DOC. NO.: DI 210072-RO
                                 STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

         APPEAL OF                           :   DOCKET NO.: DI 210072-RO
                         ZALMEN MANAGEMENT CO., :   D.R.O. ORDER NO.: ZBC
                               PETITIONER    :                210525-R
         ------------------------------------X   TENANT: VERNON PAUL


         On August 30, 1989, the above named petitioner-owner filed a Petition 
         for Administrative Review against an order issued on July 26, 1989, by 
         the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York, 
         concerning housing accommodations known as Apartment 3A, 33 Crooke 
         Avenue, Brooklyn, New York, wherein the Rent Administrator determined 
         that there had been an overcharge and ordered a refund of $20,181.50, 
         including treble damages and excess security.
         The Commissioner has reviewed all the evidence in the record and has 
         carefully considered that portion of the record relevant to the issues 
         raised by the administrative appeal.

         The tenant commenced this proceeding on March 30, 1987 by filing an 
         overcharge complaint, based in part on an alleged failure by the owner 
         to provide the tenant with a copy of the apartment registration form.

         In a letter dated March 9, 1989, the prior owner stated that the 
         subject building had been sold on December 30, 1986 to the petitioner.  
         The prior owner did not respond to the substance of the complaint.

         On March 20, 1989 the current owner, petitioner herein, was served 
         with a copy of the complaint and asked to submit all leases from April 
         1, 1984 as well as proof of any improvements to the apartment and the 
         cost thereof.  This request was repeated on April 26, 1989 along with 
         an additional request for copies of the leases just prior to 
         Guidelines Orders 16 and 17.

         The petitioner failed to respond to these requests.  On May 5, 1989 a 
         "Final Notice to Owner: Imposition of Treble Damages" form [RN-12 
         (11/87)], correctly addressed, was served on the petitioner wherein 
         overcharges for the leases commencing October 1, 1985, 1986 and 1988

         DOC. NO.: DI 210072-RO

         computed and trebled and the owner was given twenty days to submit 
         proof that the overcharges were not willful in order to avoid the 
         penalty of treble damages.  No response was reviewed to this notice.  
         The notice stated explicitly that it was the "final opportunity to 
         submit evidence to rebut a finding that the overcharge was willful."

         In Order Number ZBC-210525-R, herein under review, the Rent 
         Administrator determined that the April 1, 1984 Initial Legal 
         Registered Rent was $197.22 so that the lawful stabilized rent on 
         October 1, 1985 was $205.11, rather the $350.00 charged in the 
         complaining tenant's initial lease.  In establishing the $205.11 
         lawful rent the Administrator did not grant the owner a vacancy 
         allowance under Guidelines Order 17 stating that the owner had failed 
         to submit the requested leases needed to determine the appropriate 
         vacancy allowance. [Guidelines Order 17 allows a 7.5% vacancy 
         allowance provided no vacancy allowance was taken under Guidelines 
         Order 16.]

         In this petition, the owner contends that the Rent Administrator's 
         Order is incorrect and should be modified because DHCR Policy 
         Statement 89-2 provides that "the owner was entitled to a second 
         notice of treble damages and afforded (20) days to submit evidence 
         that the overcharge was not willful.  The current owner was never 
         served with the 'second notice' and was never afforded an opportunity 
         to submit evidence that the overcharge was not willful." 

         The current owner alleges for the first time that the prior owner had 
         renovated the subject apartment prior to the complaining tenant's 
         tenancy.  The owner asserts that the Administrator was aware of the 
         renovations due to the November 25, 1988 answer of a "prior" owner 
         under Docket Number CJ 210315R, which proceeding the Administrator 
         consolidated with BC 210525-R in an order dated February 3, 1989 
         bearing docket number ZCJ 210315-R.  

         However, the owner argues that Division policy precludes the 
         imposition of treble damages when the overcharge arises due to an 
         owner's "inability to adequately prove improvements."

         The owner further argues that treble damages should not have been 
         imposed because the "overcharge, if any, was solely the result of the 
         increase in rent taken by the prior owner....   Accordingly, it was 
         unfair for the current owner to be penalized for the actions of the 
         prior owner."

