DG 410009-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.: DG 410009-RO
                                                  D.R.O. DOCKET NOS.:
               19TH STREET ASSOCIATES,            ZBH-410001-AD
                                                  (ARL 00740-L)
                                                  (CDR 00409) (OI-10407)
                                   PETITIONER
          -----------------------------------X


          ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                   IN PART


          On July  10,  1989  the  above  named  petitioner-owner  filed  a
          Petition for Administrative Review against  an  order  issued  on
          June 8, 1989 by the Rent Administrator, 92-31 Union Hall  Street,
          Jamaica, New York  concerning  housing  accommodations  known  as
          Apartment 19-G at 205 Third Avenue, New York,  New  York  wherein
          the Rent Administrator  denied  the  owner's  application  for  a
          modification of the legal regulated rent.

          The issue in this appeal is wheth r  the  District  Rent  Admini-
          strator's order was warranted.

          The applicable sections of the law are Sections 2522.6 and 2522.7 
          of the current Rent Stabilization Code and Section 61(7)  of  the
          former 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.

          On April 12, 1983 the  owner  applied  to  the  DHCR  predecessor
          N.Y.C. Conciliation and Appeals Board (C.A.B.) in Docket N .  OI-
          10407 for a rent increase, contending that whereas  it  had  been
          required to reduce the tenants'  rent  from  $996.49  to  $866.51
          because of the filing in 1979 of an eviction plan for cooperative 
          conversion, it should be entitled to increase the rent  once  the
          eviction plan was amended to permit  the  tenants  to  remain  in
          occupancy until 1989.




          The owner had submitted the eviction plan to the Attorney General 
          on August 22, 1979.  On June 4, 1980  the  Attorney  General  had
          accepted for filing the Fourth Amendment, which provided that  no
          eviction proceeding would be commenced against the non-purchasing 
          tenants from December 28, 1979 to December 28, 1981.    The  plan
          was declared effective on July 5, 1980, and title was transferred 






          DG 410009-RO
          on January 7, 1981.  The tenants of apartment 19-G had  signed  a
          renewal lease for December 1, 1979 through November 30, 1982 at a 
          rent of $996.49.  The lease include a 90-day  owner's  option  in
          accordance with Section 61(7) of the  former  Rent  Stabilization
          Code, which provided for a monthly rental payment of $866.51 (the 
          rent in the prior lease)  since  the  conversion  plan  had  been
          accepted for filing.  The tenants paid $866.51 per  month  during
          the conversion period until December 1, 1982, at which time  they
          commenced a 3-year lease at a rent of $944.54, this rent being an 
          increase over $866.51  rather  than  over  the  rent  of  $996.49
          originally provided for  in  their  1979  lease.   This  occurred
          because of a consent decree, affirmed  by  the  Court,  resulting
          from a proceeding commenced against  the  selling  agent  by  the
          Attorney General.  The consent decree enjoined the selling  agent
          from transferring or conveying any interest in the apartments  of
          42 non-purchasing tenants until the present  tenants  vacated  or
          until December 31, 1989, whichever came first.  With respect to 4 
          apartments, including the subject apartment, the sponsor  in  the
          consent  decree  reserved  its  rights  without  any  waiver   to
          establish through the C.A.B.  or  other  appropriate  agency  and
          collect any increase in the rents to which it might  be  entitled
          from July 5, 1980.

          On July 31, 1984  in  Order  No.  CDR  00409  the  District  Rent
          Administrator dismissed the owner's application in Docket No. OI 
          10407 on the grounds that the tenants of the  subject  apartment,
          did not enjoy the full rights of Rent  Stabilized  tenants  since
          the right to continue in occupancy pursuant to renewal leases was 
          extinguished by the consent decree as of December 31, 1989.   The
          Administrator's order denied the owner permission to collect  the
          $996.49 rent reserved in the lease commencing December  1,  1979,
          or to increase the base rent to that amount for  the  purpose  of
          computing the lawful rent in subsequent leases.

          In a Petition for Administrative Review (PAR),  docketed  as  No.
          ARL 00740-L, the owner contended in substance  that  the  tenants
          had more rights, by being  able  to  remain  for  8  years  after
          December 28, 1981, than would normally be given by the Code;  and
          that it would be an inequitable windfall to the tenants for  them
          to be able to have no rent increase for 5  years  as  well  as  a
          lower base for the remaining 5 years.



          On March 24, 1986 the Commissioner denied the  owner's  petition,
          finding that, while Section 61(7) of the Code did not squarely 
          address the situation (since it envisioned either an eviction  in
          the foreseeable future or an abandonment of the conversion plan), 
          it would be inequitable to require  that  the  tenants'  rent  be
          based on rent increases occurring when their tenancy was in 
          jeopardy and where a court decree evinced an  intent  to  protect
          their tenancy, particularly since  the  owner  and  the  Attorney
          General could have easily specified in the decree the  amount  of
          increases permitted the owner.

