  Code.   Based
          thereon, the Commissioner further finds without merit the 7-A 

          Docket No.: DA 410104-RO

          Administrator's contention that the Agency is without  jurisdiction
          in this matter.  

          The Commissioner finds without  merit  the  petitioner's  assertion
          that  all  income  from  the  subject  building  must  be  used  to
          rehabilitate the  existing  structure  before  such  funds  may  be
          "diverted" to, for example, rent overcharge refunds to tenants  who
          have been remitting a rent in excess of stabilized guidelines.  The 
          Commissioner notes  that  this  position  in  effect  discriminates
          against tenants by forcing them to subsidize the cost of their  own
          housing (see  Dept.  of  Housing  Preserv.  Dev.   v.  Sartor,  487
          N.Y.S.2nd 1 [A.D. 1st Dept. 1985]) by compelling tenants to pay for 
          housing at a rent that is unlawful.

          Concerning the petitioner's  contention  that  deprivation  of  the
          additional rental payments  cripples  the  activities  of  the  7-A
          Administrator the Commissioner finds that a tenant, pursuant to the 
          Rent Stabilization Code and the Emergency Tenant Protection Act, is 
          not required to remit rent in excess of lawful  stabilized  amounts
          even if the 7-A Administrator funds would thereby be  reduced.   To
          determine otherwise  would  destroy  the  very  foundation  of  the
          stabilization system which was created "to insure that the level of 
          rent adjustments authorized under (the EPTA) will not be  subverted
          and made ineffective" [see Century Operating Corp. v. Marrero,  425
          N.Y.S. 2d 464, 465; Section 10 of Chapter 576 of the Laws  of  1974

          Finally, the Commissioner rejects the petitioner's suggestion  that
          the payment of rent overcharge amounts  to  the  tenant  should  be
          deferred until the owner, H.O. Realty, reassumes control  over  the
          subject building or in the alternative, that  the  Division  should
          make application to the Civil Court for permission to attach the 
          7-A Administrator's funds.  As hereinabove stated, a tenant is  not
          required to remit an unlawful rent.  Moreover, as the condition  of
          the subject building is in no way the fault  of  the  tenant,  such
          tenant should not be required to subsidize  the  rehabilitation  of
          this building at an illegal rent.

          While the petitioner has cited a number of court cases  in  support
          of his contentions, he has neglected to mention Schactman v.  State
          Division of Housing and Community Renewal, 531 N.Y.S. 2d 804  (App.
          Div. 1st Dept., 1988), motion for leave to appeal to the  Court  of
          Appeals denied, 540  N.Y.S.  2d  238.   That  case,  significantly,
          involved the petitioner  and  concerned  the  same  issue  of  rent
          overcharge at another  apartment  in  the  subject  building.   The
          Commissioner's order in the proceeding (Docket No. ARL 01824-K) had 
          found that the 7-A Administrator was  an  "owner"  under  the  Rent
          Stabilization Code; that the tenant was not  required  to  remit  a
          rent in excess of the lawful rent; and that the tenant  should  not
          have to wait and collect the refund of overcharges from the  actual
          owner, although the refund she could collect from the 7-A 

          Docket No.: DA 410104-RO

          Administrator was limited to the overcharges actually collected  by
          him.  The trial court upheld the order except to the extent that it 
          remanded the matter for a determination as to whether the  building
          owner was financially able to refund  the  overcharges  and  as  to
          whether the amount of overcharge should be  offset  against  future
          rents in the event that the  building  owner  was  not  financially
          sound.  The Appellate Division reversed the trial court and  upheld
          the Commissioner's order as having a rational basis.

          The Commissioner notes that the Appellate  Division  proceeding  in
          Schactman involved an  apartment  in  the  subject  building  whose
          tenants  had  been  in  occupancy  prior  to  the  time   the   7-A
          Administrator took over  management  responsibilities.   A  default
          rent was set by the Rent Administrator, and the  7-A  Administrator
          was held liable for those overcharges which he had collected.   The
          owner was held  responsible  only  for  overcharges  which  it  had
          actually collected.  In  the  present  case  the  complainant,  who
          commenced occupancy four months after the 7-A  Administrator  began
          administering the building, paid all of  his  rent  monies  to  the
          petitioner.  The 7-A Administrator is therefore solely  responsible
          for the overcharges determined by the District Rent Administrator's 

          Based upon this order the tenant may, upon the  expiration  of  the
          period in which the owner may institute a  proceeding  pursuant  to
          Article seventy-eight of the civil practice law and rules, offset  
          not in excess of twenty percent thereof per month of the overcharge 
          award against any rent thereafter due the owner.  For  the  purpose
          of this paragraph the  term  "owner"  is  taken  to  mean  the  7-A
          Administrator, Murray Schactman.

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

          ORDERED, that this petition be, and the same hereby is, denied  and
          that the District Rent  Administrator's  order  be,  and  the  same
          hereby is, modified in accordance with this order and opinion.  The 
          total overcharge, including excess security of $13.41,  is  $861.43
          as of December 31, 1988.


                                          ELLIOT SANDER
                                          Deputy Commissioner

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