DG410025RO
                                  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. DG 410025 RO
                                                           
               G.S.L. Enterprises and          DISTRICT RENT ADMINISTRATOR
               Solil Mgmt. Corp.,              DOCKET NO. CK 410047 RP
                                                                            
                                                                           
                                   PETITIONER  TENANT: INA ROMEO         
          -----------------------------------X


            ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                       IN PART


          On July 12, 1989, the above-named  owner  filed  a  petition  for
          administrative review of an order issued on June  9,  1989  by  a
          District Rent Administrator concerning the housing accommodations 
          known as Apartment 5A, 41 West 72nd Street, New York, New York.  

          The Commissioner notes that this proceeding was initiated prior to 
          April 1, 1984.  Sections 2526.1(a)(4) and 2521.1(d) of  the  Rent
          Stabilization Code (effective May 1, 1987), which deal with  rent
          overcharge and fair market rent  proceedings,  provide  that  the
          determination of overcharge  and  fair  market  rent  proceedings
          commenced before April 1, 1984 be based  upon  the  law  or  code
          provisions in effect on March 31, 1984.  Therefore, this proceeding 
          is being determined in accordance with the code in effect on March 
          31, 1984, and any  reference  herein  to  sections  of  the  Rent
          Stabilization Code is to those sections of the code in effect  on
          March 31, 1984.

          The Commissioner has reviewed all of the evidence in the record and 
          has carefully considered that portion of the record relevant to the 
          issues raised by the petition for administrative review.

          This proceeding was begun on March 29, 1984 upon the filing of  a
          fair market rent appeal by the tenant under Docket No. 
          L 3115884 RT.

          In that case, the Administrator determined  that  the  owner  had
          collected excess rents of $31,526.21.  Further, the Administrator 
          found, by using the special guidelines only, that the tenant's 















          DG410025RO




          initial lawful stabilization rent should have  been  $486.42  per
          month and not $1,300.00 per month as was collected by the  owner.
          This determination was based on the owner's failure to respond to 
          the notices mailed by the Administrator.  That order was issued on 
          January 23, 1986.

          The owner filed a petition for administrative review of the January 
          23, 1986 order under Docket No. ARL 08312 L.  In its petition the 
          owner contended that it had never been served in this fair market 
          rent appeal.  Included with this petition for review was allegedly 
          sufficient documentation to allow for a comparability  study  and
          evidence of various vacancy improvements made by the owner.

          On May  15,  1987,  the  Commissioner  denied  the  petition  for
          administrative  review  under  Docket  No.  ARL  08312  L.    The
          Commissioner determined that all notices had been properly mailed 
          by the Administrator.

          As the result of a proceeding  under  Article  78  of  the  Civil
          Practice Law and Rules, the Supreme Court of the State of New York 
          ordered the Division of Housing and Community Renewal  (DHCR)  to
          reprocess this proceeding and consider all the submissions made by 
          the owner.

          The proceeding was reopened under Docket No. CK 410047  RP.   The
          owner was supplied with forms and schedules and provided a complete 
          opportunity to submit any data it wished to allow the Administrator 
          to conduct an appropriate comparability study.

          In its answer the owner submitted the completed schedule supplied 
          by DHCR.

          On March 7, 1989, the Administrator notified the owner  that  the
          completed schedule it had submitted required the owner to  submit
          copies of the DC-1 notices and proof of  service  of  these  DC-1
          notices on the first stabilized tenant  in  each  of  the  listed
          comparable apartments.

          The owner did not submit the requested documents.

          In the order here under review, the Administrator ruled that  the
          owner had failed to furnish sufficient comparability data.  Again, 
          by using only the special guidelines, the Administrator determined 
          the tenant's initial legal regulated rent to be $486.42 and that 











          DG410025RO


          the owner had collected excess rents of $31,526.21.  Further, the 
          Administrator found no basis  for  allowing  vacancy  improvement
          increases.

          In its petition for administrative review the owner requests that 
          the Administrator's order be reversed.  The owner alleges that this 
          proceeding should have been determined under the new code and not 
          under the old code.  As such, the owner concluded that it would not 
          have been required to produce rent records more than  four  years
          old.  The owner  cites  a  variety  of  cases,  including  J.R.D.
          Management Corp. v. Eimicke, 148 A.D. 2d 610, 539  N.Y.S  2d  667
          (App. Div., 2d Dep't 1989), to support its contention  that  this
          proceeding should have been decided under the new code.  Further, 
          in the alternative, the owner alleges that even under the old code, 
          the Administrator erred in his order.  The owner asserts that the 
          Administrator was supplied with sufficient documentation to make a 
          comparability study and that the Administrator was supplied  with
          sufficient documentation to permit vacancy improvement increases.

          The  tenant  responded  with  a  thorough  and  vigorous  answer.
          Additionally, the tenant requests that interest charges be assessed 
          by the DHCR against the owner.

          After careful consideration, the Commissioner is of  the  opinion
          that this petition should be granted in part.

