STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                             JAMAICA, NEW YORK 11433

      APPEAL OF                              DOCKET NO. EF410068RO

                                          :  DISTRICT RENT OFFICE
           Dan Company,                      DOCKET NO. L3111384R/T
                                             TENANT: Stephen Calvert          
                            PETITIONER    : 


      On June 22, 1990, the above-named petitioner-owner filed a Petition for 
      Administrative Review an order issued on May 22, 1990, by the District 
      Rent Administrator, Gertz Plaza, Jamaica, New York, concerning the 
      housing accommodations known as 317 West 99th Street, New York, 
      New York, Apartment No. 3B, wherein the District Rent Administrator 
      determined the fair market rent pursuant to the special fair market rent 
      guideline promulgated by the New York City Rent Guidelines Board for use 
      in calculating fair market rent appeals.

      The Commissioner notes that this proceeding was filed prior to April 1, 
      1984.  Sections 2526.1 (a) (4)  and 2521.1 (d) of the Rent Stabilization 
      Code (effective May 1, 1987) governing rent overcharge and fair market 
      rent proceedings provide that determination of these matters be based 
      upon the law or code provisions in effect on March 31, 1984.  Therefore, 
      unless otherwise indicated, reference to Sections of the Rent 
      Stabilization Code (Code) contained herein are to the Code in effect on 
      April 30, 1987.

      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 appeal.  

      This proceeding was originally commenced by the filing of a fair market 
      rent appeal application by the tenant with the New York City 
      Conciliation and Appeal Board, one of the predecessor agencies to the 
      DHCR.  The tenant took occupancy pursuant to a lease commencing May 1, 
      1981 and expiring April 30, 1982 at a monthly rent of $975.00.  

      The owner was served with a copy of the application and was afforded an 
      opportunity to submit rent data for comparable apartments.  In answer to 


      the application, the owner stated that the complaining tenant's 
      apartment was decontrolled in March 1981 after the death of the prior 
      rent controlled tenant who had occupied the apartment for part 
      professional use since 1972.  The owner asserted that the subject 
      apartment was not subject to a fair market rent appeal because a free 
      market rent is allowed after decontrol of an apartment with a prior 
      professional use.  The owner submitted a copy of a combination 
      application/order dated May 26, 1972 increasing the maximum rent under 
      rent control for the subject apartment based on part professional use; 
      a copy of a Report of Statutory Decontrol for the subject apartment 
      filed April 8, 1981 under Docket Number ZDR105833; a copy of a lease for 
      the subject apartment for Elsa Klein commencing April 1, 1981 and a copy 
      of a DC-2 notice addressed to one Elsa Klein with proof of certified 
      mailing on May 4, 1981, four days after commencement of the complainant 
      tenant's lease.   The owner also advised that apartment 7B was the only 
      apartment in the subject line decontrolled within the period one year 
      before to one year after the decontrol of the subject apartment.  The 
      owner submitted completed rental history forms for all stabilized 
      apartments in the subject line and initial apartment registration forms 
      for the entire subject line.  The owner also submitted an invoice for 
      windows in the amount of $850.00 dated December 22, 1980.

      In reply, the tenant disputed the alleged tenancy of Elsa Klein in the 
      subject apartment, as well as the rental data supplied by the owner for 
      the other apartments in the subject line.

      In the order herein appealed, the District Rent Administrator determined 
      that the owner had failed to substantiate its allegation that the 
      applicant was not the first rent stabilized tenant to occupy the subject 
      apartment and processed the tenant's fair market rent appeal.   The 
      Administrator adjusted the initial legal regulated rent by establishing 
      a fair market rent of $376.53 effective May 1, 1981, the commencement 
      date of the tenant's initial rent stabilized lease, and directed the 
      owner to refund to the tenant excess rent in the amount of $82,718.96 
      through May 31, 1990.  The Administrator determined that Apartment 7B 
      could not be utilized in the comparability study because the owner had 
      failed to submit proof of service of the initial apartment registration 
      form (RR1) as required.  The Administrator also denied any increase for 
      new windows based on the owner's failure to adequately document this 

