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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
APPEALS OF DOCKET NO. DD410024RT;
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Texas Management, Inc.
and owner, : DISTRICT RENT OFFICE
Remo Bloise, DOCKET NO. 050491
tenant,
PETITIONERS :
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ORDER AND OPINION GRANTING OWNER'S PETITION IN PART AND DENYING
TENANT'S PETITION FOR ADMINISTRATIVE REVIEW
On April 10, 1989, the above-named petitioner-tenant filed a Petition
for Administrative Review against an order issued on March 27, 1989, by
a Rent Administrator concerning the housing accommodations known as
163 East 92nd Street, New York, New York, Apartment No. 1, wherein the
Rent Administrator determined that the owner had overcharged the tenant.
On April 19, 1989, the above-named petitioner-owner filed a petition
against the same order.
The Administrative Appeals are being determined pursuant to the
provisions of Section 2522.4 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 appeals.
The tenant originally commenced this proceeding by filing a complaint of
rent overcharge and an objection to the initial registered rent on
September 25, 1984. The tenant took occupancy of the apartment on June
16, 1984 at a rent of $650.00 per month. The tenant also objected to
the registration statement's claim that the apartment consisted of three
rooms when it had only two, and that it had a stove, when in fact there
was no heating system for the apartment.
The owner responded that when it purchased the building on October 23,
1984, the former owner stated that the apartment was "completely gut
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renovated" prior to the complainant's occupancy, and had set the rent at
$650.00 per month as based on the cost of renovations. Upon information
and belief, the owner maintained that the "substantial rehabilitation"
of the apartment included new kitchen cabinets and fixtures and new
bathroom fixtures. The owner claimed it was also told that new walls
and floors were installed in the building, but that it would contact the
former owner as well as the prior managing agent for more documentation
of all of the improvements. The owner contends that further proof of
the extensiveness of renovations is the tenant's own statement on the
objection form that on April 1, 1984, the apartment "was not there."
The owner disputes the claim of lack of heat, and encloses pictures of
the apartment's stove and further claims that the apartment has four
heating pipes. Finally, the owner enclosed a diagram of the apartment's
floor plan that was hand-drafted without stating its authorship or the
number of rooms.
On or about June 15, 1988, the owner submitted a copy of a bill for
apartment renovations performed by Franz Heber, Jr., dated April 13,
1984, totalling $18,216.20, on which was written "paid in full." The
owner stated that it was the only bill for the renovations it was able
to locate.
The DHCR conducted an inspection of the subject apartment on July 27,
1988. The inspection report states as follows: that the apartment is a
studio apartment consisting of only one room; that it contains a small
radiator and two vertical steam pipes; that it contains a stove that is
working properly.
A second inspection of the apartment was then scheduled to corroborate
the improvements listed on the bill. Upon receiving notice of the
inspection, the tenant wrote the Administrator that the claim of
$18,000.00 in renovations for a studio apartment was obviously inflated,
since the owner had renovated much larger apartments in other buildings
at much less cost.
The inspection was conducted by a DHCR inspector on October 6, 1988.
The inspection report stated that the bathroom contained a new tub and
basin, as well as a tile floor, on which some areas were cracked; that
there were new walls and ceiling throughout the apartment, a new wood
floor, new kitchen cabinets and combination sink and a new front door.
A second sheet of the inspection report concerned renovation work of the
entire building.
On November 3, 1988 a request for documentation was sent to the owner
indicating that it had ten days to submit additional bills and invoices
involving the renovations to the subject apartment. No other response
was received. A subsequent letter from the DHCR, dated February 6,
1989, requested cancelled checks to prove payment of the claimed amount.
A letter from the owner's attorney, dated March 6, 1989, requested an
extension of time to submit documentation until March 29, 1989.
However, a letter from the Administrator, dated March 6, 1989, denied
this request, pointing out that the first request for documentation was
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dated January 21, 1988 and that, even after repeated opportunities, the
owner had not supplemented the single invoice for $18,216.00.
In an order issued on March 27, 1989, the Rent Administrator determined
that the tenant had been overcharged in the amount of $28,465.59,
including excess security and interest on overcharges collected since
April 1, 1984. The order stated that, although the owner had been
granted several extensions, it had not submitted additional
documentation that would substantiate its claim concerning the "alleged
improvemants" amounting to $18,216.00, and as a result the entire claim
was denied.
In its petition, the owner contends that the Administrator failed to
include the cost of new improvements, and that the invoice for
$18,216.00 submitted by the owner was sufficient to prove that this was
the actual cost. Moreover, the inspections proved that the improvements
were actually made, and it was thus wholly unreasonable to deny the
claim in its entirety. Even if the full claim could not be
substantiated, the DHCR could have devised some method of determining
the reasonable costs of the work performed.
