STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
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
ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
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
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 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
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
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
the owner had collected excess rents of $31,526.21. Further, the
Administrator found no basis for allowing vacancy improvement
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.
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 =
In the absence of a tenant's petition for review, the Commissioner
will not consider the tenant's request that interest charges be
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,
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.
JOSEPH A. D'AGOSTA