DF 110331 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



      ------------------------------------X 
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO. DF110331RO

                                          :  DISTRICT RENT OFFICE
                                             DOCKET NOS. ZBK110033RP
           Ciampa Bell Company,                          (Q003528R) 
                                             
                                             
                                             TENANT: Roslyn & David Cohen     
             
                            PETITIONER    : 
      ------------------------------------X                             


          ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                     IN PART


      On June 14, 1989 the above-named petitioner-owner filed a Petition for 
      Administrative Review against an order issued on May 10, 1989 by the 
      Rent Administrator, 92-31 Union Hall Street, Jamaica, New York 
      concerning the housing accommodations known as 16-70 Bell Boulevard, 
      Bayside, New York, Apartment No. 318 wherein the Rent Administrator 
      determined that the owner had overcharged the tenants.

      The issue herein is whether the Rent Administrator's order was 
      warranted.

      The applicable sections of the Law are Section 26-516 of the Rent 
      Stabilization Law and Sections 2520.11(e), 2520.11(p), 2522.5(e)(2), 
      2526.1(a), 2527.2, 2527.6 and 2527.8 of the 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 August, 1985  
      of a rent overcharge complaint by the tenants, in which they stated that 
      they had commenced occupancy on March 1, 1985 at a rent of $925.00 per 
      month.

      The owner was served with a copy of the complaint and was requested to 
      submit rent records to prove the lawfulness of the rent being charged.  












          DF 110331 RO

      In answer to the complaint, the owner contended that the subject 
      apartment was destabilized due to a vacancy after the expiration of Real 
      Property Tax Law (RPTL) Section 421-a tax abatement benefits on June 30, 
      1984.  The owner enclosed a Certificate of Eligibility and a Certificate 
      of Occupancy, which stated that the building was completed on September 
      21, 1973.

      In an order (No. ZQ-003528-R) issued on July 7, 1987 the Administrator 
      found that the apartment was no longer subject to the Rent Stabilization 
      Law due to the expiration of the 421-a benefits.

      On December 2, 1987 the Administrator reconsidered and reopened the 
      proceeding, under Docket No. BK-111033-RP, based on an irregularity in 
      a vital matter, namely, that buildings completed prior to January 1, 
      1974 were subject to the Rent Stabilization Code, pursuant to Section 
      2520.11(e) of the Code [issued May 1, 1987].  On May 10, 1989 an order 
      was issued finding an overcharge of $62,735.14 as of May 31, 1989, 
      including treble damages.  Before the owner filed its Petition for 
      Administrative Review, it requested reconsideration on the grounds that 
      it had on April 27, 1989 requested an extension of time to May 25, 1989 
      to respond to a Final Notice, but that the Administrator's order was 
      issued on May 10, 1989 without the owner even being notified that the 
      requested extension of time was not being granted.  The owner enclosed 
      the response it would have made if it had been given the opportunity.  
      On June 7, 1989 the Director of the Tenant Case Processing Unit denied 
      the request on the grounds that the apartment was subject to rent 
      stabilization and the owner's charging of a free market rental was in 
      clear violation of DHCR policy and procedure regarding the issue.

      In this petition, the owner alleges in substance that the subject 
      apartment is not subject to rent regulation because it was granted tax 
      abatement benefits pursuant to RPTL Section 421-a, which was amended 
      (relevantly in Section 421-a [2][f][i]) by Chapter 346 of the Laws of 
      1984, Section 1 to deregulate apartments vacated after the expiration of 
      the benefits, and because the complainant commenced occupancy after a 
      vacancy that occurred subsequent to the expiration of the Section 421-a 
      benefits on June 30, 1984; that treble damages should not have been 
      imposed, since the owner had a good faith basis for believing the 
      subject apartment to be exempt from rent regulation, since the DHCR had, 
      during the course of the proceeding, dismissed a complaint by a tenant 
      in another apartment in the same building because a vacancy had occurred 
      after the expiration of 421-a benefits; that the Administrator's rent 
      calculations failed to allow a vacancy allowance in the complainant's 
      initial lease; that the Administrator unlawfully revoked the initial 
      July 7, 1987 order since there was no "irregularity" as required by 
      Section 2527.8 of the Rent Stabilization Code, but rather just a change 
      in the Administrator's interpretation of the RPTL; that the owner was 
      denied due process by the DHCR's failure to abide by the owner's one and 
      only request for an extension of time to submit a response; and that any 
      overcharge was based on a hypertechnical legal issue and was not 
      willful.







