DJ610161RO
                             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.: DJ610108RO

           5700-5800-5900 Arlington          DRO DOCKET NO.: BJ610524R
           Avenue Association
                                             TENANT: Ilona Henderson          
                           PETITIONER    
      ------------------------------------X                             


          ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                     IN PART

      On June 5, 1989, the above-named owner filed a Petition for 
      Administrative Review against an order of a Rent Administrator issued on 
      May 12 and amended on May 23, 1989, concerning the housing 
      accommodations known as Apt. 20F 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 that the rent charged for her "cabana" had been 
      raised impermissibly. 

      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 at a seasonal rate to be a 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 foregoing, the seasonal rental of 
      cabanas is not subject to the Rent Stabilization Code.

      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 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 







          DJ610161RO


      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 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 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 


          DJ610161RO


           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, 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 







          DJ610161RO


      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 judgment 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 shall be permitted to pay off the arrears in 
      24 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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