DL410114RT
                             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. 7002 
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO. DL410114RT 
                                              
                                          :  DISTRICT RENT OFFICE
           Stanley and Joanne Marder,        DOCKET NO. 019242 
                                tenants,       
                                             OWNER: 24 Fifth Avenue
                                                    Associates                
                            PETITIONERS   : 
      ------------------------------------X                             

           ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
                       BUT MODIFYING ADMINISTRATOR'S ORDER

      On December 13, 1989, the above-named petitioner-tenants filed a 
      petition for administrative review of an order issued on November 8, 
      1989 by a Rent Administrator concerning the housing accommodations known 
      as 24 Fifth Avenue, New York, New York, Apartment No. 1703, wherein the  
      Administrator denied the petitioner-tenants' objection to the apartment 
      registration form.

      Subsequent thereto, the owner filed a petition in the Supreme Court 
      pursuant to Article 78 of the Civil Practice Law and Rules requesting 
      that the Court direct the Division of Housing and Community Renewal 
      (DHCR) to expeditiously issue a determination of the petitioners' 
      administrative appeal.

      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.  

      This proceeding was commenced by the filing of an objection to the 
      apartment registration form which had been served on the petitioner- 
      tenants on June 26, 1984.  The petitioner-tenants had taken occupancy of 
      the subject apartment on November 1, 1982 pursuant to a "hotel apartment 
      lease" at a market rent of $3,000.00 per month.  After service upon 
      petitioner-tenants of the apartment registration form, the petitioner- 
      tenants filed the objection to the rental amount listed on the form and 
      to apartment services listed on the form.  

      In the order issued on November 8, 1989, the Administrator determined 
      that the owner was entitled to a free market rent on November 1, 1982.  
      The Administrator dismissed the proceeding but stated that the dismissal 
      was without prejudice to the tenants' seeking remedies pursuant to Order 
      Number 30,402 of the New York City Conciliation and Appeals Board (CAB), 
      the agency formerly charged with enforcing the Rent Stabilization Law 
      and Code, if the tenants were so eligible. 



      CAB Order Number 30,402, issued March 1, 1984, found that as of July 15, 
      1982 the owner was not providing hotel services, that the subject 







          DL410114RT

      building should not be classified as a hotel and ordered its 
      reclassification as an apartment house.  That order further stated that 
      the reclassification should result in a building wide rent-rollback to 
      the rent charged and paid on June 30, 1982.  The Court of Appeals in 
      Matter of 24 Fifth Avenue Associates v. DHCR, 69 N.Y.2d 808 (1987), 
      modified the CAB's order by revoking the building-wide rent rollback.  
      Instead, rent adjustments were to be made for complaining tenants for a 
      reduction of services only.

      In their petition for administrative review under Docket No. DL410114RT, 
      the petitioner-tenants claim, among other things, that the owner was not 
      entitled to charge a free market rent on November 1, 1982 because as of 
      July 15, 1982 the owner was not providing hotel services and the subject 
      building did not meet the definition of a hotel.  The petitioner-tenants 
      assert that they have never contended that they should be part of or 
      subject to any determination by DHCR or the courts under CAB Order 
      Number 30,402 and cite a decision in an Article 78 proceeding involving 
      another complaint filed by the tenants (ART9815-L/L-3114880-R) which the 
      tenants state ordered DHCR to decide that overcharge complaint 
      "independently" of DHCR's determinations in any other cases.  The 
      tenants contend that the owners "fraudulently" registered the building 
      as a hotel and as a result received many benefits.  The tenants claim 
      that DHCR must consider this as a "unique or peculiar" circumstance in 
      keeping with Section 26-513 of the Rent Stabilization Law (Section 12 of 
      the Omnibus Housing Act) which has resulted in a monthly rental amount 
      not consistent with prevailing monthly rentals.  Pursuant to that 
      section as well as other sections of the Rent Stabilization Law and Code 
      dealing with rent adjustments, the tenants claim that, since at the time 
      they took occupancy the building no longer met the definition of a 
      hotel, their initial lawful stabilization rent should have been reduced 
      to the amount in effect on June 30, 1982.  

      In its answer to the tenants' petition for administrative review, the 
      owner urges affirmation of the Administrator's decision.  The owner 
      asserts, among other things, that upon taking occupancy of the subject 
      apartment, the tenants signed a "hotel apartment lease" which did 
      include some services and also noted that various other services were 
      available to the tenants at an additional cost.  The owner asserts that 
      it properly charged the tenants a free market rent and that Section 12 
      of the Omnibus Housing Act, referring to "unique and peculiar" 
      circumstances, is not applicable here where the tenants entered into 
      free market leases.  The owner states that the Court of Appeals 
      determined in Matter of 24 Fifth Avenue Associates that the subject 
      building was properly reclassified from a hotel to an apartment house 
      prospectively as of March 1, 1984 and therefore the rent set in the 
      tenants' initial lease entered into prior to the March 1, 1984 
      prospective reclassification was lawful.  In addition to 24 Fifth Avenue 
      Associates, the owner cites the case of the Matter of Berkeley Kay Corp. 
      v. CAB, 68 N.Y.2d 851 (1986), involving common issues, to support its 
      position that is was entitled to a free market rent.  The owner concedes 
      that the tenant may be entitled to a rent reduction based on diminished 
      services but asserts that that does not affect the lawfulness of the 
      free market rent charged the tenants when they took occupancy.

