EE110418RO
                             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
      APPEAL OF                              DOCKET NO. EE110418RO

                                          :  DISTRICT RENT OFFICE
           Gatoff Realty,                    DOCKET NO. Z22411
                                            
                                             TENANT: Silverio Cortes          
                 
                            PETITIONER    : 
      ------------------------------------X                             

           ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW

      On May 22, 1990, the above-named petitioner-owner filed a Petition for 
      Administrative Review against an order issued on April 17, 1990, by the 
      Rent Administrator, 92-31 Union Hall Street, Jamaica, New York, 
      concerning the housing accommodations known as 45-39 40th Street, 
      Queens, New York, Apartment No. 3R, wherein the Rent Administrator 
      determined the fair market rent of the subject apartment pursuant to the 
      special fair market rent guidelines promulgated by the New York City 
      Rent Guidelines Board.

      The Administrative Appeal is being determined pursuant to the provisions 
      of Section 26-513 of the Rent Stabilization Law (hereafter RSL).

      The issue herein 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 appeal.  

      This proceeding was originally commenced by the filing of a Tenant's 
      Objection to Initial Registration by the tenant in August, 1984 alleging 
      that the initial rent of the subject apartment exceeded the fair market 
      rent; that a rent overcharge exists; and that air conditioner 
      electricity and a refrigerator, among other building and apartment 
      services, were omitted from the registration.

      Both the prior and current owners were served with copies of the 
      tenant's objection along with instructions on comparability requirements 
      for fair market rent appeals filed after April 1, 1984.

      The current owner responded with leases for the subject apartment from 
      January, 1983 and leases for apartments 1R and 2R from 1983 and 1984; a 
      rent roll for the subject building for January , 1990 and stated that 
      the current owner purchased the building in March, 1984; that the 
      complainant had been a tenant since 1980; that the owner collected rents 
      based on leases in effect at the time of transfer and that air 
      conditioner electricity has never been paid for by the owner; that 
      electricity is not included in the rent; that the prior owner had 
      informed the current owner that the refrigerators in all apartments were 







          EE110418RO

      the property of the owner and that the tenant's rent is less than the 
      other two identical apartments in the building (1R and 2R).

      The owner failed to provide proof of service of a DC-2 notice on the 
      complaining tenant; to sumbit a DC2 or RR1 notice on the tenants of 
      comparable apartments 1R and 2R to establish the date of decontrol of 
      the comparable apartments; or to submit data for the complete subject 
      line.

      A summary notice indicating that the fair market rent for the subject 
      apartment was to be established for the subject apartment using only the 
      special guideline increase above the 1980 maximum base rent of $227.20 
      was served on the current owner who failed to interpose a response.

      In Order Number Z22411, the Rent Administrator established the initial 
      legal regulated rent as $227.20 effective November 20, 1980, determined 
      that the tenant's rent does not include electricity and directed a 
      refund to the tenant of $7,763.30.

      In this petition, the owner contends in substance that the Rent 
      Administrator erred in establishing the fair market rent effective 
      November 20, 1980, the date of occupancy of the complainant; that upon 
      information and belief the apartment was decontrolled prior to 1980 and 
      a DC-2 notice was served on the first stabilized tenant by the prior 
      owner; that the current owner was not advised until 1990 of the tenant's 
      objection and had contacted the prior owner for additional information 
      because the initial rent had been set by the prior owner; that both the 
      current RSL and the decision in JRD vs Eimicke precluded the Rent 
      Administrator from requesting rental history beyond the four year period 
      prior to the 1990 service of the complaint on the current owner; that 
      despite the above, the current owner did submit apartments 1R and 2R as 
      comparable apartments but that the Rent Administrator failed to consider 
      them or to explain why such comparables were not considered; and that 
      the summary notice sent on March 5, 1990 stated the 1980 MBR as $227.20 
      which was an erroneous amount and misled the owner into believing that 
      the initial rent adjustment utilizing a 1980 MBR of $227.20 would result 
      in a de minimus difference between the actual rent charged on November 
      20, 1980 and the rent established by the Rent Administrator.

      The owner failed to submit a copy of the DC-2 notice served on the first 
      stabilized or subsequent stabilized tenant nor the actual date of 
      decontrol or leases and/or rental history from the alleged date of 
      decontrol either below or on appeal.

      In answer to the owner's petition, the tenant stated in substance that
      he filed a timely objection; that the tenants of apartments 1R and 2R 
      cited by the owner could also be paying rents which exceed the fair 
      market rent; and that the Rent Administrator's order should be affirmed.

      The Commissioner is of the opinion that this petition should be denied.

      Pursuant to Sections 2522.3(e) and (f) of 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 following:

           (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 


          EE110418RO

      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; 
                     and

                                    (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 involved.

