EI 510318-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
                                
                                
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IN THE MATTER OF THE ADMINISTRATIVE     ADMINISTRATIVE REVIEW
APPEAL OF                               DOCKET NO.:
                                        EI 510318-RO;
       GERMAN NAGOBICH,
                                        DISTRICT RENT
ADMINISTRATOR'S DOCKET NO.:
                        PETITIONER      BD 510257-R
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  ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
                                
                                
On  September 18, 1990, the above-named petitioner-owner filed  a
Petition  for  Administrative Review against an order  issued  on
August  14,  1990  by  a  Rent Administrator  concerning  housing
accommodations  known as Apartment 3-N at 1800 Lexington  Avenue,
New  York,  New  York,  wherein the District  Rent  Administrator
determined  that  the owner had overcharged  the  tenant  in  the
amount of $44,280.64 including excess security and treble damages
for overcharges since April 1, 1984.

The   issue   in  this  appeal  is  whether  the  District   Rent
Administrator's order was warranted.

The applicable sections of the Law are Section 26-516 of the Rent
Stabilization  Law,  Section  2526.1(a)  of  the   current   Rent
Stabilization Code.

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 commenced by the filing on April 12, 1987  of
a  rent  overcharge complaint by the tenant, in which  he  stated
that  he  had commenced occupancy in November, 1986 at a rent  of
$708.50 per month.

The  owner  had filed an initial registration statement  for  the
subject  premises  effective April  1,  1984.   The  registration
stated the legal rent as $300.00 per month.

The  owner  was  served  with a copy of  the  complaint  and  was
directed  to  submit a complete lease history  to  establish  the
lawfulness  of  the  rent being charged.  The owner  submitted  a
partial  set of the requested documentation, including bills  for
improvements to the subject apartment, which was claimed as a
"total renovation."

A subsequent letter to the Administrator from the tenant, dated
July   14,   1987,  expressed  the  tenant's  doubts   that   the
improvements  made  to  the apartment immediately  prior  to  the
tenancy   commencing   on  April  1,  1986,  constituted   "total
renovation"  of the apartment such as would account  for  a  rent
increase of $300.00 per month.

On  August 11, 1988, in response to an inquiry from the  Division
of  Housing and Community Renewal (DHCR), the owner submitted the
remainder  of  the lease history and a contractor's statement  of
work  performed  in  the subject-apartment  totalling  $19,500.00
which was dated December 16, 1985.  The work listed in the letter
included:

          sheetrock walls               $ 5,800.00
          new replacement windows         2,100.00
          new doors & carpentry           3,500.00
          tape, spackle & paint           2,500.00
          new "electric"                  3,300.00
          new kitchen appliances          2,300.00

The statement is typewritten and unsigned.

The  tenant next wrote the DHCR on April 27, 1989 after examining
the  case record, and disputed various claims of the owner.   The
tenant  claimed  that  the  apartment  had  not  been  completely
renovated,  and  that there was no itemized  bill  for  the  work
allegedly done, nor were there cancelled checks.  The tenant  did
acknowledge  that new equipment was put in, however, including  a
refrigerator,  stove,  sink  and a  plywood  kitchen  floor,  but
maintains  that this did not make it a completely new  apartment.
Enclosed  with the letter were copies of the tenant's  bills  for
repair  work in the apartment, mostly for painting, and totalling
approximately  $460.00, along with a bill  for  a  carpeting  for
$620.44.

The  Administrator  requested additional documentation  from  the
owner to explain the inconsistencies noted above and informed him
that  treble damages may be imposed if overcharges are deemed  to
be willful.
On  June  16,  1990 the owner submitted additional  documentation
involving the equipment the owner claimed to have installed.

This  included  copies of four checks totalling $109,630.22  from
the General Accident Insurance Company, Melville, New York, which
were  made to the order of the owner and Miracle Wines and Liquor
Inc.   These  checks were dated June 26, 1985.  The  packet  also
contained   two  agreements  with  the  contractor,   the   Marin
Construction  Corporation, dated July 1, 1985.   The  first  such
contract  is an agreement by the owner to pay the contractor  for
the repair of fire damage to the premises known as 144 East 112th
Street,  New  York,  New York, by assigning  the  fire  insurance
proceeds  expected  by the owner to the contractor.   The  second
contract  is  essentially the same, except that the fire  damaged
building  is  No.  127  East 100th Street, New  York,  New  York.
Neither  agreement mentions any work to be done in  the  subject-
building  at 1800 Lexington Avenue.  Submitted with the  contract
is  a  three-page list, signed by the treasurer of the contractor
company,  listing  improvements to various apartments,  including
number  3-N,  but stating a building address of "144  East  112th
Street".   On  one  sheet, that address is crossed  out  and  the
address of the subject-building is handwritten above it.