          DF 110331 RO

      The Commissioner is of the opinion that this petition should be granted 
      in part.

      The Commissioner finds that the subject apartment is within the 
      jurisdiction of the Rent Stabilization Law despite the fact that the 
      owner's tax abatement benefits expired and a subsequent vacancy 
      occurred.  Originally, the subject building was rent-regulated solely by 
      virtue of the owner's receiving 421 benefits.  In 1974, Section 5 of the 
      Emergency Tenant Protection Act (Section 8625 of McKinney's 
      Unconsolidated Laws) also furnished a separate basis for the subject 
      building to be rent regulated.  Currently, Section 2520.11(p) of the 
      Rent Stabilization Code is the applicable law.  This section states that 
      in order for an apartment building to become deregulated it must have 
      been completed after January 1, 1974 and have been subject to regulation 
      solely because the owner was receiving tax benefits.  Clearly, the 
      subject premises in the instant case, completed prior to January 1, 
      1974, do not qualify as an exception and remain rent regulated.

      When the subject building was constructed in 1973 the Rent Stabilization 
      Law provided that only buildings of six or more units constructed before 
      March, 1969 were subject to rent regulation.  The building was subject 
      to the Rent Stabilization Law beginning in 1973 solely by virtue of the 
      owner's participation in the 421 partial tax exemption program.  
      However, with the passage of the Emergency Tenant Protection Act of 
      1974, all buildings built before January 1, 1974 became subject to the 
      Rent Stabilization Law.  The fact that this building had first become 
      subject to the Rent Stabilization Law by virtue of the 421 program did 
      not now distinguish this building from any other building built before 
      January 1, 1974.  The continuing receipt of the 421 benefits no longer 
      had any relevance to the building's rent regulation status.

      The owner's argument regarding the exemption of the subject apartment 
      from rent regulation rests upon Section 1 of Chapter 346 of the Laws of 
      1984, which modified RPTL Section 421-a(2)(f) to read in pertinent part 
      that: 

           (f) Notwithstanding the provisions of any local law for the 
           stabilization of rents in multiple dwellings or the emergency 
           tenant protection act of nineteen seventy-four, the rents of 
           a unit shall be fully subject to control under such local law 
           or such act, unless exempt under such local law or such act 
           from control by reason of the cooperative or condominium 
           status of the unit, for a period of ten years or for the 
           period any such applicable law or act is in effect, whichever 
           is shorter.  Thereafter, such rents shall continue to be 
           subject to such control to the same extent and in the same 
           manner as if this section had never applied thereto, except 
           that such rents shall be decontrolled if:

                (i) with respect to units subject to the provisions 
                of this section on the effective date of this 
                subparagraph such a unit becomes vacant after the 












          DF 110331 RO

                expiration of such ten year period or applicable law 
                or act.

      It is the position of the DHCR that the words "with respect to units 
      subject to the provisions of this section on the effective date of this 
      subparagraph" were not meant to deregulate apartments which were built 
      prior to the effective date of the amendment and were independently 
      subject to regulation by virtue of being in a building completed before 
      January 1, 1974 and containing six or more units (particularly where, as 
      in the present case, the tax benefits expired before the July 3, 1984 
      effective date of the 1984 amendments so that apartment was not one of 
      the "units subject to the provisions of this section on the effective 
      date of this subparagraph...").  This position is reflected in the 
      current Rent Stabilization Code, effective May 1, 1987, nearly three 
      years after Chapter 346 of the Laws of 1984.  The only relevant mention 
      of RPTL Section 421-a is in Section 2520.11(p), which exempts from 
      regulation:

           (p) housing accommodations in buildings completed or 
           substantially rehabilitated as family units on or after 
           January 1, 1974 or located in a building containing less than 
           six housing accommodations, and which were originally made 
           subject to regulation solely as a condition of receiving tax 
           benefits pursuant to section 421-a of the Real Property Tax 
           Law, as amended, and:

                (1) the housing accommodations which were subject to 
                the RSL pursuant to section 421-a became vacant.

      This exempts from regulation, upon a vacancy, only apartments which 
      would not otherwise have been stabilized except for the receipt of 421-a 
      benefits.  Because the subject building was completed on September 21, 
      1973, and because it contains at least six apartments, this exemption 
      does not apply.

      This is the same interpretation held by the agency responsible for 
      administering RPTL Section 421-a.  Section 2.7 of the regulations 
      promulgated by the New York City Department of Housing Preservation and 
      Development on August 27, 1987, also three years after Chapter 346, 
      provides in pertinent part that:




           To be eligible for partial tax exemption the land upon which 
           the eligible project is located must meet the following 
           letting, rental and occupancy requirements:

                                        .
                                        .
                                        .