          The owner alleges that this proceeding should have been determined 
          under the new code.  As noted above, Section 2521.1(d) of the Rent 
          Stabilization Code, which deals with fair market rent proceedings 
          commenced before April 1, 1984, states that such proceedings shall 
          be based upon the law or code provisions in effect on  March  31,
          1984.  The owner alleges that the case of J.R.D. Management Corp. 
          v. Eimicke supports its allegation.  This allegation  is  totally
          without merit and is dismissible for several distinct reasons.  The 
          Commissioner is of the opinion that the JRD case is not applicable 
          in this proceeding.  The change effected by Section 14(g) of  the
          Omnibus Housing Act and Section 26-516(g) of the Rent Stabilization 
          Law, as applied in the JRD case, only  involves  rent  overcharge
          proceedings, and does not apply  to  fair  market  rent  appeals.
          Section 26-513 of the Rent Stabilization Law, which deals with fair 
          market rent appeals, continues to provide for determination of the 
          fair market rent from the date of the initial stabilized tenancy. 
          Additionally,  the  Commissioner  notes  that  the  JRD  case  is
          applicable in the Second Department only.  This proceeding is in 






          the First Department where the case of Lavanant v. DHCR, 148 A.D. 












          DG410025RO

          2d 185, 544 N.Y.S. 2d 331 (App.  Div.  1st  Dept.  1989)  is  the
          determinative authority.  Finally, the owner was not required  to
          submit comparability more than four years old but had the option to 
          do so.  Accordingly, the Rent Administrator's order was warranted. 
          The Commissioner also notes that none of the other cases cited as 
          authority by the owner dealt with fair market rent appeals.

          However, the Commissioner is of the opinion that the Administrator 
          erred when he found that the owner had failed to supply sufficient 
          usable comparability data.  The owner had listed three apartments 
          in the schedules from  the  "A"  line  which  were  proposed  for
          comparables (apartments 7A, 11A, 12A).  The Administrator requested 
          that the owner provide proof of service of the DC-1 form for these 
          three apartments.  In fact, such proof of service of a DC-1  form
          was only required for apartment 7A.  The owner's failure to produce 
          such proof correctly eliminated apartment 7A from consideration in 
          the comparability study.  Apartments 11A and 12A should have been 
          considered since no service of a DC-1 (or DC-2 notice) was required 
          when these units became decontrolled.

          Averaging the June 30, 1974 rents for apartments 11A and 12A  and
          updating that amount by annual guideline increases plus an increase 
          for the applicant's one year vacancy lease  term  results  in  an
          updated comparable amount of $613.20.

          Further, the Commissioner is of the  opinion  that  Administrator
          should have allowed a rent increase for the vacancy improvements. 
          It has been long-standing DHCR  policy  that  an  owner  claiming
          vacancy improvements has a burden  of  documenting  their  costs.
          Policy Statement 90-10 enumerated the methods by which  an  owner
          could meet this burden of proof.   Adequate  documentation  would
          require cancelled checks, or invoice receipts, or a signed contract 
          agreement, or a contractor's affidavit.  In this case, the owner's 
          method of documentation of the vacancy improvements was invoices. 
          This documentation is bolstered by the  tenant's  acknowledgement
          that vacancy improvements had been made.

          Accordingly, the Commissioner's new calculations conclude that the 
          Initial Legal Regulated Rent should have  been  $628.83  and  not
          $486.42 as  determined  by  the  Administrator.   The  amount  is
          calculated by taking the average of the amount determined by  the
          special guidelines method ($486.42) and the updated comparability 
          study amount ($613.20) and adding to that average the rent increase 




          allowable for vacancy improvements ($3,160.90  divided  by  40  =
          $79.02).
           
          In the absence of a tenant's petition for review, the Commissioner 
          will not consider the tenant's request that interest  charges  be






          DG410025RO

          assessed on the excess rents that the owner has collected.  Even if 
          this issue were to be considered, the Commissioner notes that  no
          section of the Rent Stabilization Law or Code authorizes the rent 
          agency to assess interest penalties in fair market rent appeals.

          Accordingly, the Initial Lawful Regulated Rent should  have  been
          $628.83.  The lawful stabilization rent for the lease  period  of
          January 20, 1984 to January 19, 1986 should have been $672.85.  The 
          owner is advised that all subsequent leases should  be  based  on
          these figures with appropriate guidelines increases.   The  total
          excess rent collected through January 19, 1986 was $26,007.79 which 
          amount includes excess security. 

          The owner is directed  to  roll  back  the  rent  to  the  lawful
          stabilized rent consistent with this decision and  to  refund  or
          fully credit against future rents over a period not exceeding six 
          months from the date of receipt of this order,  the  excess  rent
          collected by the owner.

          In the event the owner does not take appropriate action to comply 
          within sixty (60) days from the date of this order, the tenant may 
          credit the excess rent collected by the owner  against  the  next
          month(s) rent until fully offset.

          The owner is directed to reflect the findings and  determinations
          made in this order on all future registration statements, including 
          those for the current year if not already filed, citing this order 
          as the basis for the change.  Registration statements already  on
          file, however, should not be amended to reflect the findings  and
          determinations made in this order.

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

          ORDERED, that this petition be, and the same hereby is, granted in 
          part, and that Rent Administrator's order be, and the same hereby 
          is, modified in accordance with order and opinion.

          ISSUED:
           
                                                  JOSEPH A. D'AGOSTA
                                                  Deputy Commissioner 


    

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