In  Order  No.  BD  510257-R, issued  on  August  14,  1990,  the
Administrator determined that the tenant had been overcharged  in
the  amount  of $44,280.64, including excess security and  treble
damages.  No overcharges were computed until the one-year vacancy
lease  under Guidelines 17 for the prior tenant.  The lease  rent
of  $650.00 included the owner's claim for the improvements.  Re-
jecting the claim in its entirety, the Administrator determined a
lawful  rent  of  $369.89.  All overcharges for  the  complaining
tenant resulted from this determination.

In  its  petition, dated September 18, 1990, the  owner  contends
that  the  order  should be overturned because the  Administrator
failed  to consider the cost of individual apartment improvements
which  had been necessitated because of extensive damage  from  a
fire in the apartment, as had been documented in response to  two
earlier  requests  from  the Administrator.   The  owner  claims,
therefore,  that  it  had  supplied sufficient  documentation  to
verify  the  entire cost of $19,500, and thus no overcharges  had
occurred.    In  attempting  to  explain  why  the  Administrator
committed  this "error," the owner notes that the contractor  was
paid  by checks from the insurance company made out to the owner,
stated thereon as "Miracle Wines & Liquors Inc. & German Nagobich
and  Sutton  Adjustment Co., Inc., as PA," which the  owner  then
assigned  to  the contractor.  As a result, the cancelled  checks
were forwarded to the insurance company, and the owner could  not
produce them for the record.


Nevertheless,  the  owner  continues,  the  actual   improvements
included  "complete  sheetrock,  windows,  doors,  electric   and
kitchen  appliances,  for which full costs  are  allowable  under
Section 2522.4(a)(1) of the revised Rent Stabilization Code.
Additionally, any lack of specificity on the invoices should  not
be  considered  as fatally defective, since the Commissioner  has
ruled,  in  ARB Docket No. BC 410344-RO, that the Code  does  not
specify  the degree of detail such proof requires.  Finally,  the
owner  claims  that  the work completed was a  "gut"  renovation,
which is not always susceptible to a precise allocation of costs.

The  tenant's  answer,  dated December 27, 1990,  challenges  the
items  of equipment and repair claimed by the owner, the  quality
of  workmanship, the documentation of the alleged  cost  and  the
identity  of  the  payee on the checks.  The tenant  also  claims
that,  far  from being a "new" apartment, numerous  repairs  were
made  by  the  tenant for the same items listed  on  the  owner's
bills,  which shows how poorly the work was done, if it was  done
at  all.   The tenant encloses several bills for repairs he  paid
for  out  of  his  own money because of the poor quality  of  the
owner's repairs.

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

The   entire   basis  of  the  owner's  petition  is   that   the
determination  to reject the claim for the alleged renovation  of
the  apartment was improper.  In attempting to demonstrate  this,
the  owner  submitted numerous papers, including bills and  other
invoices, letters, copies of checks as well as its agreement with
the contractor.  Much of this documentation is problematical,  at
best.   For  instance, the work claimed for the subject-apartment
in  the  construction  contract  is  attributed  to  a  different
building.   The owner never even establishes where and  when  the
alleged  fire took place.  Nevertheless, any possible explanation
for  these  inconsistencies will not address the reason  why  the
rejection of the claim was proper; namely because the entire cost
of  the renovations was paid for out of insurance proceeds.   The
Commissioner has previously held that the cost of improvements to
the  premises cannot be added to the rent to the extent that such
costs were paid for by insurance proceeds (Accord: CF 510024-RO).
The  Administrator's denial of the alleged costs, which the owner
documents  were entirely paid for out of an insurance settlement,
was in accordance with this policy.

The petition also fails to effectively rebut the presumption that
these overcharges were willful.  It is impossible to recognize

the  owner's  "good  faith"  in  adding  the  cost  of  apartment
renovations to the tenant's rent when these alleged "costs"  were
never  suffered  by  the  owner in the  first  place.   Similarly
distinguishable  are  the  cases where treble  damages  were  not
imposed  because of the failure to prove the costs of  individual
apartment  improvements, since no actual costs were  incurred  in
this  case.  It  is  also  noted that the Rent  Guidelines  Board
regularly  includes the estimated cost of insurance  premiums  in
its calculation of the annual published guidelines increases.


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

ORDERED,  that the owner's petition be, and the same  hereby  is,
denied and that the Administrator's order be, and the same hereby
is affirmed.


ISSUED:




ELLIOT SANDER
                                         Deputy Commissioner
    

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