EA 410297 RO;
          EA 410224 RT
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                              JAMAICA, NEW YORK   11433

          ----------------------------------X     S.J.R. 6088
          APPEAL OF                               DOCKET NOS.: EA 410297-RO
                                                               EA 410224-RT
                A. RUTH AND SONS, OWNER,
                                                  DOCKET NO.:  CK 410050-R

                              FOR ADMINISTRATIVE REVIEW
                           AFFIRMING ADMINISTRATOR'S ORDER

          On January 31, 1990, the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on 
          December 28, 1989, by the Rent Administrator concerning the housing 
          accommodations known as 50 East 96th Street, New York, New York, 
          Apartment No. 5D, wherein the Rent Administrator determined the 
          fair market rent pursuant to the special fair market rent 
          guidelines promulgated by the New York City Rent Guidelines Board 
          for use in calculating fair market rent appeals.

          On January 31, 1990, the above-named petitioner-tenant filed his 
          own petition of the same order.

          Subsequent thereto, the petitioner-tenant filed a petition in the 
          Supreme Court pursuant to Article 78 of the Civil Practice Law and 
          Rules in the nature of mandamus requesting that the "deemed denial" 
          of the petitioner's administrative appeal be annulled.  By order of 
          Justice Ciparick dated May 8, 1992 the tenant's petition was 
          granted to the extent of directing the Division of Housing and 
          Community Renewal (DHCR) to determine the tenant's administrative 

          The Administrative Appeal is being determined pursuant to the 
          provisions of Section 2521.1 of the Rent Stabilization Code.

          The issue herein is whether the Rent Administrator's order was 

          EA 410297 RO;
          EA 410224 RT

          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 appeals.

          This proceeding was originally commenced by the filing on October 
          11, 1988 of a rent overcharge complaint by the tenant who stated in 
          substance that he believed his rent was excessive.

          The tenant assumed occupancy of the apartment pursuant to a two 
          year lease commencing May 15, 1988 at a rent of $2,349.00 per 
          month.  The complaint further stated that the owner refused to 
          divulge the rental history of the apartment.

          The owner responded on November 23, 1988 that the apartment had 
          been decontrolled in November, 1987 with the departure of the rent 
          controlled tenant, who had paid $544.82 per month.

          The owner had rented the apartment on December 12, 1987 for 
          $2,349.68 per month and filed a report of statutory decontrol 
          (hereafter R-42).  The owner then stated that the apartment was 
          vacant again as of  April 1, 1988, but was rented to the 
          complainant on May 15, 1988.

          In an amendment to the complaint dated July 31, 1989, along with 
          several other submissions, the tenant requested treble damages for 
          the owner's willful overcharges, which originated with the owner's 
          attempts to circumvent the Rent Stabilization Laws by establishing 
          an "illegal" initial fair market rent.

          The owner was served with the amended complaint and was requested 
          to submit a rental history as well as documentation pertaining to 
          the tenant's challenge of the initial stabilized rent, including 
          proof of service of the DC-2 notice, the RR-1 initial registration, 
          a copy of the Schedule A form, which would include the owner's 
          selection of the rents of comparable apartments, if desired, and 
          any other relevant information, including the cost of apartment 

          In its answer, dated November 29, 1989 the owner submitted 
          documentation of allegedly comparable rents in apartments 2D, 3D, 
          4D and 6D in the subject building, which are in the same line as 
          the subject apartment, as well as the breakdown of the costs of new 
          equipment and improvements to the apartment, including paid 
          receipts and checks totalling $10,701.04.

          In an order issued on December 28, 1989, under Docket Number
          CK 410050-R, the Rent Administrator adjusted the initial legal 
          stabilized rent to $1,047.85 per month, and determined that the 
          tenant had paid a total of $23,129.33 in excess rent and security.  
          The initial legal regulated rent was determined without using the 

          EA 410297 RO;
          EA 410224 RT

          owner's list of comparable apartments in Schedule A because they 
          did not meet the criteria established under Section 2522.3(e)(1).