      In their reply to the owner's answer to the petition for administrative 
      review, the tenants reassert their claim that they are entitled to an 
      independent evaluation of their complaint based on the "unique or 
      peculiar" circumstances in their case, and under the Commissioner's 


          DL410114RT

      discretionary powers to examine the equities involved in a particular 
      case to protect tenants against unreasonable rents.  The tenants 
      reassert that the law as well as the equities entitle them to a 
      reconsideration of their initial rental.  Finally, the tenants make a 
      vigorous point-by-point rebuttal of the arguments raised by the owner in 
      its answer to the petition for administrative review.

      On April 22, 1993 the owner filed a supplemental pleading.  The owner 
      notes that since the prior set of submissions by the parties was filed, 
      the DHCR issued a new administrative review order on May 24, 1991 under 
      Docket Number BH430373RO which was issued upon remit pursuant to the 
      Court of Appeals decision in 24 Fifth Avenue Associates.  The owner 
      asserts that under any interpretation of that administrative review 
      order, the owner was entitled to a free market rent.

      A series of additional supplemental pleadings followed in which the 
      parties reiterated their arguments and responded to the other parties' 
      arguments.

      After careful consideration, the Commissioner is of the opinion that the 
      tenants' petition should be denied but the Administrator's order should 
      be modified.

      Under the Old Hotel Code, a hotel was defined as:

           Any Class A or Class B multiple dwelling containing six or 
           more dwelling units which on June 1, 1968 was commonly 
           regarded as a hotel, transient hotel or residential hotel, 
           which customarily provides or makes available hotel services 
           such as maid service, furnishing and laundering of linen, 
           telephone and bellboy service, secretarial or desk service and 
           use and upkeep of furniture and fixtures.  (Emphasis Added)

      Effective July 15, 1982, an amended Hotel Code was adopted and the words 
      "or makes available" were deleted.  The amended definition is as 
      follows:

           Any Class A or Class B Multiple dwelling containing six or 
           more dwelling units which on June 1, 1968 was and still is 
           commonly regarded as a hotel, transient hotel or residential 
           hotel, which customarily provides hotel services such as maid 
           service, furnishing and laundering of linen, telephone and 
           bellboy service, secretarial or desk service and use and 
           upkeep of furniture and fixtures. 

      Accordingly, actual services had to be provided rather than just be made 
      available in order for the building to qualify as a hotel.

      On June 30, 1983, the state enacted the Omnibus Housing Act of 1983 
      (Chapter 403, Laws of 1983) which provided in Section 43 as follows:


           YY51-3.1(b): Upon application by a tenant or owner, the 
           Conciliation and Appeals Board, and on or after April first, 
           nineteen hundred eighty-four, the Division of Housing and 
           Community Renewal, shall determine if such building ... is a 
           hotel covered by this law, based upon the services provided 
           and other relevant factors.  If it is determined that such 







          DL410114RT

           building is not a hotel, it shall thereafter be subject to 
           this law pursuant to subdivision b of section YY51-3.0.  
           (Emphasis Added)

      Under the authority of this Section, on March 1, 1984 the CAB under 
      Order Number 30,402 found that the subject building did not meet the 
      statutory definition of a hotel and reclassified the building as an 
      apartment house, effective as of March 1, 1984.

      The Commissioner rejects the tenants' claim that the owner was acting 
      fraudulently and therefore "unique or peculiar" circumstances existed 
      which demand the Commissioner's exercise of discretion and an 
      independent determination based on the equities.  Rather, the subject 
      building merely failed to meet the definition of a "hotel" under the 
      amended Hotel Code.

      The prospective nature of the application of the apartment stabilization 
      provisions of the law is indicated by the Berkeley Kay decision where 
      the Court of Appeals stated that the Omnibus Housing Act "...cannot 
      affect the substantive rights of landlords that accrued prior to the 
      effective date by authorizing retroactive reclassification of the 
      premises or rollback of rents."  Citing the Berkeley decision, the Court 
      of Appeals in the 24 Fifth Avenue case found that the CAB had exceeded 
      its authority in applying a building-wide rent rollback remedy and 
      expressly prescribed a permissible rent refund remedy pursuant to 
      Section 33(g) of the former Amended Hotel Code for complaining tenants 
      to reflect the value of hotel services not provided by the owner.

      Upon remit pursuant to the Court of Appeals decision, the Commissioner 
      on May 24, 1991 issued an order under Docket Number BH430373RO wherein 
      it was held that for complaining tenants who moved into their apartments 
      on or after July 15, 1982 and before August 15, 1983 following a 
      voluntary vacancy, the rent upon which to base the rent reductions for 
      service decreases provided for in the rent reduction tables in that 
      order is the initial rent charged and paid by such complaining tenants.  
      That order further provided that any additional tenants who filed 
      complaints before May 1, 1987 regarding the failure to provide hotel 
      services would have the right to have their complaints similarly 
      decided.

      Accordingly, the Administrator correctly determined that the owner was 
      entitled to charge the tenants a free market rent since the tenants took 
      occupancy on November 1, 1982 and, based thereon, properly dismissed the 
      tenants' objection to registration.  However, the Commissioner finds 
      that the petitioner-tenants in this case are additional tenants who 
      filed complaints of failure to provide hotel services before May 1, 1987 
      and therefore the tenants are entitled to an adjustment of their rent in 
      accordance with the rent-reduction calculation tables in the order under 
      Docket No. BH430373RO.  A copy of that order is attached hereto.  

      The Commissioner also notes that the Article 78 remit under Docket No. 
      ART09815L does not require the Commissioner to ignore precedent.  In 
      that case, DHCR agreed that "... the tenant's allegations have raised 
      sufficient issues to warrant reconsideration of the issues present."  
      That case, involving the tenants' complaint under Docket Number 
      L3114880R, is currently open at the administrative review level.

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


          DL410114RT


      ORDERED, that this petition for administrative review be, and the same 
      hereby is, denied, and the 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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