STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                             JAMAICA, NEW YORK 11433

      APPEAL OF                              DOCKET NO.: DH210476RO

               Peter J. Burgess Realty Corp. DRO DOCKET NO.: K000805R

                                             TENANT: Raymond Perez            


      On August 18, 1989, the above-named owner timely refiled a petition for 
      administrative review of an order issued on May 11, 1989 by a District 
      Rent Administrator concerning the housing accommodations known as       
      250 Pacific Street, Apartment 16, Brooklyn, New York wherein the Rent 
      Administrator determined that the owner had overcharged the tenant.

      The Commissioner has reviewed all of the evidence in the record and has 
      carefully considered that portion of the record relevant to the issues 
      raised by the administrative appeal.  

      This proceeding was commenced by the filing of a rent overcharge 
      complaint on February 22, 1985.  The tenant alleged that the subject 
      building was a part of a New York City management program and that he 
      believed he was paying more than other tenants in his building.  The 
      tenant stated that he took occupancy of the subject apartment on January 
      15, 1984 under a two year escalated lease at a rent of $325.00.  On 
      January 1, 1985 the second portion of the escalated lease took effect 
      and the monthly rent was increased to $350.00.    

      In its answer, the owner alleged that the subject building was owned by 
      the City of New York when the complainant-tenant took occupancy.  The 
      petitioner managed the building for the City of New York under the 
      supervision of the City's Department of Housing Preservation and 
      Development (HPD).  Further, the owner alleged that it purchased the 
      subject building in June of 1985 from the City of New York and that no 
      overcharge occurred.

      In the order of May 11, 1989, the Administrator found that the use of an 
      escalator clause in the two year vacancy lease was prohibited by Section 
      2522.5(e)(1) of the Rent Stabilization Code.  Accordingly, the 
      Administrator based all the overcharge calculations on the lower 
      escalator lease figure of $325.00 per month which amount the 
      Administrator referred to as the Initial Legal Registered Rent.  The 

      Administrator also found that the overcharges were willful and assessed 
      treble damages.  As a result of the Administrator's calculations, it was 


      determined that the total overcharges through May 31, 1989 were 
      $4,239.60 including treble damages and excess security and that the 
      lawful stabilization rent was $377.26 per month for the lease period 
      begining January 1, 1989.

      In its petition for administrative review, the owner asserts that the 
      Administrator's order must be revoked and realleges that no overcharges 
      occurred.  The owner asserts that the subject building was exempt from 
      rent regulation when the complainant-tenant took occupancy in 1984.  
      Further, the owner alleges that only when the building was sold by the 
      City of New York to the petitioner-owner did it return to rent 
      stabilization status.  The owner alleges that the lawful stabilization 
      rent for the units in the building after its return to rent 
      stabilization status was to be the rent being charged at the time of the 
      sale.  The owner alleges that after the owner acquired the property, all 
      rent guidelines were correctly followed.  Documents submitted by the 
      owner included a copy of the executed deed which transferred the 
      property from the City of New York to the petitioner-owner on May 28, 

      The Commissioner is of the opinion that this petition for administrative 
      review should be granted.

      It is uncontested that at the time the tenant took occupancy of the 
      subject apartment the building was owned by the City of New York.  
      Section 2520.11 (b) of the Rent Stabilization Code states that housing 
      accommodations which are owned or operated by a municipality or a public 
      housing authority are exempt form rent regulation by the Division of 
      Housing and Community Renewal (DHCR).  Section 26-507 (a) of the Rent 
      Stabilization Law states that upon the sale of the municipally-owned 
      building it becomes subject to the Rent Stablization Law ". . . at the 
      last rent charged by the city, or on behalf of the city, for the 
      dwelling unit."

      Accordingly, the Adminiatrator's calculations should have been based on 
      the monthly rental amount of $350.00 which was "the last rent charged by 
      the city" and not the $325.00 per month which was the monthly rental 
      charged in the first year of the two year lease which contained the 
      escalator clause.

      All subsequent increases were within appropriate rent guidelines and no 
      overcharge occurred.

      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 is permitted to pay off the arrears in 12 
      equal monthly installments.  Should the tenant vacate after the issuance 
      of this order or have already vacated, said arrears shall be payable 

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


      ORDERED, that this petition for administrative review be, and the same 
      hereby is, granted, that the order of the Rent Administrator be, and the 
      same hereby is, revoked, and it is found that no rent overcharge 


                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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