          In its petition, dated July 30, 1990, the owner contends that it 
          had satisfactorily responded to the tenant's first complaint of 
          November, 1988 and, upon seeing that there was no overcharge, the 
          Administrator should have immediately dismissed the complaint.  
          This was because the initial stabilized tenant, Dr. Hoody, had not 
          challenged the initial rent, which became the lawful rent for any 
          calculation of overcharges, as provided under Section 2521.2(a) of 
          the Rent Stabilization Code.  The owner maintains that the 
          submitted copy of the R-42 and the initial tenant's lease were 
          sufficient proof of this.  Furthermore, since the complainant's 
          rent was actually lower than the initial stabilized rent, there was 
          no overcharge and the complaint should have been dismissed.  
          Secondly, the owner contends that the DHCR has no authority to 
          convert the tenant's overcharge complaint into a fair market rent 
          appeal.  The owner contends that the DHCR improperly directed the 
          owner to serve an amended RR-1 on the complainant, thereby allowing 
          the tenant 90 days to challenge the initial rent, and then 
          converting the complaint into a fair market rent appeal, even 
          though the complainant was not qualified under the Rent 
          Stabilization Law.  Furthermore, since the tenant did not 
          specifically file a fair market rent appeal within 90 days after 
          June 28, 1989, when the amended RR-1 was served, even this illegal 
          action is statutorily time-barred.  Thirdly, the owner contends 
          that it had satisfactorily established the cost of extensive 
          improvements to the apartment which would have allowed a monthly 
          increase of $274.52, but that the DHCR allowed less than half that 
          amount, without explanation.  Finally, the owner contends that the 
          Administrator improperly ignored the owner's comparability data for 
          4 apartments in the same line.  The owner also notes that the 
          tenant has not paid rent for the last 8 months, and a non-payment 
          action has been commenced.

          The tenant's answer, dated April 6, 1990, disputes all of the above 
          contentions by the owner.  Instead of being time-barred from filing 
          a fair market rent appeal, as posited by the owner, the tenant 
          states that he has never received either a DC-2 or an initial 
          registration (RR-1).  The tenant contends that as a result his 
          right to a fair market rent appeal is preserved.  The tenant then 
          proposes that the tenant whom the owner claimed as the initial 
          stabilized tenant was "illusory", and was invented by the owner to 
          charge the subject tenant a very high rental while at the same time 
          denying him an appeal.  However, the tenant continues, since the 
          owner never filed the registration for this non-existent tenant, 
          the subject tenant retains the right to a fair market rent appeal, 
          as preserved under Section 2522.3 of the Code.  Additionally, the 
          tenant continues, the DHCR has broad powers to initiate proceedings 
          under Section 2527.2, and could convert the overcharge complaint 
          into a related fair market rent appeal, especially since both 

          EA 410297 RO;
          EA 410224 RT

          proceedings are challenging the initial stabilized rent.  The 
          tenant also maintains that the DHCR correctly disallowed much of 
          the cost of improvements, since the work was merely deferred 
          maintenance.   In reference to the non-payment claim, the tenant 
          states that it has deposited nearly $20,000 in an escrow fund 
          pending the court's decision.

          The tenant submitted his own petition on January 30, 1990.  The 
          tenant first points out an inconsistency in the subject order; 
          whereas the order states that the initial legal regulated rent is 
          $1,047.85 for the complainant's lease, which commenced on May 15, 
          1988, the calculations chart also lists the same rent as the 
          initial regulated rent but commencing with the prior tenant's lease 
          (Dr. Hoody) commencing on December 15, 1987.  The remainder of the 
          petition lists numerous instances of the owner's alleged willful 
          attempts to deceive the tenant about his rights to a fair market 
          rent appeal and to collect overcharges, with the conclusion that 
          such conduct transforms the proceeding from a "normal" fair market 
          rent appeal proceeding to an overcharge proceeding requiring treble 
          damages.  One example cited by the tenant is when the owner 
          "placed" an "illusory tenant named Dr. Hoody in temporary 
          possession" of the subject apartment only to make it appear that 
          the period to file a fair market rent appeal had expired.  The 
          tenant notes that no initial registration (RR-1) was ever served 
          and explains that this is because the owner could then inflate the 
          rent 400% without being challenged, and the next tenant, being the 
          complainant, would have to accept the inflated rent as 
          "accomplished fact".  

          It should be noted here that both parties have submitted voluminous 
          and repetitive "supplements" and/or "answers" to their own and each 
          other's petitions wherein the various issues are haphazardly 
          addressed without regard to whether they originated in a petition 
          or any other document.  

          The owner submitted an answer to the tenant's petition dated May 3, 
          1990 wherein the owner disputes the tenant's claim for treble 
          damages, noting that the Rent Stabilization Code specifically 
          exempts fair market rent appeals from this penalty under Section 
          2526.1(g).   The owner then categorically denies the tenant's 
          accusation that the initial stabilized tenant, Dr. Hoody, was 
          "illusory", and challenges the tenant to present proof of this.  
          Finally, the owner notes that the tenant has refused to sign a 
          renewal lease and that under Section 2524.3(f) of the Code, the 
          owner is entitled to remove him from the premises.

          The tenant's response, dated June 1, 1990, reaffirms the charge 
          that Dr. Hoody was an "illusory" tenant, stating that the owner's 
          failure to bring any action to collect the unfulfilled 21 months 
          portion of the lease was different from the owner's behavior with 
          other tenants who moved out before their leases were up, and shows 

          EA 410297 RO;
          EA 410224 RT

          the owner's intent to falsely claim him as the first stabilized 
          tenant in order to circumvent the Rent Stabilization Code.  The 
          tenant also claims it was an illusory tenancy because no initial 
          registration was ever served.  The tenant also reaffirms the claim 
          for treble damages, basing it on the owner's "systematic denial of 
          Rent Stabilization rights" to the tenant herein as well as other 
          tenants in the building.  

