DF610110RO
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
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IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: DF610110RO
5700-5800-5900 Arlington DRO DOCKET NO.: BJ610528R
Avenue Association
TENANT: G. & L. Stolowitz
PETITIONER
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART
On June 6, 1989, the above-named owner timely filed a Petition for
Administrative Review against an order of a Rent Administrator, issued on
May 23, 1989, concerning the housing accommodations known as Apt. 22S at
5700 Arlington Avenue in the Bronx, New York, wherein the Rent
Administrator determined that the owner had willfully overcharged the
tenant.
The tenant had initiated this proceeding by filing a complaint of rental
overcharge alleging: "Pool - - 1986=$120, 1987=$190 -- excess of 6%
allowed." (Later submissions made clear that the complaint pertained not to
the pool, but to "cabanas" associated therewith, the seasonal rental of
which had risen by the aforementioned $70 in one year.)
The owner responded: that the "cabana" is "merely a table with an umbrella
and four (4) chairs"; that the three-building complex in which the tenant
lives has 1,308 tenants, but only 150 cabanas "available to members of the
pool on a first come first served basis "; that said pool was "operated by
a separate, independent contractor," which was also the case with the prior
owner; that the pool is available "only to tenants of the premises for a
seasonal rate to be member of the pool"; that "a separate charge for pool
membership was always made by a pool operator, of which there was no common
ownership between the owner and the operator"; and that, in view of the
foregoing, the seasonal rental of cabanas is not subject to the Rent
Stabilization Code.
Later the owner submitted documents showing outside management of the pool
starting in 1980, commenting that the pool and cabanas were not provided
for in the tenant's lease.
The tenant responded with a copy of another tenant's submission in a
similar proceeding, to the effect that he had commenced occupancy in 1962
and that after the first two summers the building management had introduced
the "cabanas" here at issue, not contracting for outside management until
it had been "decided to go co-op."
In the ensuing order, here appealed, the Rent Administrator found that the
"seasonal rental" was $120.00 in 1986 and $190.00 in 1987, and determined
that the permissible increases between those years (under order number 18
of the Rent Guidelines Board) was $7.20, leaving an overcharge of $62.80
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for the season, and that the overcharge had been willful, so that it had to
be trebled for payment to the tenant.
In this petition the owner now attacks the finding of overcharge and, in
the alternative, the finding of willfulness. The argument is: that the
number of cabanas has always been much too small for the number of tenants
in the subject complex, indicating that providing cabanas was never a
required service; that that service was not "primarily for the use of
tenants" but rather for "pool members" (other tenants being ineligible
therefor), and thus did not fit the Code's definition of a required
service; that the failure of all tenants to file a timely protest to the
absence of pool and cabanas from the list of services in the owner's
initial registration, bars a current finding that those were required
services; that if the cabana rentals were indeed "stabilized," the owner
must be granted a vacancy increase "upon the expiration of [the] rental
agreement every summer . . . on [each] cabana since the same tenant does
not rent it year after year"; regarding willfulness, that the owner's firm
belief that the cabanas were not required (as evidenced by its failure "for
a long period of time" to raise the rent therefor) shows nonwillfulness,
leaving no basis for imposing treble damages; and that the owner is
entitled to a major capital improvement rent increase for work done in the
pool area and to the cabanas.
The Commissioner is of the opinion that this petition should be granted in
part.
Section 2520.6(r) (3) of the Rent Stabilization Code regarding ancillary
services provides as follows:
Ancillary Services.
That space and those required services not contained within the
individual housing accommodation which the owner was providing on
the applicable base dates set forth below, and any additional
space and services provided thereafter by applicable law. These
may include, but are not limited to, garage facilities, laundry
facilities, recreational facilities, and security. Such
ancillary services are subject to the following provisions:
(i) No owner shall require a tenant or prospective tenant to
lease, rent or pay for an ancillary service, other than security,
as a condition of renting a housing accommodation.
(ii) Where an ancillary service is provided to a tenant pursuant
to a lease or rental agreement separate and apart from the lease
or rental agreement for the housing accommodation occupied by the
tenant, the tenant shall not be required to renew such lease, or
rental agreement, for the ancillary service upon the expiration
of such lease or rental agreement.
(iii) Where an ancillary service is provided to a tenant pursuant
to a lease or rental agreement for a housing accommodation,
whether at a charge separate and apart from the rental of the
housing accommodation, or included in the legal regulated rent,
the tenant may be required to renew the rental term for the
ancillary service upon the renewal of the lease for the housing
accommodation. However, where the owner requires a tenant to
continue such ancillary service, the owner may not unreasonably
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withhold consent to the tenant to sublet for the term of each
renewal lease, the space or other facility constituting the
ancillary service.
