EA 410129-RO and EA 410277-RT
                                  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 SJR 5985 (Mandamus)
          IN THE MATTER OF THE ADMINISTRATIVE  ADMINISTRATIVE REVIEW
          APPEALS OF                           DOCKET NO.: EA 410129-RO;
                                                           EA 410277-RT
                                               
          Metropolitan Life Insurance          DISTRICT RENT ADMINISTRATOR
          Co. (owner),                         DOCKET NO.: ZAG-410140-R
          and Michael Borak (prime tenant),
           
                                  PETITIONERS  Subtenant: Richard Miller  
          -----------------------------------X

                 ORDER AND OPINION TERMINATING PROCEEDING IN DOCKET
              NO. EA 410129-RO AND DENYING PETITION FOR ADMINISTRATIVE
                               REVIEW NO. EA 410277-RT

          On January 22, 1990 the  above  named  petitioner-owner  filed  a
          Petition for Administrative  Review  (Docket  No.  EA  410129-RO)
          against an  order  issued  on  December  27,  1989  by  the  Rent
          Administrator,  92-31  Union  Hall  Street,  Jamaica,  New   York
          concerning housing accommodations known as Apartment  7A  at  651
          East  14th  Street,  New  York,  New  York   wherein   the   Rent
          Administrator determined  that  the  owner  had  overcharged  the
          tenant.  In response to the petition, which  contended  that  the
          issue was a prime tenant/subtenant overcharge in which the  owner
          had no involvement, an amended order  was  issued  on  March  19,
          1990, finding the prime tenant solely liable for  the  $42,545.52
          in overcharges for the period from June  1,  1984  to  March  31,
          1986.  On January  31,  1990  the  above  named  petitioner-prime
          tenant had filed a Petition for Administrative Review (Docket No. 
          EA 410277-RT) against  the  original  order.   That  petition  is
          regarded as also being an appeal of the amended order, since  the
          gravamen of the entire proceeding which resulted in the  original
          order was whether or not  the  prime  tenant  had  overcharged  a
          subtenant, and since the amended order finally  dealt  with  that
          actual issue.

          Subsequent thereto, the subtenant filed a Petition in the Supreme 
          Court pursuant to Article 78 of the Civil Practice Law and  Rules
          requesting that an expeditious determination of the Petitions for 
          Administrative Review be mandated.  The proceeding  was  remitted
          to the Division of Housing and Community Renewal (DHCR), and  the
          petitions are herein decided on the merits.
          As these petitions involve common grounds of law  or  fact,  they
          are being decided in one order and opinion.

          The issue in these appeals is whether  the  Rent  Administrator's
          order was warranted.

          The applicable sections of the Law are Section 26-516 of the Rent 
          Stabilization Law and Sections 2520.13, 2525.6(b)  and  2526.1(a)
          of the Rent Stabilization Code.







          EA 410129-RO and EA 410277-RT
          The Commissioner has reviewed all of the evidence in  the  record
          and has carefully considered that portion of the record  relevant
          to the issue raised by the administrative appeal.

          This proceeding was originally commenced by the filing  in  July,
          1986 of a rent overcharge complaint by the tenant,  in  which  he
          stated that he had commenced occupancy  on  June  1,  1984  as  a
          subtenant of Michael Borak at a  rent  of  $1,200.00  per  month,
          although the prime lease rent was $553.72;  that  Mr.  Borak  was
          married and never lived in the apartment during the time  of  the
          sublease; and that Mr. Borak required him to sign an agreement to 
          sublease the apartment.  The tenant included an agreement, signed 
          by him and Mr. Borak, stating that:

               I, Michael Borak, residing at:
               651 East 14th Street, Apt. 7A,
               New York, New York do hereby agree to have 
               Richard Miller reside at same  address  as  my  Roommate
               for a period of no less than  12  months  (1  yr.)  from
               June 1, 1984 to May 31, 1985.  After the initial  period
               (June  1,  1984  -  May  31,  1985)  either  party   may
               terminate this understanding with  a  minimum  of  three
               (3)  months  notice,  either  in  writing,   or   orally
               transmitted.
               The amount will be $1200 per month.

          At the bottom of  the  agreement  Mr.  Borak  included  his  home
          address and phone number in New Jersey.