          On June 26, 1987 the owner made another application, docketed  as
          No. BH-410001-AD, for determination of the legal regulated  rent.
          The owner contended in substance that legislation approved by the 
          New York Senate  and  Assembly  effective  August  2,  1986  gave






          DG 410009-RO
          certain tenants in the subject building (and in no other building 
          in the state) senior citizen status as of that date although they 
          did not originally qualify in 1979 due to  their  excess  income;
          that the tenants  herein  subsequently  filed  a  senior  citizen
          election form, which the owner  rejected  in  view  of  its  late
          filing; that  such  rejection  was  overridden  by  the  Attorney
          General's office in accordance with its memorandum dated  October
          23, 1986;  that  the  tenants  have  now,  as  a  result  of  the
          legislation and the Attorney General's memorandum, been  restored
          to all the rights of rent stabilized  tenants,  thereby  negating
          the  basis  for  the  DHCR's  rejection  of  the  owner's   prior
          application;  that  prior   C.A.B.   opinions,   cited   by   the
          Administrator in Docket No. OI-10407/Order No.  CDR  00409,  have
          held that where a senior citizen  exercises  his  option  not  to
          purchase an owner may collect the higher rental reserved  in  the
          lease containing the 90-day  cancellation  clause,  because  such
          tenant is no longer subject to eviction and  has  had  no  rights
          under the Rent  Stabilization  Law  extinguished;  and  that  the
          tenants had obtained a windfall of over $13,000 to date and  were
          continuing to receive a windfall of $178.00 per month.

          In answer to the owner's application,  the  tenants  asserted  in
          substance that the consent decree of May 24, 1982 was a result of 
          a determination by the Attorney General that that the  owner  had
          utilized fraudulent practices during the  cooperative  conversion
          process,  including  harassment  of  senior  citizens  and  false
          notification that subscription agreements had been received  from
          more than the required 35% of the tenants in occupancy.

          In response, the owner contended in substance that the  Court  of
          Appeals on June 2, 1988 found that there was  no  basis  for  the
          Attorney General's action; that the consent decree did not 



          specify an amount of  increase  because  with  respect  to  these
          particular tenants the owner had reserved its rights to establish 
          through the C.A.B. or other agency, and to collect, any  increase
          in the rent; that the Commissioner's decision in Docket  No.  ARL
          00740-L was clearly predicated upon the fact  that  the  "tenants
          [did] not enjoy the full rights of rent stabilized  tenants"  due
          to the fact that the consent decree required them to vacate their 
          apartment by a certain date; that the tenants now have  the  same
          rights as other rent stabilized senior citizens, although they 
          would not have qualified for senior citizen status at the time of 
          the declaration  of  the  conversion  plan;  and  that  equitable
          considerations require that the rents be  based  on  the  $996.49
          reserved in the lease commencing December 1, 1979 rather than the 
          $866.51 rent that was actually paid because of the 90-day  option
          clause.  In a later submission the owner  contended  among  other
          things that the moratorium on eviction proceedings until December 
          28, 1981 contained in the Fourth Amendment filed on May 30,  1980
          should have cancelled the 90-day clause and the rent reserved  in
          the lease should have been applicable once the plan was  declared
          effective on July 5, 1980.

          On June 8, 1989 the  Rent  Administrator,  without  specifying  a
          reason, denied the owner's application for a rent adjustment.







          DG 410009-RO
          In its petition (the subject of the present  proceeding)  against
          the Administrator's order, the owner makes the  same  contentions
          made in its application and its responses.

          In answer to the owner's petition, the  tenants  repeat  verbatim
          their answer to the owner's application.

          In response, the owner asserts in  substance  that  the  tenant's
          answer consists of inaccurate and  false  statements,  since  the
          Attorney General's determination that  there  was  fraud  by  the
          agent and/or owner in the conversion process, and  that  the  35%
          threshold had not been met, was reversed by the Court of Appeals; 
          and because the fact that legislation qualifying the tenants  for
          senior citizen exemption status entitled them to "full rights  as
          rent stabilized tenants", as originally required  in  the  P.A.R.
          decision of March 24, 1986.

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

          Section 61(4)(d) of the former Rent Stabilization  Code  provides
          in substance that an owner may refuse to renew  the  lease  of  a
          tenant declining to purchase her or his apartment; and that  such



          tenant may remain in possession without any rent  increase  until
          one year after presentation of the conversion  plan,  until  such
          time as the plan is declared effective,  or  until  the  tenant's
          lease expires, whichever occurs later.

