EJ 410096-RO

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

          ------------------------------------X  S.J.R. 6561 (DEEMED DENIAL)
          APPEAL OF                              DOCKET NO.: EJ 410096-RO

                 WINDSOR PLAZA COMPANY,          DRO DOCKET NO.: ZAH-410125-R

                                                 TENANT: BARRY LEVINE         

                                       IN PART

          On October 10, 1990 the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on 
          September 11, 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. 7B
          wherein the Rent Administrator determined that the owner had 
          overcharged the tenant.

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

          The issue herein is whether the Rent Administrator's order was 

          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 in August, 
          1986 of a rent overcharge complaint by the tenant, who stated that 
          he had commenced occupancy on June 1, 1986 at a rent of $2,200.00 
          per month, and that the rent on March 31, 1980 was $513.29.

          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 $10,598.58.  The owner submitted 
          bills and cancelled checks totalling that amount for new equipment 
          and work in the apartment; a May 15, 1989 letter from Bau 
          Contracting Corporation stating that, in addition to the $7,850.00 
          in construction work that it had done [in 1985], "[p]reviously, 
          part of this apartment was added to apartment 7-A as an additional 
          room"; and a December 5, 1989 letter from Bau Contracting 
          Corporation giving a breakdown of the alterations which it had done 
          and stating that "[i]t should also be mentioned that the partition 
          separating this one from the adjacent apartment 7-C was relocated 
          east in order to provide the area for an additional room in 
          apartment 7-C, usually used as a second bedroom there."

          EJ 410096-RO

          On March 3, 1988 and April 18, 1989 the owner was requested to 
          submit a copy of the new Certificate of Occupancy and of the floor 
          plans prior to and after the renovation.  The owner submitted "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."  This 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.

          The President of Bau Contracting, while contending that a room had 
          been removed from the subject apartment, 7B, and added either to 
          apartment 7A [May 15, 1989 letter] or to apartment 7C [December 5, 
          1989 letter], had also stated in his May 15, 1989 letter that 
          "dining room was added," and in his December 5, 1989 letter "[n]ew 
          closets constructed, including masonry."  On February 14, 1990 a 
          DHCR inspector reported that "[t]here is NO dining-room," and 
          "[t]here is one closet which appears to have been added in the 
          hallway; there are two others which appear to have been originals."

          In an order issued on September 11, 1990 the Administrator found 
          that the conditions to charge a "first rent" had not been 
          satisfied, and determined an overcharge of $79,320.01, including 
          interest, as of August 31, 1990 after allowing a rent increase of 
          $264.96 per month for improvements.  The order stated that the 
          owner had proved the cost of such improvements in the amount of 

          In this petition, the owner contends in substance that the 
          apartment was reduced in size; that the owner was entitled to 
          charge the tenant a free market rent since the owner created a new 
          unit not in existence on the base date; that the owner has been 
          accepting a rent of $600.00 per month pursuant to a Civil Court 
          stipulation; and that the Administrator was incorrect in allowing 
          only $2,748.58 of the owner's expenditures of over $11,000.00 for 
          renovations.  With its petition the owner has enclosed a copy of a 
          Stipulation of Settlement, dated September 29, 1987 and signed by 
          the owner's [but not the tenant's] attorney, stating that the 
          tenants [Barry and Martin Levine] agree that rent of $8,400.00 is 
          outstanding for the period from September 1, 1986 through September 
          30, 1987, and that they agree to pay a rent of $600.00 per month 
          from the inception of the tenancy until the DHCR determines the 
          overcharge complaint.  The owner has also enclosed a computer 
          printout showing the tenants owing arrears of $8,800.00 as of 
          January, 1987, making no payments before a $3,800.00 one on March 
          10, 1988, and then generally paying $600.00 per month.

          In answer, the tenant asserts in substance that none of the claimed 
          work changed the size of the apartment; that the owner has claimed 
          both that the apartment was enlarged and that it was reduced in 
          size; that no plans were filed; that no permit was issued; that the 
          owner does not mention that a rent of $2,200.00 was paid for 
          several months before being reduced to $600.00; that the cost of 

          EJ 410096-RO

          the renovations is questionable; that some of the work does not 
          qualify for a rent increase; and that treble damages should be 

          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 on October 9, 1992 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 DHCR has not and should not require that 
          approved plans be used to show that the outer configuration of an 
          apartment has been changed.

