Docket No.: DA 410104-RO
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.: 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
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
AND MODIFYING RENT ADMINISTRATOR'S ORDER
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
Administrator.
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,
1983.
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
repairs.
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
building.
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
modified.
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
(ETPA)].
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
order.
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.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
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