STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
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
ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
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
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
the monthly allowance for improvements pursuant to Code
Section 2522.4 (c) was established at 1/40th of $3,643.71 or
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
The tenant asserts specifically that:
1. She should not be penalized for the prior owner's
negligence in losing documents;
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
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.
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
Accordingly, the Commissioner finds that treble damages should not be
assessed and modifies the Administrator's order to reflect this finding.
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.
JOSEPH A. D'AGOSTA