DF610112RO

                                  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.: DF610112RO

       5700-5800-5900 Arlington              DRO DOCKET NO.:  BK610040R
       Avenue Association
                                             TENANT: M. & J. Kante               
                            PETITIONER    
      ------------------------------------X                             

            ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                       IN PART

      On June 6, 1989, the above-named owner 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. 6J 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 in 1986 the charge for "the swimming pool" had 
      been $120.00 that the owner was unlawfully charging $190.00 for the 1987 
      season.

      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 
      for the season, and that the overcharge had been willful, so that it had to 
      be trebled for payment to the tenant.







          DF610112RO


      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.

      In answer to the owner's petition, the tenants stated in substance that the 
      prior owner did abide by the Rent Stabilization Law and Code in charging 
      rent increases for the cabanas, and that the owner herein should have also.

      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 


          DF610112RO

           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 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, 







          DF610112RO

      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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