DG410230RT
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. DG410230RT
: DISTRICT RENT ADMINISTRATOR'S
Sal Viviano DOCKET NO. L003739R
OWNER: Two Associates/
WGS Management
PETITIONER :
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ORDER AND OPINION REMANDING PROCEEDING FOR FURTHER PROCESSING
On July 20, 1989, the above-named tenant filed a petition for
administrative review of an order issued on June 15, 1989 by a District
Rent Administrator concerning the housing accommodations known as 262 West
22nd Street, Apartment No. 15, New York, New York, wherein the
Administrator determined that no overcharged occurred because when the
tenant took occupancy of the subject apartment the owner had created a new
dwelling unit and was entitled to a first rent.
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 administrative appeal.
This proceeding was commenced by the filing of an overcharge complaint.
The tenant stated, among other things, that he took occupancy of the
subject apartment on July 1, 1985 at a monthly rental of $795.00 and that
the prior tenant paid $96.27 per month. The tenant acknowledged that the
subject apartment had been renovated and had several new appliances, but
claimed that the workmanship and materials were shoddy and that the cost
of the renovations could not have accounted for the rental increase.
In its answer to the petition, the owner alleged that this tenant had no
standing to challenge the initial rent because he was the first tenant
after vacancy decontrol and could only challenge his initial rent via a
fair market rent complaint. The owner concluded that because the tenant
was personally served with the initial apartment registration form and the
DC-2 notice, and because no fair market rent appeal was filed, the
overcharge complaint should have been dismissed. The owner submitted a
copy of the tenant's first lease in which the tenant acknowledged that he
had been personally served with the RR-1 and DC-2 forms and a managing
agent's affidavit confirming the personal service.
In the alternative, the owner alleged that even if the Division of Housing
and Community Renewal (DHCR) is of the opinion that the DHCR has the
authority to examine the first stabilized rent, it would still be a lawful
first stabilization rent. The owner alleged that the renovations made
during the vacancy period prior to the tenant's occupancy were of such a
substantial nature as to constitute a new dwelling unit not in existence
in its present form prior to the occupancy by this tenant, and the owner
DG410230RT
was, therefore, allowed to charge a first stabilized rent. In support of
this position, the owner alleged that the former unit, which was
classified as a Old Law Tenement, did not contain a toilet and the former
tenant used a hallway water closet. The "new" apartment contained a full
bathroom, augmented kitchen area, closet and loft bed as well as new
carpeting and bathroom tiles at a cost of over $20,000. The owner also
alleged that he made a substantial number of building-wide capital
improvements at costs exceeding $40,000.
During the course of the proceeding before the Administrator the owner
submitted the following documentation to bolster its argument: (1) the
current Certificate of Occupancy which indicated that the subject building
was formerly an Old Law Tenement and now consisted of class "A" apartments
exclusively; (2) floor plans, allegedly depicting a likeness of the
subject apartment before and after these renovations; (3) copies of
contractor's plans, invoices and cancelled checks for work both inside
the subject apartment and building-wide; (4) two contractors' affidavits
certifying the in-apartment renovations.
Finally, the owner made a third alternative argument involving the
inclusion of an allowance for vacancy improvements if any calculation of
the initial lawful stabilization rent were made by DHCR and asserted that
under no circumstances should treble damages be assessed on an overcharge,
if any.
In the Administrator's order, the Administrator determined that, based on
the evidence, and taking into account all factors bearing on the equities
involved, it was determined that the subject apartment did not previously
exist in its present form and the owner was entitled to a first rent of
$795.00 per month. Subsequent rent increases were within rent guidelines
and no overcharges were collected.
In his petition for administrative review, the tenant states, among other
things, he has been denied due process because he did not see the
documents submitted by the owner in the proceeding before the
Administrator and further states that he believes the owner may have
submitted false information about the apartment and its renovations.
In its answer to the petition for administrative review, the owner
reasserts the arguments made below and resubmits copies of the documents
which constituted the owner's supporting evidence in the proceeding before
the Administrator. In addition, the owner asserts that the tenant's
petition for administrative review was filed in an untimely manner. This
answer to the petition for administrative review was forwarded to the
tenant.
Subsequently, the tenant, through his authorized representative, filed a
request for reconsideration and various other supplemental pleadings. The
request for reconsideration was denied. All supplemental pleadings filed
by the tenant are made part of the record and are being fully considered
by the Commissioner in this Order and Opinion.
In substance, the tenant claims that the Administrator erred by processing
this case as a rent overcharge instead of a fair market rent appeal. The
tenant goes on to address the merits of the case in a point-by-point
manner. The tenant argues, among other things, that the addition of a
toilet is not enough to warrant an uncontested first rent.
DG410230RT
The Commissioner is of the opinion that this petition for administrative
review should be remanded for further processing.
The Commissioner finds that this petition for administrative review was
filed in a timely manner. The postal cancellation stamps indicates that
the petition was mailed to the DHCR on July 20, 1989 which is within the
permissible 35 days period from the date of the issuance of the
Administrator's order.
The Commissioner is of the opinion that the Administrator erred in his
determination that the owner was entitled to collect a first rent from the
tenant. Where a dwelling unit is substantially altered to the extent that
a new unit is created the owner is entitled to a first rent. To avoid
possible abuse of this procedure by owners, both DHCR and the courts have
strictly interpreted the term "substantially altered." It is the well-
established policy of the DHCR that for an owner to be entitled to collect
a first rent the exterior walls of the apartment must be changed to create
a unit of new dimensions along with renovations made inside the unit. An
owner is not permitted to charge a first rent if the apartment remains the
same size regardless of the improvements made within the subject
apartment. In the instant case all the parties acknowledge that no
changes were made to the outer dimensions of the subject apartment.
Accordingly, the owner was not entitled to a first rent.
The Commissioner is further of the opinion that the DHCR may, in its
discretion, convert an overcharge complaint to a fair market rent appeal
in accordance with Section 2527.2 of the Rent Stabilization Code. In the
instant case, it is acknowledged that the complainant was the first tenant
after vacancy decontrol, was served with the DC-2 form, and that his
complaint was filed within 90 days of this service. Accordingly, this
remanded proceeding will be processed as a fair market rent appeal. The
owner will be given a full opportunity to submit comparable apartments and
the Administrator will fully consider the alleged vacancy improvements in
this reprocessing.
A copy of this order and opinion is being sent to the current tenant.
THEREFORE, in accordance with the provisions of the Rent Stabilization Law
and Code, it is
ORDERED, that this petition for administrative review be, and the same
hereby is, granted to the extent of remanding the proceeding to the Rent
Administrator for further processing in accordance with this order and
opinion, and that the Rent Administrator's order be, and the same hereby
is, revoked.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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