EC 410074 RO
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. EC 410074 RO
: DISTRICT RENT OFFICE
West End Avenue Syndicate Inc., DOCKET NO. CE 410242 R
TENANT: Diane Carey
ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
On March 16, 1990, the above-named petitioner-owner filed a Petition for
Administrative Review against an order issued on February 9, 1990, by
the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York,
concerning the housing accommodations known as 348 West End Avenue,
New York, New York, Apartment No. 3C, wherein the Rent Administrator
determined that the owner had overcharged the tenant.
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.
The tenant commenced this proceeding on May 19, 1988 by the filing of a
complaint of rent overcharge.
In response to the complaint, the owner stated that it had altered the
configuration and the spacial dimensions of apartment 3C by adding a
greenhouse to the outside deck area, thereby creating a new apartment
with greater living space and therefore was entitled to set a "first
stabilized rent." In the alternative, the owner asserted that should a
"first rent" be disallowed, the owner should be permitted to add 1/40th
of the cost of the greenhouse to the rent. Subsequently, the owner
submitted a copy of an amended Certificate of Occupancy in support of
its claim for a "first rent."
In January 31, 1990, an inspection of the subject apartment was
conducted by a staff member of the DHCR who reported that there was a
greenhouse but that there were no utilities: electrical system, water
system or heat services to accommodate the greenhouse.
In the order here under review, the Rent Administrator established the
lawful stabilized rent at $737.39 as of March 16, 1988, allowing the
owner 1/40th of the cost ($225.00 per month) for new equipment and
directed the owner to refund to the tenant an overcharge of $32,336.92
inclusive of excess security and treble damages.
In its appeal, the owner contends that the Administrator erred in not
finding that a new apartment had been created for which the owner was
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entitled to set a "first rent." In previous decisions by the DHCR, a
new Certificate of Occupancy has been considered prima facie evidence of
the creation of a new apartment. The owner further contends that treble
damages are inappropriate because ample evidence has been submitted to
show the owner's good faith in setting the rent and that this evidence
meets the burden of establishing non-willfulness as stated in
Operational Bulletin 89-2.
The tenant seeks an affirmance of the order with respect to the finding
that the owner overcharged the tenant but seeks a reversal of that part
of the order which permits the owner a rent increase for new equipment.
The tenant contends that the overcharge was willful: 1) the placement of
a greenhouse on an existing terrace did not create a "new apartment; 2)
the DHCR inspection showed that the greenhouse is uninhabitable and
added no new living space; 3) the new Certificate of Occupancy was
issued because the owner added new apartments at the same time it
installed the greenhouse; 4) the greenhouse was installed after the
tenant moved in; and 5) the owner's answers to the complaint are legally
defective and do not rebut the complaint because they were not verified
or affirmed. The tenant also contends that notwithstanding her failure
to file her own appeal, her request for reversal of a portion of the
Administrator's order may be granted on the authority of Sakraf
Properties Inc. v. Eimicke, 139 Misc. 2d 519, 527 N.Y.S. 2d 951 (Sup.
Ct. N.Y.C. 1988) where the court held that the tenants' failure to file
their own petition for administrative review did not warrant a dismissal
of their Article 78 proceeding. The court reasoned that although the
tenants in that case did not initially seek administrative review, when
confronted with the landlord's petition, they responded in effect with
a counterclaim. The court stated that rejection of the claim on
procedural ground exalts form over substance. Similarly, the tenant
herein contends that although she did not file her own PAR, she did
write to the DHCR seeking to modify the order on the same claim.
Because the evidence shows that the greenhouse was installed during her
tenancy, not during a vacancy, the tenant contends that the cost of the
greenhouse cannot be grounds for a rent increase.
In reply, the owner asserts, that the installation of the greenhouse
commenced before the tenant moved in; that the greenhouse would receive
heat from the living room but for the tenant's desire to have a door;
that the new certificate of occupancy was issued for both the new
greenhouse and the new penthouse apartment; and that structural work was
done in order to install the greenhouse.
The Commissioner is of the opinion that this petition should be granted
The Division of Housing and Community Renewal (DHCR) has long held that
in order for an owner to qualify for a "first rent," the apartment
alternations must be so substantial as to create a new unit. DHCR
policy and numerous precedents state that in order to qualify for a
first stabilization rent the owner must change the dimensions of the
In this case, the owner asserts that the creation of new interior space
is sufficient to entitle it to a first stabilization rent. The
Commissioner finds that where, as here, the new interior space was
merely a different usage of pre-existing exterior space which was part
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and parcel of the subject apartment, a new unit was not created so as to
qualify for a first rent. Accord: FL 410297 RT, FK 410175 RO. The
issuance of the new certificate of occupancy is not determinative of
whether the owner made substantial alterations that would warrant a
"first rent." The Rent Stabilization Code, not the Department of
Buildings, determines whether alterations to an apartment warrant a new
legal rent. Accordingly, the owner was not entitled to collect a first
Further, the Commissioner is of the opinion that treble damages should
not have been assessed by the Administrator. Section 2526.1 of the Rent
Stabilization Code imposes a penalty of treble damages on all willful
overcharges. All overcharges are presumed willful unless the owner
overcomes the presumption by a preponderance of the evidence that the
overcharge was not willful. In prior cases before the DHCR where the
owner's allegation that it was entitled to a first rent was rejected,
the issue of treble damages was determined on a case-by-case basis. The
Administrator must determine if the extent of the work done was of
sufficient substance to warrant a conclusion that the owner had a good
faith belief that it was entitled to a first rent. The evidence of
record, including the inspection report, and new Certificate of
Occupancy, indicates that the extent of work required to install the
greenhouse was substantial, consisting of reflooring the converted space
and enclosing the pre-existing terrace as a greenhouse. Accordingly,
the record demonstrate a lack of willfulness and the imposition of
treble damages is not appropriate.
Therefore the Rent Administrator's order is hereby modified to eliminate
the treble damages and to impose interest on the overcharge. The total
amount of the overcharge plus interest and excess security is
Section 2527.4 of the Code requires that every answer or reply shall be
affirmed or verified but sets no penalty for the failure to do so and
sets no requirement as to who must make the affirmation or verification.
In the instant case, the attorney for the owner-corporation affirmed its
answer and a principal of the corporation verified the petition.
Accordingly, the Commissioner accepts the owner's submissions for the
With respect to the rent increase for the cost of new equipment
permitted by the Administrator, the Commissioner notes that although the
tenant requested reconsideration of the issue, she did not file her own
An administrative appeal is not a de novo proceeding and it is not the
Division's policy to impose harsher penalties on a party seeking
administrative review unless the other party files its own "PAR." The
case cited by the tenant, Sakraf Properties Inc. v. Eimicke, does not
control on this issue because in that case the court held that the
tenants' failure to file a PAR did not require dismissal of their
Article 78 proceeding.
This order may, upon the expiration of the period in which the owner may
institute a proceeding pursuant to Article 78 of the Civil Practice Law
and Rules, be filed and enforced in the same manner as a judgment or not
in excess of twenty percent per month thereof may be offset against any
rent thereafter due the owner.
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Because this determination concerns lawful rents only through February
28, 1990, the owner is cautioned to adjust subsequent rents to an amount
no greater than that determined by the Rent Administrator's order and to
register any adjusted rents with this order and opinion being given as
the explanation for the adjustment.
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 in part, and that the order of the Rent Administrator
be, and the same hereby is, modified to exclude treble damages and find
a total overcharge of $12,558.76 including interest and excess security.
In all other respects, the Rent Administrator's order is affirmed.
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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