          In  answer  to  the  complaint,  Mr.  Borak  contended  that  the
          $1,200.00 monthly payment was  comprised  of  $553.72  for  rent,
          $6.50  for  an  intercom,  $500.00  towards  the  acquisition  of
          furniture, and $139.78 as  a  service  charge;  that  the  tenant
          requested the signed agreement to protect his rights against  any
          attempted eviction; that the arrangement continued for 24 months, 
          at which time the tenant abruptly informed the prime tenant  that
          he was terminating the arrangement and vacating; that the  tenant
          moved some of the furniture out of the apartment; that the  prime
          tenant, when asking the tenant about his intentions regarding the 
          rest of the furniture, was told that the tenant was taking him to 
          court; and that the prime tenant  had  to  pay  the  owner  three
          months additional rent due to the tenant's failure to remove  his
          personal property.  With his answer the prime tenant  enclosed  a
          list of what he contended was $12,000.00 in furniture  and  other
          items purchased by the tenant, and a list of  what  he  contended
          the tenant removed upon vacating.

          In reply, the tenant  asserted  that  he  subleased  a  furnished
          apartment, that he had no agreement to  purchase  any  furniture,
          and that he left all the  furniture  in  the  apartment  when  he
          vacated.  With his  reply  the  tenant  enclosed  cancelled  rent
          checks to the order of the prime tenant,  including  a  $1,200.00
          check for a security deposit.

          In an order issued on December 27, 1989  the  Rent  Administrator
          determined that the lawful stabilized rent duri g  the  month-to-
          month tenancy of the complainant was $590.91 per  month  ($553.72
          increased  by  10%  for  a  furnished  sublet),  and   that   the
          complainant had been overcharged in  the  amount  of  $42,545.42,






          EA 410129-RO and EA 410277-RT
          including treble damages, during his 24 month tenancy.  The order 
          named Metropolitan Life Co. as the owner.  After the owner  filed
          its appeal against the order, an amended order, naming the  prime
          tenant as being solely responsible for the overcharge, was issued 
          on March 16, 1990.

          In an affidavit in support of  his  petition,  the  prime  tenant
          repeats the assertions made in his answer to the  complaint,  and
          additionally contends in substance that he would  send  his  rent
          check to Metropolitan after the tenant had forwarded the  monthly
          rent bill, slipped under the door of the  subject  apartment,  to
          the prime tenant's address in New Jersey, and that

               In  or  about  the  end  of  May  1986,  I  entered  the
               Apartment to inspect the  premises  in  preparation  for
               respondent's departure.  I was shocked to discover  that
               the  place  was  an  absolute  mess  and  that   certain
               furniture had been removed.  Subsequently, I  telephoned
               Mr. Miller the following day and asked him when  he  was
               going to clean the Apartment and what  had  happened  to
               the missing furniture.  Mr. Miller got  very  angry  and
               replied that "I'll see you in  court."   Prior  to  this
               conversation,  Mr.  Miller  and  I  always  had  amiable
               discussions   without   any   conflict.     Respondent's
               behavior caused me to believe that he had  planned  this
               suit from the outset of  the  sublet  and  that  he  had
               bided his time until the termination of the sublease  to
               increase the possible amount which he could obtain  from
               me.

          The prime tenant also contends in substance  that  the  subtenant
          has  failed  to  return  the  approximately  $2,000.00  worth  of
          furniture which  he  removed  from  the  apartment.   In  another
          affidavit in support of the petition, the prime tenant's attorney 
          asserts  in  substance  that  the  subtenant's  bad   faith   and
          unconscionable conduct in seeking a windfall by knowingly  paying
          an overcharge in an attempt to recover treble damages should  not
          be countenanced by the DHCR,  since  his  behavior  subverts  the
          purpose of the Rent Stabilization Law; that, while there  are  no
          reported court decisions construing Section 2525.6(b) of the Rent 
          Stabilization  Code  where  a   subtenant   knowingly   pays   an
          unlawfully high rent  and  then  sues  for  treble  damages  upon
          conclusion of the sublet,  the  court  in  Hurst  v.  Miske,  505
          N.Y.S.2d 984 (N.Y. City Civ. Ct. 1986) declined to  grant  treble
          damages to a subtenant in a rent-controlled apartment  where  the
          subtenant knowingly continued to pay an overcharge throughout the 
          sublease and thus had "unclean hands"; that New York courts  have
          determined that equitable considerations require that they ignore 
          the "letter  of  the  law"  to  prevent  individuals  from  being
          unjustly enriched by their wrongful acts; that the subtenant knew 
          from the outset of his sublease that  he  was  being  charged  in
          excess of the lawful stabilization rent; that he remained for the 
          full two year sublet period anyway;  that  he  removed  furniture
          from the apartment even though claiming that the rent he paid had 
          no relation to the furniture owned by the prime tenant; that when 
          he was questioned by the prime tenant regarding his intentions to 
          clean the apartment he replied "I'll see you in court", and filed 
          an overcharge complaint less than  six  weeks  later;  that  this
          indicates that he acted with premeditation in  remaining  in  the






