ED 410084-RT; ED410230-RO

                                  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
          IN THE MATTER OF THE ADMINISTRATIVE   ADMINISTRATIVE REVIEW  
          APPEALS OF                            DOCKET NOS.: ED 410084-RT; 
                                                             ED 410230-RO

                  BRUCE MEISEL, TENANT           DRO DOCKET NO.: ZAH-410126-R      
                           AND
                WINDSOR PLAZA COMPANY, OWNER,

                                  PETITIONERS
           ----------------------------------X                                   


                     ORDER AND OPINION GRANTING TENANT'S PETITION
                                         FOR
                               ADMINISTRATIVE REVIEW
                                        IN PART
                                          AND
                  DENYING OWNER'S PETITION FOR ADMINISTRATIVE REVIEW


           On April 12 and April 2, 1990 the above-named petitioner-tenant and 
           petitioner-owner filed Petitions for Administrative Review against 
           an order issued on March 16, 1990 by the Rent Administrator, 92-31 
           Union Hall Street, Jamaica, New York concerning the housing 
           accommodations known as 952 Fifth Avenue, New York, New York, 
           Apartment No. 6B wherein the Rent Administrator determined that the 
           owner had overcharged the tenant.

           As these appeals involve common grounds of law and fact, they are 
           herein merged and decided in one order and opinion.

           The Administrative Appeals are being determined pursuant to the 
           provisions of Sections 2522.4(a) and 2526.1 of the Rent 
           Stabilization Code.

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

           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 appeals.
           This proceeding was originally commenced by the filing in August, 
           1986 of a rent overcharge complaint by the tenant, who stated that 












          ED 410084-RT; ED410230-RO

           he had commenced occupancy on July 1, 1986 at a rent of $2,200.00 
           per month, and that the rent on March 31, 1980 was $850.00.

           In answer to the tenant's complaint, the owner stated in substance 
           that the subject apartment had been substantially renovated, to the 
           extent that it was not in the same form that it had been on the 
           base date, at a total cost of $10,701.73.  The owner submitted 
           cancelled checks totalling that amount, and bills for a lesser 
           amount, for new equipment and work in the apartment; a March 28, 
           1988 letter from Bau Contracting Corporation stating that $7,850.00 
           had been spent to "materially " and "substantially" enlarge the 
           apartment; an October 17, 1989 letter from Bau Contracting stating 
           that "[i]n demolishing partitions, the westerly one was relocated, 
           resulting in a second bedroom for the adjacent Apartment 6-C at 952 
           Fifth Avenue"; and a copy of a floor plan allegedly showing a 
           change in the size of the subject apartment.  The plan consisted of 
           a portion of a plan sheet.  It did not contain a title block 
           describing what the sheet was or giving an address, apartment 
           number or date.  The page contained a symbol of short parallel 
           lines within long parallel lines signifying a wall.  While this 
           appears to signify the addition of walls, there are no symbols or 
           lines to indicate the removal of any walls.  The only notes on the 
           page describing work to be done concern toilet ventilation.

           In a proceeding (Docket Nos. AH-410127-R and EJ 410096-RO) 
           concerning another apartment in this building, the owner had 
           described an identical copy of this as "a copy of a floor plan 
           which typically represents the change in square footage by taking 
           space from the 'B' line apartment which was added to the 'C' line 
           apartments."  Because of the deficiencies in the sheet allegedly 
           showing the plan for changing the size of the apartment, and 
           because the Administrator had requested an Altered Certificate of 
           Occupancy [which would typically not have been issued unless there 
           was a change in the use of one or more apartments or in the number 
           of apartments on one or more floors], rather than a building permit 
           application, the owner was requested in the appeal proceeding to 
           submit a legible copy of the complete architect's plan sheet or 
           sheets concerning the movement of the outer wall of the apartment 
           to change its area, including the title block, any list of symbols 
           used, notes, and stamped approvals present on the plan.  The owner 
           was also requested to submit a complete copy of the application for 
           the building permit, showing the work to be done, and of the 
           approved building permit.  In response, the owner submitted the 
           same floor plan sketch as before; stated that it was the entire 
           plan which was used, that it was not filed with the Building 
           Department, and that there was no building permit application, 
           stamped approval or approved permit; and contended that the 
           Division of Housing and Community Renewal (DHCR) had not and should 
           not require that approved plans be used to show that the outer 
           configuration of an apartment had been changed.  Because of the 
           "typical" floor plan, the similar letters from Bau Contracting, and 
           the fact that those constitute the only evidence submitted by the 






          ED 410084-RT; ED410230-RO

           owner in the present case to establish that the subject apartment 
           was changed in size, it is presumed that there is no approved 
           building permit and no architect's plans pertaining specifically to 
           alleged changes in the subject apartment herein.

