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
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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 :
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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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