          DF 110331 RO

           (2) Notwithstanding the provisions of any local law for the 
           stabilization of rents in multiple dwellings or the emergency 
           tenant protection act of 1974, the rents of a unit shall be 
           fully subject to regulation under such local law or such act, 
           unless exempt under such local law or such act from regulation 
           by reason of the cooperative or condominium status of the 
           unit, for the entire period during which the property is 
           receiving tax benefits pursuant to the Act, or for the period 
           any such applicable local law or such act is in effect 
           whichever is shorter.  Thereafter such rents shall continue to 
           be subject to such regulation to the same extent and in the 
           same manner as if this section had never applied thereto, 
           except that for dwelling units in buildings completed, as that 
           term is defined herein, on or after January 1, 1974, such 
           rents shall be deregulated if:

                (a) with respect to dwelling units located in 
                multiple dwellings completed after January 1, 1974 
                such unit becomes vacant after the expiration of the 
                lease for the unit in effect when such benefit 
                period or applicable law or act expires..

      This again is exempting, upon vacancy, only apartments which would have 
      been continuously exempt from the time of their completion but for the 
      receipt of 421-a benefits.

      Because the subject apartment does not fall under any of the exemptions, 
      it is subject to regulation under the Rent Stabilization Law and Code.  
      Tenants are entitled to stabilization leases at lawful rents, and the 
      owner is required to register the building annually with the DHCR.  
      While the owner has enclosed a copy of an order (Docket No. Q003522R) 
      issued by the Administrator in 1987, finding that another apartment in 
      the subject building was no longer subject to rent stabilization due to 
      the expiration of 421-a benefits, the Commissioner notes that a new 
      order (Docket No. BK110036RP) was issued in 1989, revoking the prior 
      order and finding that the apartment was subject to rent stabilization.  
      The owner filed an appeal (Docket No. DI 110296-RO) against the new 
      order.  An order is being issued in that appeal at approximately the 
      same time as this order, and with a similar outcome.

      Because the language of Chapter 346 of the Laws of 1984 could give rise 
      to a good faith belief that the subject apartment was not subject to 
      rent regulation, and that the DHCR was without jurisdiction, the 
      Commissioner does not consider that the overcharge should be considered 
      to be willful.  Interest rather than treble damages has therefore been 
      imposed.  The overcharge from March 1, 1985 to February 28, 1986 is 
      $382.24 x 12 = $4,586.88; from March 1, 1986 to February 29, 1988 is 
      $9,769.92; from March 1, 1988 to February 28, 1989 is $5,031.48; and 
      from March 1, 1989 to May 31, 1989 is $1,371.09.  Interest through May 
      31, 1989 (the end of the month of the Administrator's order) for the 
      respective overcharges is $1,565.28, $2,015.05, $358.50 and $20.57.  The 
      total overcharge is therefore $24,718.77.












          DF 110331 RO


      Regarding the owner's contention that it was improper for the 
      Administrator to revoke and reconsider the July 7, 1987 determination: 
      The Commissioner considers it to be an irregularity in a vital matter 
      when a mistake is made in the determination of such a fundamental issue 
      as whether or not a building is even subject to the jurisdiction of the 
      Rent Stabilization Law. An erroneous determination once made on such an 
      issue should not be a bar to a re-examination at the Administrator's own 
      initiative, any more than an erroneous determination, not challenged by 
      an administrative appeal, that a newly-built detached 2-family home was 
      subject to the Rent Stabilization Law would be considered to bar any 
      subsequent attempt to reconsider whether the rent of the one or two 
      rental apartments should be regulated.

      Regarding the due process issue: The arguments which the owner would 
      have made if given in extension of time have been considered in this 
      appeal proceeding.


      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, 
      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.


      This order may, upon the expiration of the period in which the owner may 
      institute a proceeding pursuant to Article 78 of the Civil Practice Law 
      and Rules, be filed and enforced in the same manner as a judgment.


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







      ORDERED, that this Petition be, and the same hereby is, granted in part 
      and that the Rent Administrator's order be, and the same hereby is, 
      modified in accordance with this order and opinion.  The total 
      overcharge is $24,718.77.   The lawful stabilization rent is $648.96 per 
      month in the lease from March 1, 1989 to February 28, 1991.

      ISSUED:
                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner
    

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