          Section 61(7) provides that:

               Notwithstanding  anything  contained   herein   to   the
               contrary, any renewal or vacancy  lease  executed  after
               notice to the Department  of  Housing  Preservation  and
               Development that a proposed cooperative  or  condominium
               Plan has been submitted to the Attorney General may 
               contain a provision that  the  lease  may  be  cancelled
               after 90 days' notice to the tenant that  the  Plan  has
               been declared effective.  In any lease  containing  such
               a provision, upon submission of the Plan of  cooperative
               or condominium ownership to the tenant after  acceptance
               for filing by the Attorney General, no increase in  rent
               may be collected thereafter pursuant to said lease.   If
               the Plan is abandoned then the rent will be at the  rate
               set forth in said lease from the date of abandonment.

          The tenants' lease commencing December 1, 1979 contained  such  a
          90-day eviction clause, so they continued  to  pay  rent  at  the
          $866.51 rate of the previous lease rather  than  at  the  $996.49
          rate of the new lease.  That clause would normally  have  allowed
          the owner to cancel the lease after October 3,  1980  (since  the
          Plan was declared  effective  July  5,  1980),  although  in  the
          present case no eviction occurred because the  4th  Amendment  to
          the Plan declared a moratorium on evictions from May 30, 1980  to
          December 28, 1981, and the consent  decree  prohibited  evictions
          from May 24, 1982 to December 31, 1989. 







          DG 410009-RO
          Section 352-eeee of the General Busine s  Law  protects  non-pur-
          chasing senior citizens from eviction pursua t  to  an  eviction-
          type cooperative or condominium plan in  New  York  City.   Until
          July  21,  1982  senior  citizens  who  exceeded  certain  income
          limitations  then  in  effect  were  ineligible  for  protection.
          Effective as of that date the law was  amended  to  protect  from
          eviction  all  non-purchasing  senior  citizens   regardless   of
          income.  At the time of the  filing  of  the  Plan,  the  tenants
          herein exceeded the  income  limitations  which  were  applicable
          until July 21, 1982.  Since Chapter 555  of  the  Laws  of  1982,
          which modified G.B.L Section 352-eeee to remove the income 
          limitations, limited the definition of "eligible senior citizens" 
          to include only those non-purchasing  senior  citizens  who  made
          election of coverage within 60 days  of  the  date  the  Attorney
          General accepted the plan for filing, since Section 10 of Chapter 


          555 of the Laws of 1982  provided  that  any  plan  accepted  for
          filing prior to the  effective  date  of  Chapter  555  would  be
          governed by G.B.L. Section 352-eeee as it existed previously, and 
          because the conversion plan was accepted by the Attorney  General
          in 1979, the tenants  herein  did  not  become  "eligible  senior
          citizens" protected  by  Chapter  555  from  eviction.   However,
          Chapter 850 of the Laws of 1986  did  give  the  tenants  of  the
          subject building a new "window"  period  during  which  to  elect
          coverage.  The tenants  herein  so  elected,  and  the  sponsor's
          challenge to  the  election  as  untimely  was  rejected  by  the
          Attorney General on October 23, 1986.

          As noted by the Commissioner in Docket No. ARL  00740-L,  Section
          61(7) of the Code does not squarely address the  situation  where
          an eviction plan accepted for filing is not abandoned (or changed 
          to a non-eviction plan as read into Section 61[7] by the C.A.B.), 
          but where a tenant is protected from eviction for  a  far  longer
          period than the 90 days provided in the lease.  The 1984 Adminis 
          trator's and 1986 Commissioner's orders relating to  the  owner's
          rental adjustment applications all  explicitly  (except  for  the
          order herein under appeal, which did so implicitly) found that  a
          continuing reduced rental was  appropriate  because  the  tenants
          herein  were  not  enjoying  the  full  protection  of  the  Rent
          Stabilization Law and Code.  However, the tenants had  full  rent
          stabilized tenant protection (as much as if the 90-day  cancella-
          tion clause had never been inserted in their lease) as of October 
          23, 1986,  the  date  that  the  Attorney  General  rejected  the
          sponsor's challenge of the tenants' election  of  senior  citizen
          status.   In  a  C.A.B.  opinion  (No.  20,010)  where  an  owner
          unsuccessfully challenged a non-purchasing tenant's  election  of
          senior citizen status, the rent was  restored  as  of  the  month
          following the date that the owner's challenge was rejected by the 
          Attorney General.  In the present case the rent should  therefore
          be restored as of November 1, 1986.  The Commissioner also  notes
          that the owner did not initiate an Article 78 proceeding to over 
          turn the March 24, 1886 denial of its Petition for Administrative 
          Review of the July 31, 1984 denial of its earlier application for 
          modification of the lawful rent.  That decision that  the  lawful
          rent was frozen was therefore final and binding  and  became  the
          "law of the case" until the  1986  legislation  changed  matters.
          This is an additional reason for not restoring any rent increases 
          prior to 1986.  