Further Section 2520.6 (r) (4)(xi) of the Rent Stabilization Code provides
as follows:
A service as defined in paragraph (3) of this subdivision (r) for
which there is or was a separate charge, shall not be subject to
the provisions of this Code where no common ownership exists or
existed on the applicable base date, or at any time subsequent
thereto, and such service is or was provided on the applicable
base date and at all times thereafter by an independent
contractor pursuant to a contract or agreement with the owner.
Where, however, on the applicable base date or at any time
subsequent thereto, there is or was a separate charge, and there
is or was common ownership, directly or indirectly, between the
operator of such service and the owner, or the service was
provided by the owner, any increase, other than the charge
provided in the initial agreement with a tenant to lease, rent or
pay for such service, shall conform to the applicable rent
guidelines rate. However, notwithstanding such common ownership,
where such service was not provided primarily for the use of
tenants in the building or building complex on the applicable
base date or at any time subsequent thereto, such increases shall
not be subject to any guidelines limitations.
The Commissioner is of the opinion that provision of the cabanas is in the
nature of a recreational facility and thus a required ancillary service
pursuant to Section 2520.6(r) (3). Further the record shows that on the
applicable base date for the subject premises and for some time subsequent
thereto, the cabana service was provided by building management and not by
an independent contractor. In addition the record shows that the cabana
service is provided primarily for the use of tenants in the subject
premises. Therefore rent increases for the cabana service must conform to
the applicable rent guidelines rates pursuant to Section 2520.6(r)(4)(xi).
Regarding the number of tenants versus the number of cabanas, it is not a
criterion of a required service that it be usable by all tenants; a limited
number of parking spaces, for example, can constitute such a service.
"Primarily for the use of tenants" is to be interpreted as distinguishing
between tenants and outsiders, rather than between all tenants and a group
of them. As petitioner does not claim that pool membership was open to
nontenants, its argument regarding primary use of the cabanas must fail.
As to the absence of the cabanas from the registered list of services
provided: under Section 2523.4 of the Rent Stabilization Code, an owner
must maintain all required services (as defined by Section 2520.6(r))
regardless of whether those services are registered. Therefore the tenants
were not bound by the 90-day limitation from the date of initial
registration to file a complaint regarding the cost of the cabana service.
Thus the Administrator did not err in making his own de novo determination
as to whether these cabanas are required and hence rent-stabilized.
With regard to the assertion that each cabana could have been considered
"vacant" after each summer and thus subject to an annual vacancy increase,
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the Commissioner is of the opinion that guideline vacancy increases are not
applicable to the seasonal renting of ancillary recreational facilities
such as pools or cabanas.
With regard to the owner's contention that it is entitled to a major
capital improvement rent increase for pool work and work done to the
cabanas, the owner must file an application with the DHCR and prove such
entitlement before collecting a rent increase for such alleged work.
There is merit, on the other hand, to petitioner's position regarding
treble damages. If an owner proves before the Administrator that the
overcharge was not willful, treble damages are not to be imposed. Here
there was a reasonable basis--that the cabanas were an ancillary service
to an ancillary service (the pool) -- for the owner to have believed that
the cabana rentals were not subject to stabilization despite the fact that
a prior owner treated the service as rent stabilized. Therefore the
Commissioner will remove the treble-damages penalty and will instead assess
interest on the actual overcharge collected.
The Commissioner hereby determines that the owner collected overcharges of
$74.10. Upon expiration of the period for seeking review of this order
pursuant to Article 78 of the Civil Practice Law and Rules, not in excess
of 20 percent per month of the overcharge may be offset against any rent
thereafter due the owner, until that overcharge has been recouped. The
tenant may add to the overcharge, interest at the rate payable on a
judgement pursuant to section 5004 of the Civil Practice Law and Rules,
from the date of the Rent Administrator's order to the date of the
Commissioner's order.
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 twelve
equal monthly installments. Should the tenant vacate after the issuance of
this order or have already vacated, said arrears shall be payable
immediately.
The owner is directed to adjust subsequent rents for "cabanas" to an amount
no greater than that determined in this order plus any lawful increases.
THEREFORE, in accordance with the Rent Stabilization Law and Code, it is
ORDERED, that this petition be, and the same hereby is, granted to the
extent set forth above, the Rent Administrator's order being hereby
modified to the same extent.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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