DF210387RO

                                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  SJR No. 6479
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO. DF210387RO

                                          :  DISTRICT RENT OFFICE
           S.Drogaris/Realty Management,     DOCKET NO. ZAJ210263R
                                             
                                             TENANT: Felicita Caban           
                
                            PETITIONER    : 
      ------------------------------------X                             

       
          ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                     IN PART


      On June 30, 1989, the above-named petitioner-owner filed a Petition for 
      Administrative Review against an order issued on June 15, 1989, by the 
      Rent Administrator, 92-31 Union Hall Street, Jamaica, New York,  
      concerning the housing accommodations known as 605 57th Street, 
      Brooklyn, New York, Apartment No. 3R, wherein the Administrator 
      determined that the owner had overcharged the tenant.

      On May 12, 1992, the Commissioner issued an order denying the owner's 
      administrative appeal and affirming the Administrator's order.

      Subsequent thereto, the owner filed a proceeding in the Supreme Court, 
      Kings County pursuant to Article 78 of the Civil Practice Law and Rules.  
      By order of the court, dated August 13, 1992, the proceeding was 
      remanded to the Commissioner for reconsideration of the rent overcharge, 
      in particular, the issue of treble damages.

      The tenant originally commenced this proceeding by filing a complaint of 
      rent overcharge on October 20, 1986.

      In response, the owner asserted that it had purchased the subject 
      building on November 4, 1985 and that it had made extensive improvements 
      to the subject apartment prior to renting it out.  With its answer, the 
      owner submitted a copy of the deed, a lease history from August 31, 1984 
      through September 30, 1988, and copies of cancelled checks and invoices 
      in support of claimed improvements at a cost of $7,463.97.


      In response on December 1, 1986 to a Request for Additional Information, 
      the owner stated that it was unable to provide either a copy of the 1984 












          DF210387RO

      rent registration or the lease for the tenant of record at that time 
      because the prior owner claimed that these documents had been stolen 
      from his car.  To explain the discrepancy between the 1984 registered 
      rent and the 1985 lease rent, the owner explicated that the 1985 rent 
      had been calculated by increasing the 1984 registered rent by a 6% 
      guidelines increase and 15% vacancy allowance and by adding therto 
      1/40th of the cost of a new bathroom.  There was no explanation for the 
      discrepancy between the 1984 registered rent and the 1985 registered 
      rent.  The owner submitted a copy of the 1985 apartment registration.

      Subsequently, on October 15, 1987, the owner submitted a contractor's 
      statement dated August 7, 1984 for $4,297.00 in claimed improvements to 
      the subject bathroom paid for in cash by the prior owner.

      In the order issued on June 15, 1989, the Administrator determined that 
      the lawful stabilization rent as of October 1, 1988 was $466.43 and 
      directed the owner to refund $17,641.72 inclusive of excess security and 
      treble damages for the period from October 1,1986 to June 30, 1989.

      In this petition, the owner requests that the Administrator's order be 
      modified to take into account the $4,297.00 improvement made by the 
      prior owner not included in the Rent Administrator's calculation and to 
      correct the computation of permitted increases for improvements made by 
      the current owner.  The owner further contends that treble damages are 
      not warranted because there was no overcharge and there is no evidence 
      to show any intent to overcharge.

      On August 2, 1989, the order issued on June 15, 1989 was amended to 
      correct various arithmetic errors:

           the lawful stabilized rent as of October 1, 1988 was changed 
           to $471.33;

           the monthly allowance for improvements pursuant to Code 
           Section 2522.4 (c) was established at 1/40th of $3,643.71 or 
           $91.09; and,

           the total refund was recalculated to equal $18,277.26 
           including treble damages and excess security for the period 
           from October 1, 1986 to August 31, 1989.

      In reply to the petition, the tenant contends that the appeal should be 
      dismissed and the amount to be refunded be recalculated to find an even 
      greater overcharge.  The tenant alleges that not all claimed 
      improvements were made or, if made, do not qualify for the rent increase 
      granted.


      The tenant asserts specifically that:

           1.   She should not be penalized for the prior owner's 
                  negligence in losing documents; 






          DF210387RO


           2.   the refrigerator and stove were not new; 

           3.   the bills and checks submitted by the owner are not 
                valid evidence of the claimed improvements;

           4.   plaster and sheetrock do not constitute improvements 
                but are repairs.

      Finally, the tenant asserts that she should receive treble damages as it 
      is evident that the overcharge was willful.

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

      Code Section 2522.4(a) of the Rent Stabilization Code provides in 
      pertinent part that an owner is entitled to a rent increase where there 
      had been a substantial increase in new equipment or improvements 
      provided in or to the tenant's housing accommodations, on written tenant 
      consent to the rent increase.  In the case of vacant housing 
      accommodations, tenant consent is not required.