      In this petition, the owner contends that the District Rent 
      Administrator's Order is incorrect and should be reversed because the 
      owner did submit prof of service of the RR-1 as well as documentation of 
      improvements as the agency had requested, and therefore the order should 
      be based on the use of comparables and the cost of improvements, or the 
      owner should be entitled to a free market rent as the apartment had a 
      prior professional use.  The owner also asserts that the Administrator 
      used an incorrect 1980 Maximum Base Rent (MBR) and asserts that the MBR 
      figure should have included increases of $21.79 granted in October 1970, 
      $54.51 granted May 26, 1972 and $5.75 granted December 18, 1974.  With 
      its petition, the owner includes a copy of a submission from the owner 


      to Administrator dated May 15, 1989 and a receipt for certified mail 
      indicating receipt by the DHCR on May 30, 1989.  This submission 
      includes proof of mailing of an initial apartment registration for 
      apartment 7B in the subject building date stamped by the Post Office 
      June 29, 1984, two checks for windows totaling $850.00 dated December 
      22, 1980 and May 21, 1981 and a bill and cancelled check for kitchen 
      flooring dated July 9, 1980.

      In answer to this petition, the tenant contends that the order should be 
      upheld because the combined residential and commercial use of an 
      apartment does not entitle the owner to charge a free market rent on 
      decontrol, that the requested rent adjustment for the improvements 
      should be denied on the basis of laches, and that the Administrator was 
      correct in ruling that the owner had failed to submit proof of service 
      of the RR-1 for the comparable apartment.

      In response to a notice from the DHCR, the owner submitted a lease for 
      apartment 7B for tenant Deborah Weinstein for the period from October 1, 
      1980 to September 30, 1981 at $1,000.00 per month and a Landlord's 
      Report of Statutory Decontrol (R42 Form) for apartment 7B naming Deborah 
      Weinstein as the tenant and indicating that the apartment became vacant 
      on September 29, 1980 and was rented on October 1,1980.  The R42 form 
      was dated October 25, 1980 and was date stamped received November 9, 
      1980 by the Office of Rent Control.  The owner also submitted a one year 
      lease for tenant Petrini (a/k/a Brierty) and co-tenants commencing 
      August 1, 1981 and renewal leases for those tenants.

      In reply, the tenant disputed the claimed tenancy of Deborah Weinstein, 
      asserting that such person was never a tenant of apartment 7B and that 
      the tenancy of Petrini (a/k/a Briety) commencing August 1, 1981 was the 
      first stabilized tenancy in that apartment.  The tenant asserted that 
      the owner had created the fictitious tenancy of Deborah Weinstein in 
      apartment 7B just as the owner had created the fictitious tenancy of 
      Elsa Klein for the subject apartment for the same purpose, to deprive 
      the first stabilized tenant of the right to challenge the initial rent.  
      The tenant cited the following: the owner had failed to serve the 
      Landlord's Report of Statutory Decontrol on the tenant of apartment 7B, 
      failed to submit a DC-2 notice properly served on a bona fide tenant of 
      apartment 7B and failed to register that apartment until 1984; there are 
      discrepancies in the address listed by the owner for itself on the 
      various documents submitted by the owner indicating subsequent creation 
      of the Deborah Weinstein lease; the owner had listed different dates of 
      decontrol for apartment 7B on different submissions.  The tenant 
      submitted a report from a private investigating agency indicating that, 
      based on a search of public records and interviews with building 
      residents, the agency could find no evidence that a Deborah Weinstein 
      had ever occupied the subject apartment. 

      By subsequent correspondence, the owner denied that it had created a 
      fictitious tenancy for apartment 7B and asserted that the fact that 
      different addresses (675 West End Avenue and 700 West End Avenue) were 
      used by the owner on different documents does not have any chronological 


      significance since at the time in question the owner owned both 
      buildings, resided in one of the buildings and used either address.  The 
      owner submits supporting documentation including a Multiple Dwelling 
      Registration application which lists both addresses (one as a business 
      address and the other as a home address).

      The Commissioner is of the opinion that this petition should be granted 
      in part.

      The first question to be answered is whether the fair market rent appeal 
      procedure applies to this case, as the Administrator determined, or 
      whether the owner was entitled to charge a free market rent, as the 
      owner claims, given the fact that the apartment was used for part 
      professional use from May 1972 through March 1981.