         DOC. NO.: DI 210072-RO

         In addition, the petitioner contends that since the complaint was 
         filed in March, 1987 but the current owner was not informed of the 
         complaint until March, 1989, it was unfair to impose treble damages
         for that two year period "which resulted solely from administrative 

         Finally, the owner argues that the Administrator erred by not granting 
         the 7.5% vacancy allowance pursuant to Guidelines Order 17 for the 
         complaining tenant's October 1, 1985 vacancy lease because Guidelines 
         Order 17 allows such an allowance "provided that the owner did not 
         receive a vacancy allowance during the period covered by Rent 
         Guidelines Board Order 16 [i.e.,] from October 1, 1984 to September 
         30, 1985."  Since the Administrator found the rent from April 1, 1984 
         to October 1, 1985 to have remained at $197.22, the owner did not 
         receive a vacancy allowance during the Guidelines 16 period.  
         Accordingly, the owner argues that the 7.5% vacancy allowance under 
         Guidelines Order 17 should have been granted by the Administrator.  

         In answer to this petition, the tenant contends that the order should 
         be upheld because the willfulness of the overcharge is demonstrated by 
         the owner's taking of a security deposit of twice the rent charged 
         rather than one month's rent.  The tenant mentions several service 
         decreases and states that the owner has purposely refused to correct 
         these problems in retaliation for the tenant's filing of the 
         overcharge complaint herein.  [This allegation was also made to the 
         Administrator.]  The tenant also alleges that the owner called him 
         about midnight one night and asked the tenant to withdraw his 
         complaint in return for a rent reduction to $350.00; and that when the 
         tenant refused this offer the owner allegedly called him "stupid" and 
         threatened to prolong this proceeding.

         In response the owner stated that it only acquired the building in 
         December, 1986 and therefore could not have been involved in taking 
         excess security.  The owner further alleges that it is unaware of any 
         service complaints being filed by the tenant and denies that the 
         problems stated by the tenant do exist.  The owner characterizes the 
         tenant's allegations as "impossible to believe" and finally notes that 
         the tenant "has not denied that the apartment was substantially 
         renovated prior to his occupancy."

         The Commissioner is of the opinion that this petition should be 

         Policy Statement 89-2 states, in part:

         DOC. NO.: DI 210072-RO

              "The owner must prove by a preponderance of the evidence 
              that the overcharge was not a willful act.  This simply 
              means that where an owner submits no evidence or where the 
              evidence is equally balanced, the overcharge is deemed to be 
              willful.  The owner can submit such evidence after receiving 
              notice of a tenant's filing of an overcharge complaint prior 
              to the final order being issued.  When an owner receives the 
              second and final notice that an overcharge has been 
              determined and treble damages are about to be imposed, he or 
              she will be notified to submit evidence within twenty days 
              to prove that the overcharge was not willfull."  (Emphasis 

         It is clear from the emphasized wording of the policy statement that 
         the May 5, 1989 "Final Notice to Owner: Imposition of Treble Damages" 
         form [RN-12 (11/87)] is the "second and final [20 day] notice" 
         referred to in the policy statement.  The owner's contention that it 
         must be sent two such notices of the imposition of treble damages is 
         without merit.  Policy Statement 89-2 does not require a duplicate 
         notice, nor does due process.  Indeed, the courts have approved the 
         imposition of treble damages even without any notice of the type given 
         in RN-12(11/87).  More specifically, even for overcharge complaints 
         filed prior to April 1, 1984 (the relevant effective date of the 
         Omnibus Housing Act of 1983, which first imposed treble damages in 
         Rent Stabilized Apartments) the notice of the possibility of treble 
         damages given on an answer form or a default notice was held 
         sufficient notice to support the imposition of treble damages.  See 
         Lavanant v. DHCR, 544 N.Y.S.2d 331 (A.D. 1st Dept. 1989).

         In the present proceeding the complaint was filed after April 1, 1984, 
         so that the owner had notice of the possibility of treble damages from 
         the law in effect at the time of the complaint, the directions which 
         accompanied the answer form, and the RN 12(11/87) form. Nevertheless, 
         the owner defaulted before the Administrator and has offered no excuse 
         for such default on appeal.