      An examination of the record in this case discloses that both the prior 
      and current owners were served with the tenant's application and given 
      the opportunity to submit comparability data pursuant to Sections 
      2522.3(e) and (f) of the Code, as cited above; that in the proceeding 
      before the Rent Administrator the owners did not submit useable 
      comparability data in that they did not submit DC-2 or RR1 notices for 
      apartments 1R and 2R as required; and that although the 1980 maximum 
      base rent was incorrectly listed in the summary notice as $227.20, 
      maximum base rent records disclose that the 1980 MBR was correctly 
      listed as $197.57 in the Rent Administrator's order.  Further, the 
      summary notice is not a final order and the owner was so advised of this 
      in the summary notice.  Further, although rent records for the subject 
      apartment disclose that a Report of Statutory Decontrol was filed in 
      1978, the prior owner and current owner never submitted evidence showing 
      a rental history since 1978 and never established that a DC-2 notice was 
      served on the alleged first rent stabilized tenant or when the alleged 
      first rent stabilized tenant commenced occupancy nor the rent charged 
      such tenant.  Further, in the proceeding before the Rent Administrator, 
      the owners never raised the issue of whether the tenant herein was in 
      fact the first rent stabilized tenant.   

      The Commissioner notes that the failure of the owner to provide the 
      rental history back to the base date in 1978 or even to provide the 
      actual 1978 initial rent being challenged, should have properly resulted 
      in the processing of the tenant's overcharge complaint with the use of 
      the DHCR default procedure to establish the tenant's initial rent in 
      November 1980 including a freezing of the rent through the issuance date 
      of the Rent Administrator's order and the imposition of treble damages 
      effective April 1, 1984.

      Inasmuch as application of the correct processing procedure outlined 
      above would result in a lower lawful stabilized rent than was 
      determinedby the Administrator, and, as the tenant did not challenge the 
      Rent Administrator's order as processed by filing his own discrete 







          EE110418RO

      petition, the Commissioner deems it appropriate in the instant case to 
      affirm the Rent Administrator's order, as issued.

      The Commissioner rejects the owner's contention that the current Rent 
      Stabilization Law precluded the Rent Administrator from requesting 
      comparability data and a rental history beyond the 4 year limitation 
      period.  The section of the Rent Stabilization Law referred to by the 
      current owner, Section 26-516(g), concerns rent overcharges and 
      specifically excludes fair market rent appeals.  Likewise, the owner's 
      reliance on the JRD Decision is misplaced as that decision also applies 
      to overcharge cases and does not apply to fair market rent appeals.  In 
      addition, the owner was not required to submit comparability data but 
      was afforded the option to do so.

      With regard to the current owner's contentions that it was first served 
      with the tenant's complaint in 1990; that the prior owner held title to 
      the premises at the time the subject apartment was decontrolled; that 
      the current owner believed that the prior owner had properly served the 
      first stabilized tenant with a copy of the DC-2 notice and that since 
      the current owner acquired title to the premises, it had only collected 
      rents which had been initially set by the prior owner, the Commissioner 
      notes that copies of the tenant's complaint were served on the prior 
      owner on December 24, 1985, March 16, 1986, October 21, 1988, December 
      1, 1988 and December 8, 1989, as well as on the current owner in 
      February 1990.

      It is a long standing DHCR Policy that a new owner "steps into the 
      shoes" of the prior owner.  Upon purchasing a rent regulated property, 
      the new owner knew or should have known of its obligation to acquire a 
      complete set of rental documents in order to verify that the rents 
      contained in the building rent roll included with a transfer of title 
      were legal regulated rents.  The change of ownership therefore cannot 
      serve to excuse the current owner from liability for excess rent 
      collected by the current owner based on rents established by a prior 
      owner.

      Moreover, even on appeal, the owner has failed to submit a complete 
      comparability submission including the date of the initial stabilized 
      lease for all apartments in the subject line; a copy of a DC-2 or RR1 
      with proper proof of service for those comparable apartments initially 
      stabilized within 4 years prior to or one year subsequent to the date 
      the subject apartment was initially stabilized, as well as the purported 
      initial lease of the subject apartment prior to November, 1980 with a 
      copy of the DC-2 with certified proof of service.

      Accordingly, the Rent Administrator's order was warranted.

      Because this determination concerns lawful rents only through April 30, 
      1990, the owner is directed to reflect the findings and determinations 
      made in this order on all future registration statements, including 
      those for the current year if not already filed, citing this 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 this order.  The owner is further directed to 
      adjust subsequent rents to an amount no greater than that determined by 
      this order plus any lawful increases. 

      If the owner does not take appropriate action to comply with this order 


          EE110418RO

      within sixty days from the date of issuance of this order, the tenant 
      may credit the excess rent against the next month(s) rent until fully 
      offset.

      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, denied, and, that the order of the Rent Administrator be, and 
      the same hereby is, affirmed.



      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner





    

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