      With respect to the alleged bathroom improvements provided by the prior 
      owner, written tenant consent was not submitted and the record contains 
      no evidence that the improvements were made during a vacancy period.  
      Further the Commissioner notes that no mention of apartment improvements 
      was made in the 1985 apartment registration to account for the increase 
      in rent.  Moreover, the statement submitted is not fully itemized and 
      some of the items that are listed constitute maintenance or repairs.

      Finally, the Commissioner notes that the owner was allowed a rent 
      increase for bathroom improvements made by the current owner-bathroom 
      tiles, bathtub, toilet and medicine cabinet-as part of the current 
      owner's allowed improvement costs of $3,643.71.

      Accordingly, the Commissioner finds that the Administrator did not err 
      in disallowing this cost as a rent increase.

      As regards the improvements made by the current owner, review of the 
      record discloses that only $3,643.71 of the claimed $7,463.97 qualified 
      for a rent increase pursuant to Section 2522.4(a)(1).

      This was determined as follows:

           $2,598.71 - for lumber and material, electric work, stove and 
           refrigerator and bathroom improvement for which full 
           documentation was submitted;

           $1,045.00 based on the J51 schedule for improvements for which 
           the owner did not submit sufficient proof of costs-no itemized 
           breakdown-these items were kitchen sink, bathroom tiles, 
           kitchen cabinet, toilet, medicine cabinet.












          DF210387RO


      As proof of these items, the owner submitted a paid bill for $4,100.00 
      but said bill was not itemized and included properly disallowed items of 
      repairs and maintenance such as installation and repair of sheetrock and 
      molding.  Accordingly, the Rent Administrator properly used the J51 
      schedule for the items allowable as improvements.

      In addition, the remainder of the amount asked for by the owner was 
      correctly disallowed for the following reasons:

           considered maintenance of repair;

           no apartment number on bills or cancelled checks;

           failure to submit an itemized breakdown or proof of payment 
           for various items.

      With respect to the issues raised by the tenant, the Commissioner notes 
      that the tenant is in agreement with the Administrator's findings for 
      some.  As to the others, the Commissioner further notes that the tenant 
      did not raise these issues in the proceeding before the administrator or 
      file her own petition.  Accordingly, it would be inappropriate to 
      consider these issues de novo in this appeal.

      The Commissioner finds, therefore, that the Administrator correctly 
      determined the permissible rent increase for improvements, establishing 
      the lawful stabilization rent at $471.33.

      Section 26-516 for the Rent Stabilization Law provides in pertinent part 
      for a penalty of treble damages where an overcharge is willful.  The 
      statute creates a presumption of willfulness subject to rebuttal by the 
      owner showing non-willfulness by a preponderance of the evidence.  In 
      the absence of affirmative proof by the owner, treble damages are 
      assessed where an overcharge determination is made.

      The Commissioner recognizes, in accordance with previous opinions on the 
      issue, that where an overcharge results from an owner's failure to 
      adequately substantiate improvements as claimed under Section 20C(1) of 
      the former Rent Stabilization Code and Section 2522.4 of the current 
      Code), but where there is sufficient evidence to show that the owner 
      believed in good faith that it could increase the rent by the entire 
      cost, the DHCR will not consider the overcharge willful (Accord: DHCR 
      Administrative Review Docket Numbers ARL01921L, ARL02037K, ARL03737K, 
      FA210103RO).  It is noted that a portion of the instant overcharge 
      derives from such a claim.  The remainder similarly derives from such 
      claim by the prior owner.   Therefore, as the record supports the 
      owner's good faith reliance upon the claims, treble damages will not be 
      imposed.

      Accordingly, the Commissioner finds that treble damages should not be 
      assessed and modifies the Administrator's order to reflect this finding.







          DF210387RO

      Section 2526.1(a)(1) of the Rent Stabilization Code provides in 
      pertinent part that where an owner establishes by a preponderance of the 
      evidence that the overcharge was not willful, the DHCR shall establish 
      the penalty as the amount of the overcharge plus interest from the date 
      of the first overcharge on or after April 1, 1984, at the rate of 
      interest payable on a judgment pursuant to section 5004 of the Civil 
      Practice Law and Rules.  Accordingly, the owner is directed to refund to 
      the tenant an overcharge of $7,013.52 inclusive of excess security and 
      interest on the overcharge occurring on or after April 1, 1984.

      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 or not 
      in excess of twenty percent per month thereof may be offset against any 
      rent thereafter due the owner.

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

      ORDERED, that this petition be, and the same hereby is, granted in part, 
      and the Rent 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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