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

          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 

          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 

          EJ 410096-RO

          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 
          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.  
          Although Section 2522.4(a)(1) requires a tenant to consent in 
          writing to the installation of new equipment, the Courts have ruled 
          that new equipment installed during a vacancy prior to the 
          tcommencement of a new tenancy or upon the commencement of a new 
          tenancy and reflected in the lease rent, 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 $10,598.58 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 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 two letters from the President of 
          Bau Contracting Corp. do not establish a change in size, since he 
          does not claim to have performed such work, but merely states that 
          it was done "previously."  In addition, one of his letters claims 
          that part of the apartment was added to apartment 7A, and the other 
          letter claims that it was added to apartment 7C.  The Administrator 
          was therefore warranted in concluding that the owner had not proven 
          its entitlement to a "first rent."

          While the owner has objected to the footnote in the Administrator's 
          order stating that the owner had proven the cost of only $2,748.58 
          in improvements [that being the $10,598.58 total cost claimed by 
          the owner minus the $7,850.00 cost of work done by Bau Contracting 
          Corp.], the $264.96 rent increase allowed by the Administrator 
          actually reflects an allowance of the entire cost, since $264.96 
          equals $10,598.58 divided by 40.
          While the Administrator was correct in finding the lawful 
          stabilization rent to be $850.11 per month in the lease from June 
          1, 1986 to August 31, 1988, and $905.37 per month in the lease from 
          September 1, 1988 to August 31, 1990, and while the leases were for 
          rents of $2,200.00 and $2,343.00 respectively, the owner has 
          actually not collected an overcharge for the period covered by the 
          leases.  The October 2, 1990 computer printout submitted by the 
          owner shows the tenant as owing four months arrears ($8,800.00 

          EJ 410096-RO

          divided by $2,200.00) as of January 1, 1987, meaning that the 
          tenant had paid $2,200.00 monthly rent for either two or three 
          months in 1986.  (Although his lease commenced June 1, 1986, he 
          stated that he was not given keys to the apartment until the end of 
          June.)  This is consistent with the tenant's statement that he 
          "paid $2,200.00 for several months before reverting to the $600.00 
          amount."  Through the end of August, 1990 the tenant paid an 
          additional $21,200.00 in rent.  It would appear, then, that the 
          tenant paid total rent of no more than $27,800.00 through August, 
          1990.  This is more than $15,000.00 less than the amount that the 
          owner was entitled to collect at the lawful rents established in 
          the Administrator's order (and upheld in this order).  Therefore, 
          the Rent Administrator's order is hereby modified to eliminate the 
          finding that a rent overcharge occurred.

          Regarding the tenant's contentions that treble damages should be 
          imposed, that some of the work does not qualify for a rent 
          increase, and that the cost of the renovations is questionable, 
          those contentions may not be considered since the tenant did not 
          raise them in his own appeal against the Administrator's order.

          Even though the owner registered the tenant as being in occupancy 
          on April 1, 1992 pursuant to a lease expiring August 31, 1992, the 
          Commissioner notes that two notices recently sent to the tenant at 
          the subject apartment were returned by the Postal Service stamped 
          "Forwarding Order Expired."

          The owner is cautioned to adjust the rent, in leases after those 
          considered in this order, to amounts no greater than that 
          determined by this order plus any lawful increases, and to register 
          any adjusted rent, with this order being given as the reason for 
          the adjustment.  Because the complainant has apparently vacated, a 
          copy of this order is being sent to the current tenant.

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

          ORDERED, that this Petition be, and the same hereby is, granted in 
          part and that the Rent Administrator's order be and the same hereby 
          is, modified in accordance with this order and opinion.  The lawful 
          stabilization rent is $905.37 per month in the lease from September 
          1, 1988 to August 31, 1990.


                                          JOSEPH A. D'AGOSTA
                                          Acting Deputy Commissioner



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