      That the subject apartment had a combined residential and professional 
      use does not exempt it, upon vacancy decontrol, from coverage under the 
      Rent Stabilization Law and Code.  The apartment remained subject to rent 
      control until vacancy decontrol in March 1981.  Section 25A(3) of the 
      former Rent Stabilization Code, which applies to this case, permits the 
      first tenant in occupancy of an apartment which was subject to rent 
      control on June 30, 1974 and vacated by the rent controlled tenant after 
      that date, to file an application to adjust the initial legal regulated 
      rent on the ground that it exceeds the fair market rent.  There is no 
      warrant in the Law or Code which would support the owner's contention 
      that it was entitled to charge a free market rent upon vacancy decontrol 
      or that that rent became the initial legal regulated rent not subject to 
      challenge by the tenant.

      Section 26-513 of the Rent Stabilization Law provides, in pertinent 
      part, that fair market rent adjustment applications are to be determined 
      by the use of special fair market rent guidelines orders promulgated by 
      the New York City Rent Guidelines Board and by the rents generally 
      prevailing in the same area for substantially similar housing 
      accommodations.  In order to determine rents generally prevailing in the 
      same area for substantially similar housing accommodations, it is DHCR's 
      procedure for fair market rent appeal cases filed prior to April 1, 1984 
      to allow owners to submit June 30, 1974 free market rental data for 
      complete lines of apartments, beginning with the subject line.  The 
      average of such comparable rentals will then be updated by annual 
      guidelines increases.  Alternatively, DHCR procedure allows owners to 
      have comparability determined on the basis of rents charged after June 
      30, 1974.  In order to use this method, owners were required prior to 
      November 1, 1984 to submit rental history data for all stabilized 
      apartments in the subject premises and subsequent to November 1, 1984 to 
      submit such data for comparable lines of apartments beginning with the 
      subject line.  Post-June 30, 1974 rent data will be utilized if the 
      comparable apartment was rented to a first stabilized tenant within one 
      year of the renting of the subject apartment and if the owner submits 
      proof of service of an initial legal regulated rent notice (DC-2 Notice) 
      or apartment registration form indicating that the rent is not subject 
      to challenge. 


      The Commissioner finds that the Rent Administrator erred in finding that 
      the owner had not submitted proof of service of the initial apartment 
      registration form for Apartment 7B.  The owner has submitted 
      documentation that the required of proof of service conforming to the 
      acceptable methods of service of the initial apartment registration at 
      the time in question was provided by the owner to the Administrator.  
      However, the Administrator apparently never received,and therefore never 
      considered, this submission.  The owner has also submitted documentation 
      of the rent for apartment 7B.  The tenant had questioned the validity of 
      the owner's rental data during the proceeding before the Administrator, 
      but the Administrator failed to request documentation of the rent for 
      Apartment 7B.  Therefore such documentation has been requested and 
      submitted on administrative appeal.  The documentation submitted by the 
      owner to substantiate the tenancy of Deborah Weinstein in apartment 7B 
      includes a lease and an R-42 form naming that tenant, including a 
      decontrol date consistent with that tenancy, and date-stamped received 
      November 9, 1980 by the Office of Rent Control, also consistent with 
      that tenancy.  Additionally, DHCR rent control records include other 
      documents consistent with that tenancy, including a rent registration 
      card indicating the filing of a decontrol report for apartment 7B on 
      November 10, 1980, fuel cost adjustment schedules filed at the time 
      listing apartment 7B as rent controlled as of June 30, 1980 but not as 
      of March 18, 1981 and Maximum Base Rent Schedules filed at the time 
      listing apartment 7B as rent controlled as of January 28, 1980 but not 
      as of January 22, 1981.
      Regarding the tenant's objections to the owner's documentation, the 
      Commissioner finds as follows: 1) there is no requirement to serve an 
      R42 form on the tenant; 2) while the owner does not allege service of a 
      DC-2 notice on a tenant of apartment 7B, it is sufficient that the owner 
      has adequately documented service of the initial apartment registration 
      form on the tenant of that apartment as of April 1, 1984 so that the 
      initial registered rent for that apartment is no longer subject to 
      challenge; 3) registration requirements did not take effect until 1984; 
      4) the owner has adequately explained the different addresses for the 
      owner on various documents submitted by the owner; 5) the owner's 
      statement in its submission dated August 3, 1988 that apartment 7B was 
      decontrolled in August 1981 appears to have been an error inasmuch as 
      the rental history form included in that submission indicates a base 
      date of October 1, 1980 and a base rent of $1000.00, and the owner 
      properly listed subsequent tenants thereafter; 6) the private 
      investigator's report submitted by the tenant is at best inconclusive 
      and is inadequate to refute the documentation in the record 
      substantiating the initial stabilized tenancy in apartment 7B commencing 
      October 1, 1980 at a monthly rent of $1000.00.  The Commissioner further 
      finds that the owner's submission of documents for an alleged prior rent 
      stabilized tenant (Elsa Klein) in the subject apartment which was 
      subsequently determined by the Administrator not to be a legitimate 
      tenancy does not outweigh the overwhelming credible evidence, including 
      the owner's documentation and DHCR records, which substantiates the 
      tenancy of Deborah Weinstein in apartment 7B.  Moreover, it is noted 