          The Commissioner is of the considered opinion that the tenant's 
          petition should be denied, the owner's petition should be denied 
          and the Administrator's order should be affirmed.

          Pursuant to Sections 2522.3(e) and (f) the Rent Stabilization Code 
          effective May 1, 1987, for fair market rent appeals filed after 
          April 1, 1984, comparability will be determined based on the 

               (e). . .(1)  Legal regulated rents, for which the time to 
               file a Fair Market Rent Appeal has expired and no Fair 
               Market Rent Appeal is then pending, or the Fair Market 
               Rent Appeal has been finally determined, charged pursuant 
               to a lease commencing within a 4 year period prior to, or 
               a one year period subsequent to, the commencement date of 
               the initial lease for the housing accommodation involved; 

               (2)  At the owner's option, market rents in effect for 
               other comparable housing accommodations on the date of 
               the initial lease for the housing accommodation involved 
               as submitted by the owner

               (f)  Where the rents of the comparable housing 
               accommodations being considered are legal regulated 
               rents, for which the time to file a Fair Market Rent 
               Appeal has expired, and such rents are charged pursuant 
               to a lease ending more than 1 year prior to the 
               commencement date of the initial lease for the subject 
               housing accommodation, such rents shall be updated by 
               guidelines increases for 1 year renewal leases, 
               commencing with the expiration of the initial lease for 
               the comparable housing accommodations to a date within 12 
               months prior to the renting of the housing accommodations 

          The record contains the owner's submissions of proposed comparable 
          rent for the "D" line, which is the same as the subject-premises, 
          and includes copies of the RR-1 initial registrations.  The 
          material was submitted with DHCR's Schedule 1 form, which states 
          the requirements for their consideration as comparable apartments.  
          The owner failed, however, to submit proof of service of the 
          registrations on the tenants, as clearly requested on the form.  

          EA 410297 RO;
          EA 410224 RT

          The owner's comparables are therefore unusable, since there is no 
          proof that the allegedly comparable rent is not still open to 
          challenge by a fair market rent appeal.  In addition, none of the 
          fair market rents was charged pursuant to a lease commencing within 
          a 4 year period prior to, or a one year period subsequent to, the 
          commencement date of the initial lease for the subject-apartment.

          Finally, the Commissioner notes that it is a basic requirement of 
          appropriately designated comparable apartments that they be similar 
          in size, type and amenities  (Accord:  ART 09216 Q).  The subject 
          apartment differs from all other apartments in the "D" line in that 
          it has only 6 rooms, instead of 7 as is documented on the initial 
          registration statements.  Accordingly, the other "D" line 
          apartments are not acceptable for comparability purposes.

          The owner's contention that the tenant was time-barred from filing 
          a fair market rent appeal is incorrect.  Section 2522.3 of the 
          current Rent Stabilization Code requires that a fair market rent 
          appeal be filed within ninety (90) days of the certified mailing of 
          the initial registration.  According to DHCR records, the initial 
          registration of the apartment recorded the April 1, 1989 rent of 
          the complaining tenant, who claims he was never served with it.  
          Since the owner presents no documentation to prove service, the 
          tenant's challenge was not time-barred.  Furthermore, although the 
          owner submits a copy of a 1988 apartment registration listing the 
          allegedly prior tenant, Steve Hoody, the DHCR has no record of this 
          registration and the owner cannot prove that the tenant was served 
          with it either, thereby preserving the current tenant's right to 
          challenge the initial rent.

          The owner's claim that the tenant was time-barred because his 
          "second" complaint on July 31, 1989 was filed more than 90 days 
          after he was served with the registration is also without merit 
          because the initial overcharge complaint filed on October 11, 1988 
          had effectively challenged the initial rent.

          Contrary to the owner's claim, the Commissioner has repeatedly and 
          consistently held that an eligible tenant cannot be denied a fair 
          market rent appeal simply because the complaint was filed on an 
          overcharge complaint form (Accord:  ART 08849-L, ARL 02626-L).  
          Such a ruling is all the more warranted when, as in the present 
          case, the tenant has been denied his rights to the rent history.