          DG 410009-RO

          The owner is now being  credited  with  restored  rent  effective
          November 1, 1986.  By its terms the lease from December  1,  1979
          to November 30, 1982, nominally for a rent of  $996.49,  provided
          that the rent "shall be $866.51 per  month  unless  the  landlord
          advises of its abandonment of its Cooperative Plan and/ or 

          withdrawal  of  its  ninety  (90)  day  cancellation  option,  in
          accordance with Section 61 of the Code of the Rent  Stabilization
          Association, in which event,  your  monthly  rent  shall  be  the
          amount stated above in this renewal."  The owner did not  abandon
          the Plan, and the moratorium on eviction until December 28,  1981
          can not be considered to be a withdrawal of the 90-day  cancella-
          tion option, as the moratium did not extend to  the  end  of  the
          lease, nor even to the date of the consent decree.  In the  lease
          commencing December 1,  1982  the  owner  did  include  a  clause
          reserving its rights without any waiver to establish  the  proper
          base rent through the C.A.B. and to collect  any  increases  from
          July 5, 1980  to  which  it  might  be  entitled.   Later  leases
          contained Rent Guidelines Riders having  the  same  effect.   The
          consent decree did not bind the owner to the rent being  charged,
          as the owner in that decree also reserved its right with  respect
          to the subject  apartment  to  establish  the  proper  base  rent
          through the C.A.B. and to collect  any  increases  from  July  5,
          1980.

          While the present order, in finding that  the  tenants  had  full
          rent stabilization protection as of October 23,  1986,  may  seem
          inconsistent with the earlier Administrator's and  Commissioner's
          orders involving this apartment, the Commissioner notes that  the
          initial Administrator's and Commissioner's orders were made  with
          an awareness that a trial court had found  that  fraud  had  been
          committed in the conversion process.   Such  awareness  may  well
          have played a part in the orders' concern about possible eviction 
          of the tenants after December 31, 1989, and in  their  conclusion
          that the tenants were not receiving full  protection.    (Indeed,
          Chapter 850 of the Laws of 1986, applying solely to  the  subject
          building by virtue of a criterion, among others, that the  apart-
          ments are unsold by reason of a  Supreme  Court  judgment  in  an
          action brought by the Attorney General, evinces a similar concern 
          to protect senior citizens in the face of  apparently  fraudulent
          conduct by the sponsor.)  In  addition,  those  orders  may  have
          implicitly contained a punitive element, of attempting to  lessen
          the gain resulting from fraudulent conduct.   Subsequent  to  the
          time  that  those  orders  were  issued,  the  Court  of  Appeals
          determined that there was in fact no fraud involved.

          While the Administrator's order appealed  herein  was  made  with
          knowledge both of the  Court  of  Appeals  decision  and  of  the
          tenants' attainment of the protection of senior citizen status, 
          the  Administrator  may  have  felt  constrained  to  follow  the
          reasoning of the earlier Commissioner's decision, which was  made
          without such knowledge.  This order does diverge from the earlier 
          orders, for reasons stated earlier,  in  not  continuing  a  rent
          reduction of approximately $150.00 per month once the tenants had 
          the full protection of the Rent Stabilization Law and Code.


          Because the rent is being restored as of November  1,  1986,  the






          DG 410009-RO
          lawful  stabilization  rent  during  the  balance  of  the  lease
          commencing December 1, 1985 is $1,156.77  ($996.49  reserved  but
          not charged in the lease commencing December 1,  1979,  increased
          by  9%  equals  $1,086.17,  increased  by  6  1/2%  for  a  lease
          commencing during Guideline period 17 [not  9%  applicable  to  a
          lease  commencing  during  Guideline  period  16,  as  mistakenly
          calculated by the owner] in the lease commencing December 1, 1985 
          equals $1,156.77).  The lawful stabilization rent  in  the  lease
          commencing December 1, 1987 is $1,231.96 ($1,156.77 increased  by
          6 1/2% under Guideline 19). 

          Because this order will result in the tenants  owing  substantial
          arrears, the owner is directed to allow the tenants  to  pay  off
          the arrears in 24 equal monthly installments. Should the  tenants
          vacate after the issuance of this order, or have previously  done
          so, said arrears shall be payable immediately.


          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  Administrator's  order  be,  and  the  same
          hereby is, revoked.


          ISSUED:

                                                   _____________________
                                                   JOSEPH A. D'AGOSTA
                                                   Deputy Commissioner

    

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