      that accepting the tenant's argument that the tenancy of apartment 7B 
      commencing August 1, 1981 was the first stabilized tenancy of that 
      apartment would result in a higher rent for that apartment being used in 
      the comparability study since the August 1, 1981 rental occurred within 
      one year of the initial rental of the subject apartment, the tenant of 
      that apartment was served with an initial apartment registration and 
      failed to challenge the rent and therefore the August 1, 1981 rent of 
      $1050.00 could, if it were the first stabilized tenancy, be used as a 
      comparable rent.

      The Commissioner finds that the owner has adequately documented and the 
      tenant has failed to refute that apartment 7B was rented to a first 
      stabilized tenant commencing October 1, 1980 at a monthly rent of 
      $1000.00 and that that rent should be used in the comparability study as 
      part of the calculation of the fair market rent for the subject 

      Regarding the improvements for which the owner claims a rent increase, 
      the bill and checks submitted for these items (windows and kitchen 
      flooring) indicate that the items were not installed as new items 
      immediately prior to the tenant's occupancy but were rather installed 
      during the tenancy of the rent controlled tenant.  Therefore the 
      Commissioner finds that no increase to the tenant's rent is warranted 
      for these items.  It is noted that rent control records contain no 
      evidence that the owner ever applied for or was granted an adjustment to 
      the MBR for those items.

      Regarding the owner's assertion that the 1980 MBR which was used by the 
      Administrator was incorrect, the Commissioner finds that two of the 
      increases cited by the owner - the increase of $21.79 granted in October 
      1970 prior to the institution of the MBR system and the increase of 
      $54.51 granted May 26, 1972 for part professional use of the apartment - 
      do not affect the MBR.  However, the increase of $5.75 granted December 
      18, 1974 for a new refrigerator does affect the MBR and should have been 
      included by the Administrator in calculating the 1980 MBR.  The 1980 MBR 
      is recalculated as follows:

           1972 MBR                      $206.29
           Biennial Adjustment           +  8.5%
           1974 MBR                      $223.82
      Increase for new refrigerator      + $5.75   
           Biennial Adjustment           + 22%

           1976 MBR                      $280.08
           Biennial Adjustment           +  9%
           1978 MBR                      $305.29


           Biennial Adjustment           + 10%
           1980 MBR                      $335.82

      Based on the above findings, the fair market rent is recalculated as 

      Pursuant to Special Guidelines Order Number 12, the 1980 Maximum Base 
      Rent of $335.82 must be adjusted by an additional 15%, resulting in a 
      fair market rent of $386.19.

      Averaging the results of the Special Guidelines formula with the 
      comparability data results in a final fair market rent of $693.10 
      ($386.19 + $1000.00 divided by 2 = $693.10) for the tenant's initial 
      lease term commencing May 1, 1981.

      The lawful stabilization rents thereafter have been recalculated on the 
      attached rental history chart,which is fully made a part of this order.  
      The total amount of excess rent is $28,379.63.

      The owner is directed to roll back the rent to the lawful stabilized 
      rent consistent with this decision and to refund or fully credit against 
      future rents over a period not exceeding six months from the date of 
      receipt of this order, the excess rent collected by the owner.

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

      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.  

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

      ORDERED, that this petition be, and the same hereby is, granted in part 
      and the Rent Administrator's order be, and the same hereby is, modified 
      in accordance with this order and opinion.  


                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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