           On February 14, 1990 a DHCR inspector visited the subject apartment 
           and, while noting that the kitchen and bathroom were comparatively 
           new, also stated "[a]s the wall in the bedroom between the two 
           apartments 6B and 6C is a solid supporting wall, and there is no 
           evidence of there ever having been a door in that wall, I think 
           this room has been there all the time, or it was with the 
           livingroom one large studio."

           In an order issued on March 16, 1990 the Administrator found that 
           the conditions to charge a "first rent" had not been satisfied, and 
           determined lawful rents of $1,170.37 and $1,246.44 in the 
           complainant's first two leases after allowing a rent increase for 
           $8,054.78 worth of claimed improvements.  No overcharge was found 
           through March 30, 1990 because the tenant was listed as having 
           actually paid $1,000.00 per month due to a court stipulation.

           In his petition (Docket No. ED 410084-RT) against the order, the 
           tenant contends in substance that the order failed to address the 
           fact that he paid a substantial overcharge of $2,200.00 per month 
           for six months through December, 1986 as well as a $2,200.00 
           security deposit.

           In answer, the owner asserts in substance that the tenant paid no 
           rent at all for 14 months following December, 1986, and that he 
           currently owes arrears of $8,962.18.  With its answer the owner has 
           enclosed a listing of rents paid and balances owed from June, 1986 
           through May, 1990.  The listing agrees with information submitted 
           by the tenant in the proceeding before the Administrator.  Using as 
           rent due the lawful rents determined by the Administrator it shows 
           the tenant as starting to owe arrears as of June, 1987, and as 
           owing $8,952.18 arrears as of the time of the Administrator's 
           order.  It also shows excess security of $953.56 as having been 
           credited on the first rent payment date following the 
           Administrator's order.

           In its petition (Docket No. ED 410230-RO) against the order, the 
           owner's attorney contends in substance that the owner had submitted 
           information showing that the apartment had been materially enlarged 
           and rebuilt at a cost of over $10,000.00, and that the enlargement 
           of the apartment to create a new unit not in existence on the base 
           date entitles the owner to charge a free market rent.  The owner's 
           attorney has enclosed the same "typical floor plan" submitted 
           earlier, stating that "[t]his plan shows that the area from the 'C' 
           line was added to the 'B' line thus altering the outer dimensions 
           of the apartment."   [The Commissioner notes that the President of 
           Bau Contracting, in an October 17, 1989 letter, and the managing 
           agent, in an October 30, 1989 submission, had claimed that a 












          ED 410084-RT; ED410230-RO

           bedroom was removed from the subject apartment's line and added to 
           the "C" line, thus reducing it in size, although the President of 
           Bau Contracting had earlier stated in a March 28, 1988 letter that 
           the subject apartment had been substantially and materially 
           enlarged in size.]

           In answer, the tenant asserts in substance that there is no 
           indication that the apartment was enlarged in any respect; that all 
           the walls are made of plaster and are thicker than walls of modern 
           construction, indicating that all the existing walls were built 
           when the building was constructed; that the bedroom which the owner 
           claims to have been added appears to have been constructed when the 
           building was built, as it provides the only access to the bathroom 
           and as all walls in the bedroom and the bathroom are made of 
           plaster, as originally constructed.

           The Commissioner is of the opinion that the tenant's petition 
           should be granted in part and that the owner's petition should be 
           denied.

           Under the system of rent stabilization, an apartment's legal 
           regulated rent is computed by adding guidelines increases and other 
           permitted increases to an initial base rent.  This system assumes 
           that the apartment will remain essentially the same throughout its 
           stabilized rental history.

           Prior administrative decisions have created an exception to this 
           rule.  Where an owner substantially alters an apartment to the 
           extent that it was not in existence in its new state on the base 
           date, he or she is permitted to collect a free market rent from the 
           first tenant to take occupancy after the alteration.  A review of 
           these cases shows that this special rule was applied where the 
           outside walls of the apartment were either enlarged or contracted.  
           For example, in CAB Opinion Number 9358, an owner had created a new 
           duplex apartment from three previously separate apartments located 
           on two different floors.  The administrative agency concluded that 
           in such cases the substantial alteration had in effect broken the 
           rental history of each of the three apartments.  It makes no sense 
           to continue to base the current legal regulated rent on a base rent 
           and stabilized increases collected for an apartment that no longer 
           exists.  Therefore, after the new apartment is created, the owner 
           is entitled to collect a free market rent, which becomes the new 
           base rent upon which future stabilized increases are to be 
           computed.
           This doctrine is not applied to apartments which have received 
           renovations or improvements but whose outer walls have not been 
           changed.  The Rent Stabilization Code takes account of apartments 
           whose internal characters may be changed without their outside 
           walls being changed.  Section 2522.4(a)(1) of the Rent 
           Stabilization Code permits an owner to collect a rent increase 
           equal to one-fortieth (1/40th) of the cost of new equipment 
           installed or improvements made in the apartment.  Section 