         The owner is correct that DHCR policy precludes the imposition of 
         treble damages when the only source of an overcharge is the owner's 
         failure to prove the actual cost of known improvements.  This, 
         however, is not such a case.  At no point in this proceeding did the 
         current or any prior owner specify any improvement that was made to 
         the subject apartment.  The vague, undocumented assertion that 
         substantial renovations had been made in no way satisfies the policy

         of that treble damages will ordinarily not be imposed when the sole 
         reason for the overcharge in the owner's failure to prove the cost of 
         known improvements.  The fact that the tenant did not specifically 

         DOC. NO.: DI 210072-RO

         deny that the apartment had been substantially renovated does not 
         change this result.  Indeed, the tenant has raised many allegations of 
         decreases in services that imply that the tenant does not acknowledge 
         any substantial renovation.

         Furthermore, the owner was requested on two occasions to submit proof 
         of any renovations and their cost.  The owner failed to respond to 
         those requests.  The owner's claim that the Administrator should have 
         incorporated the answer to another proceeding is rejected.  A party is 
         required to submit a separate answer for each proceeding before DHCR.

         In addition, the owner was given twenty days to prove the overcharges 
         were not willful and again failed to respond. Thus, even actual proof 
         of the alleged renovations and their cost would normally be rejected 
         on appeal where, as here, the owner has offered no excuse for its 

         Similarly, the owner's argument that the overcharges, "if any," were 
         solely the fault of the prior owner can not be raised for the first 
         time on appeal without a showing that the owner's default was 
         excusable.  Furthermore, the argument has no merit even if it had been 
         timely raised.   A new owner is obligated to review and correct, if 
         necessary the legality of the rents charged by a prior owner.  Failure 
         to meet this obligation can result in treble damages.  See ARL 13024- 
         K.  This policy is memorialized in Code Section 2526.1(f)(2) which 
         holds a current owner in a post-April 1, 1984 proceeding "responsible 
         for all overcharge penalties, including penalties based upon 
         overcharges collected by any prior owner."  Similarly, the owner was 
         obligated to discover and refund any excess security collected by a 
         prior owner. 

         The owner's contention that treble damages should not be imposed for 
         the period March, 1987 (when the complaint was filed) to March 1989 
         (when the petitioner was first notified of the complaint) is without 
         merit.  As stated above, the prior owner did not inform the Division 
         that the subject building was sold to the petitioner until March 9, 
         1989, i.e., eleven days before the petitioner was served.   (The 
         record shows the prior owner was served with the complaint and answer 
         forms on April 9, 1987.)  Furthermore, the petitioner was not 
         registered as the managing agent until the 1989 apartment registration

         was filed on October 5, 1989.  Thus it is clear that there was no 
         "administrative delay" as alleged by the owner.  Moreover, had the 
         petitioner promptly refunded the overcharges upon being served no 
         treble damages at all would have been imposed.  See Policy Statement 

         DOC. NO.: DI 210072-RO

         As stated above, the petitioner was specifically requested on April 
         26, 1989 to submit leases just prior to the Guidelines 16 and 17 
         periods.  These leases would have proved whether or not the owner had 
         taken a vacancy allowance during the Guidelines 16 period, which in 
         turn would have determined whether or not the owner was permitted to 
         charge the 7.5% vacancy allowance pursuant to Guidelines Order 17.  
         The burden of proof is on the owner to demonstrate whether or not it 
         could impose this 7.5% vacancy allowance.  The owner submitted no 
         evidence on this issue and therefore has not met its burden of proof.  
         Accordingly, the Administrator was correct not to allow the 7.5% 
         vacancy allowance.   The fact that the Administrator kept the rent at 
         $197.22 during the Guidelines 16 period (because of the owner's 
         default) in no way changes this result.  The guidelines 17 vacancy 
         allowance is dependent on the actual rental history during Guidelines 
         period 16.  It was surely not intended to benefit a defaulting owner.

         This order is without prejudice to the tenant's right to file a 
         service and/or harassment complaint against the owner if the facts so 
         warrant.  However, those allegations are beyond the scope of this 

         This order may, upon the expiration of the period in which the owner 
         may institute a proceeding pursuant to Article seventy-eight of the 
         civil practice law and rules, be filed and enforced by the tenant in 
         the same manner as a judgment or not in excess of twenty percent 
         thereof per month may be offset against any rent thereafter due the 

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

         ORDERED, that this petition be, and the same hereby is, denied and the 
         Rent Administrator's order be, and the same hereby is, affirmed.


                                            ELLIOT SANDER
                                            Deputy Commissioner

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