          Sections 20C(1) of the former Code and 2522.4(a)(1) of the current 
          Code provide that where there had been an installation of new 
          equipment in a stabilized apartment, the monthly stabilization rent 
          for said unit may be increased by 1/40th the cost of such equipment 
          provided the tenant then in occupancy has consented thereto in 
          writing.  In addition, the courts have ruled that an increase for 
          new equipment installed during a vacancy prior to the commencement 

          EA 410297 RO;
          EA 410224 RT

          of a new tenancy or upon the commencement of a new tenancy and 
          reflected in the lease rent, may be collected without the new 
          tenant's consent to pay such increase.  Matter of LeHavre Corp. v. 
          Gribeta, et. al., N.Y.L.J., January 20, 1971, p. 19, col. 8 (Sup. 
          Ct., Queens Co., Crisona, J.); Matter of Morton I. Hamberg v. CAB, 
          N.Y.L.J., November 9, 1972, p. 18, col. 8, (Sup. Ct., N.Y.Co., 
          Sarafite, J.).

          Although the owner challenges the Administrator's assessment of the 
          apartment renovations that were eligible for a rent increase, the 
          record supports the order as it stands.  The following work was 
          improvements for which the owner was entitled to an increase:  
          lighting fixture, $212.68; kitchen flooring, $876.00; dishwasher, 
          $302.02; refrigerator, $538.00; stove, $370.16; kitchen cabinets, 
          $2,508.10; kitchen fixture and dishwasher line, $150.00; various 
          new electrical fixtures, $400.52.  The remaining items, totalling 
          $5,633.31 out of $10,980.79, were ineligible as normal maintenance 
          and repair, including painting, plastering and alleged "carpentry" 
          which could not be so identified from the description on the 
          invoice.  A claim for $200.00 for electrical work was also 
          disallowed as mere repair work.

          Section 2526.1 of the current Rent Stabilization Code provides that 
          any owner found to have collected an overcharge above the 
          authorized rent shall be liable for a penalty equal to three times 
          the amount of such overcharge and may be assessed the reasonable 
          costs and attorney's fees of the proceeding as well as interest on 
          any overcharge which occurs after April 1, 1984.  This section 
          applies to willful violations of the Rent Stabilization Law and 
          Guidelines and does not apply to fair market rent appeals.  
          Pursuant to Section 26-512(b)(2) of the Rent Stabilization Law, for 
          apartments which are removed from rent control and become subject 
          to the Rent Stabilization Law by virtue of a vacancy occurring 
          after June 30, 1974, the owner is permitted to charge an initial 
          fair market rent as "agreed to by the landlord and the tenant", 
          subject to the tenant's right to challenge the initial rent as 
          exceeding the fair market rent.  If the tenant does not challenge 
          the initial rent, it becomes the legal base rent.  If the tenant 
          challenges the initial rent, a determination may be made that the 
          tenant's initial rent exceeds the proper fair market rent for the 
          apartment.  In such case, the owner is required to give the tenant 
          a refund or credit for the amount collected in excess of the fair 
          market rent.  However, such determination that the initial rent 
          exceeds the fair market rent is considered in the nature of a rent 
          adjustment rather than a rent overcharge and thus the imposition of 
          treble damages and attorney's fees is not warranted.  It is noted 
          that rent overcharge proceedings where treble damages may be 
          imposed generally involve cases where an initial owner willfully 
          charges rents higher than permitted by the Rent Guidelines Board 
          upon subsequent renewal leases or refuses to submit a complete 
          rental history thus leading to the conclusion that rent overcharges 

          EA 410297 RO;
          EA 410224 RT

          occurred.  In addition, Section 2526.1(g) of the Rent Stabilization 
          Code provides that "[t]he provisions of this section [Section 
          2526.1, concerning overcharge penalties and assessment of costs and 
          attorney's fees] shall not apply to a proceeding pursuant to 
          Section 2522.3 of this Title (Fair Market Rent Appeal)."  
          Accordingly, the tenants' petition for treble damages must be 
          denied as contrary to the specific provisions of the Rent 
          Stabilization Law and Code.

          With regard to the tenant's contention that the Rent 
          Administrator's order is inconsistent in that it lists the tenant's 
          rent as $1,047.85 effective May 15, 1988 but lists the fair market 
          rent as $1,047.85 effective December 15, 1987, it is noted that the 
          May 15, 1988 date was a typo and that the fair market rent in fact 
          was established at $1,047.85 effective December 15, 1987.  With 
          regard to the tenant's contention that the prior tenancy was 
          illusory, it is noted that the tenant had submitted no evidence in 
          support of this contention and it is hereby denied.

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

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

          ORDERED, that the tenant's petition be, and the same hereby is, 
          denied, that the owner's petition be and the same hereby is denied 
          and that the Administrator's order be, and the same hereby is, 
          modified to show on page two that the "initial legal regulated rent 
          is adjusted from $2,349.00 to $1,047.85 effective December 15, 
          1987" rather than May 15, 1988.  In all other respects the Rent 
          Administrator's order is affirmed.


          EA 410297 RO;
          EA 410224 RT

                                                  JOSEPH A. D'AGOSTA
                                                  Acting Deputy Commissioner


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