          ED 410084-RT; ED410230-RO

           2522.4(a)(1) does not permit the owner to charge whatever it wishes 
           after the improvements are made.  The improvement allowance is 
           added to the existing legal regulated rent; the apartment's rental 
           history has not been interrupted by the internal improvements.  
           Section 2522.4(a)(1) requires a tenant to consent in writing to the 
           installation of new equipment, except that a rent increase for new 
           equipment installed during a vacancy prior to the commencement of 
           a new tenancy may be collected without the new tenant's consent to 
           pay such increase.

           In the present case the owner has submitted evidence of the 
           expenditure of $8,054.78 for improvements in the subject apartment 
           prior to the time that the tenant commenced occupancy.  The owner 
           claims the right to collect a "first rent" by virtue of having 
           changed the size of the apartment.  The Commissioner does not 
           consider that the owner has proven that there has been such a 
           change.  The floor plan sketch is claimed by the owner to be a 
           "typical" sketch of work done in the 'B' and 'C' lines.  There is 
           no evidence on the sketch to indicate that any such work was done, 
           or even intended to be done, specifically in the subject apartment.  
           The fact that the owner apparently did not obtain or even apply for 
           the building permit that would typically be required, based on a 
           detailed application showing work to be done, also argues against 
           the likelihood that the apartment was changed in size.  In 
           addition, even the "typical" sketch submitted by the owner appears 
           to be internally inconsistent, in that its use of a single, 
           unlabelled symbol for a change in walls means either that  a wall 
           was added without removing another one, or that a wall was removed 
           without adding another one.  The letters from the President of Bau 
           Contracting Corp. are not sufficient to establish a change in size, 
           particularly since he is not even consistent in claiming whether 
           the apartment was substantially enlarged or whether a room was 
           removed.  The Administrator was therefore warranted in concluding 
           that the owner had not proven its entitlement to a "first rent."

           While the Administrator was correct in finding that there had been 
           no overcharge as of March 30, 1990, the order was incorrect in 
           listing an actual rent charged of $1,000.00 per month during the 
           initial lease.  The tenant actually paid a total of $26,940.00 
           during 26 2/3 months, or an average of $1,010.25 per month.
           The Administrator's order is correct in noting that the tenant was 
           paying $1,000.00 per month from September 1, 1988 through March 30, 
           1990.  Since both $1,010.25 and $1,000.00 are less than the lawful 
           stabilization rent, and since the owner's failure, due to the 
           tenant's withholding of rent and a court stipulation to accept 
           $1,000.00 per month pending the DHCR's determination, to charge the 
           full lawful stabilization rent cannot be considered a waiver of the 
           owner's right to collect it, this order is issued without prejudice 
           to the owner proceeding against the tenant in a court of competent 
           jurisdiction for monies owed.

           Taking these factors into account, the Commissioner has set them 












          ED 410084-RT; ED410230-RO

           forth on an amended rent calculation chart attached hereto and made 
           a part hereof.

           The owner is directed to reflect the findings and determinations 
           made in the Rent Administrator's order on all future registration 
           statements, including those for the current year if not already 
           filed, citing the Rent Administrator's 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 
           the Rent Administrator's order.  The owner is further directed to 
           adjust subsequent rents to an amount no greater than that 
           determined by the Rent Administrator's order plus any lawful 
           increases.

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

           ORDERED, that the tenant's petition be, and the same hereby is, 
           granted in part, that the owner's petition be, and the same hereby 
           is, denied and that the Rent Administrator's order be, and the same 
           hereby is, modified in accordance with this order and opinion.  The 
           lawful stabilization rents and the rent paid are set forth on an 
           amended rent calculation chart, which is fully made a part of this 
           order.






           ISSUED:

                                                   ------------------------
                                                   JOSEPH A. D'AGOSTA
                                                   Deputy Commissioner
            
              
                                              
    

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