          EA 410129-RO and EA 410277-RT
          apartment  to  the  conclusion  of  the  sublet;  that  the  Rent
          Stabilization Law and Code were not meant to provide windfalls to 
          wrong-doers who  seek  to  circumvent  the  equitable  principles
          underlying the law; that  the  Administrator's  order  should  be
          reversed; and that the petitioner should  be  awarded  an  amount
          equivalent to the value of  the  furniture  which  the  subtenant
          removed from the apartment.

          The Commissioner is of the opinion that the proceeding in  Docket
          No. EA 410129-RO should be terminated, and that the Petition  for
          Administrative Review No. EA 410277-RT should be denied.

          The appeal by the owner, Metropolitan Life Insurance Company,  is
          being terminated as moot because the amended order of  March  16,
          1990 gave the owner everything it had asked for in  its  petition
          against the original order of December 27, 1989.

          With regard to the prime tenant's petition, section 2525.6 of the 
          Rent Stabilization Code provides in pertinent part that a  tenant
          who maintains an apartment as his or her primary  residence,  and
          who intends to occupy  it  as  such  at  the  expiration  of  the
          sublease, may sublease it for no more than  the  legal  regulated
          rent, plus a surcharge of no more than 10% if  the  apartment  is
          sublet fully furnished.  When a tenant charges a higher rent  the
          subtenant shall be entitled to treble damages on the overcharges.

          By its terms the May 22, 1984 agreement between the  parties  was
          for the subtenant to reside as the prime tenant's  "roommate"  at
          an "amount" of $1,200.00  per  month.   While  the  prime  tenant
          contends that this amount included  $500.00  for  furniture  (and
          $139.78 for a "service charge"), side agreements for  payment  of
          other obligations cannot be part of the rent, since the rent laws 
          could easily be evaded by claiming that what appeared  to  be  an
          unlawful rent actually  included  various  other  payments.   The
          prime tenant's subleasing of the apartment, without  the  owner's
          consent or even knowledge, for $1,200.00 when he was  paying  the
          owner only $560.22 evinces a profiteering intent that  cannot  be
          countenanced.

          While this order disallows furniture  payments  as  part  of  the
          rent, the Commissioner considers it unlikely that  the  $1,200.00
          payments were even meant to include them.  It might  be  expected
          that parties to a purported agreement to transfer  the  ownership
          of $12,000.00 worth of furniture would put something  in  writing
          to safeguard their interests, but the record contains no evidence 
          for the sale of furniture, other than  contentions  made  by  the
          prime tenant after being served with  the  overcharge  complaint.
          In addition,  while  the  prime  tenant  in  his  answer  to  the
          complaint, and his attorney in an affidavit  in  support  of  the
          appeal, contended that the prime  tenant  asked  the  complainant
          after he vacated about his intentions to remove the rest  of  the
          furniture, the prime tenant in his affidavit states that  he  was
          shocked in May, 1986 to discover that some furniture was removed, 
          and that he asked  the  complainant  what  had  happened  to  the
          missing furniture.  Since 24 monthly  payments  of  $500.00  each
          would have completely paid the claimed $12,000.00 selling  price,
          and since the prime tenant would have had no way to know that the 
          subtenant would subsequently file a complaint  and  contend  that
          there was no agreement to purchase furniture, it is hard  to  see






          EA 410129-RO and EA 410277-RT
          why the prime tenant would be shocked  by  the  removal  of  some
          furniture since the prime tenant's contentions about an agreement 
          would mean that  all  the  furniture  was,  by  that  point,  the
          property of the subtenant.

          Because the prime  tenant's  allegations  about  the  removal  of
          furniture are more a matter between the  parties  than  they  are
          matter of "rent", the Commissioner does  not  find  it  necessary
          to inquire into them  in  this  order.   This  order  is  without
          prejudice to any rights the prime tenant may have to pursue  such
          claim  against  the   subtenant   in   a   court   of   competent
          jurisdiction. 