The tenant's answer to the petition states that the owner's claimed cost
for the alleged renovation of the tenant's one room apartment is
inconsistent with its claimed cost for renovation of a larger apartment
in the adjacent building, which had cost only $8,700.00; that there were
no new walls or new floors installed in the building or lobby; that the
tenant's statement that the apartment "was not there" before she moved
in did not mean, as the owner had claimed in the petition, that the
owner's improvements in effect had created a new apartment, but that it
was not available because it was being occupied at the time by the
janitor and that it had no radiator or other means of heating.
The tenant's own petition of the order contends that treble damages
should have been imposed because the owner had consistently and
willfully charged her for a three room apartment in collecting MCI
increases even though it should be considered only a single room
apartment and that this is evidence of the owner's willfulness in
overcharging her.
The Commissioner is of the opinion that the owner's petition should be
granted in part and that the tenant's petition should be denied.
The main issue in this appeal is the adequacy of proof of the owner's
claim for major renovations to the apartment, which were completed prior
to the complainant's occupancy. The Administrator rejected the
$18,262.00 claim in its entirety, stating that the owner had failed to
submit copies of contracts, bills, agreements, and cancelled checks
which would substantiate the extent of the renovations. The owner had
only submitted a one-page invoice listing the renovations and cost.
Virtually the entire amount of determined overcharges is due to the
rejection of this claim.
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Based upon the totality of the evidence in the record, including the
inspection report, the Commissioner finds that it was improper for the
Rent Administrator to reject the claim in its entirety, and that the
invoice is sufficient to establish the cost of several items in the
owner's claim, under the guidelines stated in Policy Statement 90-10,
which states in part that an invoice receipt is adequate if marked paid
in full if contemporaneous with the completion of the work. The invoice
was marked "paid in full" by the contractor and the inspection report
dated October 6, 1988 verified that several specific items were new.
The list of qualified improvements is as follows: new bath utilities
($521.69); new kitchen utilities ($840.85); new entrance door ($365.00);
new windows $1,276.66); and new wood floor ($1,135.00), for a total
allowable claim of $4,139.20.
However, the other items on the invoice are not described with
sufficient specificity to substantiate the nature and extent of the work
performed. The list of items that do not qualify for a rent increase is
as follows: material hoisting ($100.00); carpentry labor ($6,000.00);
taping, labor only ($700.00); painting, material and labor ($650.00);
general clean up ($360.00); electrician, labor and material ($850.00);
plumber, labor and material ($1,450.00); extra work ($375.00); material
($2,167.00); demolition and rubbish removal ($850.00).
The tenant's petition requests treble damages on overcharges, but
confines his arguments solely to the owner's claim that the apartment
consisted of three rooms and that this was a willful misrepresentation
since the owner knew it was really only a one-room apartment, as was
confirmed by the order. The tenant argues that the collection of an MCI
increase for three rooms was proof of such willfulness, and treble
damages should have been imposed by the Administrator.
The Commissioner finds this argument unconvincing and finds that the
record does not support a finding of willfulness. It is noted that the
major part of the overcharges was due to the rejection of the new
equipment claim.
Further, the inspection reports of October 6, 1988 supports the finding
that a substantial number of the improvements were actually performed.
The tenant does not deny that improvements were made to the subject
apartment, but simply disputes the cost. The sole reason for the denial
of most of the claimed improvements is the owner's failure to document
the work performed with sufficient specificity. Such a failure to
supply adequate documentary proof improvements made in an apartment is
an insufficient basis for a finding of willfulness and the imposition of
treble damages. Finally, the excessive MCI increases resulting from the
incorrect room count, constitutes a very minor part of total
overcharges, and does not demonstrate willfulness by itself.
As a result of the above modification, total overcharges are reduced to
$25,426.08 from $28,464.59, as documented in the rent calculation chart
attached hereto and made a part hereof.
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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.
If the owner has already complied with the Rent Administrator's order
and there are arrears due to the owner as a result of the instant
determination, the tenant shall be permitted to pay off the arrears in
twenty four equal monthly installments. Should the tenant vacate after
the issuance of this order or have already vacated, said arrears shall
be payable immediately.
THEREFORE, pursuant to the Rent Stabilization Law and Code, it is
ORDERED, that the owner's petition be, and the same hereby is, granted
in part; that the tenant's petition be, and the same hereby is, denied;
and that Administrator's order be, and the same hereby is, modified in
accordance with this order and opinion.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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