          With regard to the imposition of treble damages,  Section  2525.6
          provides for the mandatory imposition of treble  damages  when  a
          prime tenant charges a subtenant a higher  rent  than  the  prime
          tenant is entitled to. 

          Section 2520.13  of  the  Rent  Stabilization  Code  provides  in
          pertinent part that a tenant may not waive  the  benefit  of  any
          provision of the Rent Stabilization Law or Code.  Thus, even if a 
          tenant were to agree  to  pay  a  rent  higher  than  the  lawful
          stabilization rent, but lower than an unregulated rent, to obtain 
          an apartment in a tight housing market,  the  lawful  rent  would
          not be affected by the rent actually paid.  The prime  tenant  is
          attempting to avoid two-thirds of the  mandatory  treble  damages
          penalty by talking about the  subtenant's  "wrongful"  acts,  and
          effectively arguing that the act  of  willfully  overcharging  is
          somehow more acceptable, and less objectionable, if a  tenant  is
          aware that the rent is unlawfully high  but  pays  it  anyway  in
          order to have a place to live.  The imposition of treble  damages
          is designed mainly to deter owners  from  overcharging;  and  the
          purportedly "wrongful" failure of the subtenant to object to  the
          unlawfulness of the rent charged until after  he  vacated  should
          not save the prime tenant from mandatory treble damages.   To  do
          otherwise could gut the deterrent effect of the  penalty,  as  an
          owner could often argue that tenants knew or  should  have  known
          that they were being overcharged, and that therefore  such  owner
          should not have to refund any more than just the actual  unlawful
          overcharges.

          Several of the court cases cited by the prime  tenant's  attorney
          in support of his argument that the subtenant's  "unclean  hands"
          make him undeserving of reaping the "windfall" of treble  damages
          involve situations where a tenant could be considered to be doing 
          something affirmatively wrong, rather than just passively failing 
          to object to someone else's wrongful acts.  In the  present  case
          there is no evidence, or contention, that the  subtenant  somehow
          entrapped the prime tenant into giving him  a  sublease  (without
          the owner's consent or knowledge) at a rent approximately  double
          the lawful rent.  The rent control case of Hurst v. Miske is  not
          applicable  o  this  case  because  Hurst   concerned   a   rent-
          controlled  apartment  and  the  instant  case  concerns  a  rent
          stabilized apartment.  Under rent control, the  courts  have  the
          primary duty of determining  whether  treble  damages  should  be
          imposed; under rent stabilization,  the  DHCR  is  authorized  to
          impose treble damages.  Second, as discussed above the imposition 
          of treble damages where a prime tenant overcharges a subtenant of 
          a rent stabilized apartment is mandatory.  Unlike the case  where






          EA 410129-RO and EA 410277-RT
          an owner overcharges a prime tenant and is permitted to show by a 
          preponderance  of  the  evidence  that  the  overcharge  was  not
          willful, thereby avoiding the imposition  of  treble  damages,  a
          prime tenant does not have this opportunity.
          Even Hurst assessed damages of $15,000.00  on  an  overcharge  of
          $10,431.00.  Because it appears that approximately  $2,500.00  of
          the overcharges for the relevant period represented  arrears  not
          yet paid by the subtenant, the $15,000.00 award was approximately 
          twice the overcharges actually paid by that subtenant.  Based  on
          the reasons given previously  in  this  order,  the  Commissioner
          declines to follow the example of this one Court, and upholds the 
          Administrator's imposition of mandatory treble damages.

          Furthermore, after the subtenant filed his complaint,  the  prime
          tenant had an opportunity to refund all overcharges  and  thereby
          relieve himself of the penalty of treble damages.  His failure to 
          do so cannot be ascribed to the actions of the subtenant.

          This order may, upon the expiration of the period  in  which  the
          prime tenant, Michael Borak may institute a  proceeding  pursuant
          to Article seventy-eight of the civil practice law and rules,  be
          filed and enforced by the subtenant against the prime  tenant  in
          the same manner as a judgment.

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

          ORDERED, that the proceeding in Docket No. EA 410129-RO  be,  and
          the same hereby is, terminated; that Petition for  Administrative
          Review No. EA 410277-RT be, and the same hereby is,  denied;  and
          that the Rent Administrator's amended order of March 16, 1990 be, 
          and the same hereby is, affirmed.  The total  overcharge  of  the
          subtenant by the prime tenant is $42,545.52.

          ISSUED:

           
                                                       JOSEPH A. D'AGOSTA
                                                       Deputy Commissioner




    

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