EK 810352-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.:
                                        EK 810352-RO
       CARLO PASQUALINI,
                                        DRO DOCKET NO.:
                        PETITIONER      KCL-8-1-0091-R
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  ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
               AND MODIFYING ADMINISTRATOR'S ORDER
                                
                                
On November 21, 1990, the above named petitioner filed a Petition
for  Administrative Review against an order issued on October 29,
1990,  by  a Rent Administrator concerning the housing accommoda-
tions  known  as Apartment 7-B, 100 Diplomat Drive, Mount  Kisco,
New  York,  wherein it was determined that the  tenant  had  been
overcharged in the amount of $17,096.87, including interest.

The  Administrative Appeals are being determined pursuant to  the
provisions  of  Sections  36 and 123  of  the  Tenant  Protection
Regulations (now Sections 2502.6 and 2509.3).

The issue herein is whether reduction of the legal regulated rent
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 issues raised by the administrative appeal.

On  December  17,  1988, the tenant filed  a  complaint  of  rent
overcharge  in which she stated that she had commenced  occupancy
on  April 1, 1984, pursuant to a 3-year lease at an initial  rent
of  $825.00  per month for the firt year, $875.00 for the  second
year  and  $925.00  for the third year.  The  tenant  was  paying
$1,050.00 per month at the time the complaint was filed.

The owner was served with a copy of the complaint and directed to
submit  a  complete rent history including copies of  all  leases
from  the  base date to verify the lawfulness of the  rent  being
charged.

The  owner  answered on March 31, 1989 that the tenants  had  not
been  overcharged,  and  that he had  made  improvements  to  the
premises.

The  subject apartment is part of a cooperative development.  The
owner  was  a  tenant of the subject-apartment,  which  was  rent
stabilized  under the auspices of the ETPA, at the  time  of  the
occupancy of the complaining tenants on April 1, 1984.  The owner
purchased the subject apartment on June 14, 1984.

In  a  letter  of confirmation to the sponsor, Loewen Associates,
dated  May 17, 1989, the Administrator requested that the  signed
and dated acknowledgement of Claire Adam, as officer, be added to
a  summary  of her statements to the Administrator in an  earlier
telephone  conversation to the effect that the rent paid  by  the
owner  at  the time of purchase was $646.00 per month,  including
$25.00  parking fee.  This letter was signed "Claire  T.  Adams,"
dated May 18, 1989 and returned to the Administrator.

In  a  letter  to the owner dated May 1, 1990, the  Administrator
stated  that  the  sponsor corporation,  Loewen  Associates,  had
confirmed  by telephone that the owner had paid rent  of  $646.00
per  month,  inclusive  of $25.00 per month  parking  fee.   This
letter  further advised the owner that any claim of  improvements
to  the  apartment must be verified by paid receipted bills  plus
cancelled checks.

On May 21, 1990 the owner responded that he had been living in  a
different  apartment in the building prior to  purchasing  it  in
June,  1984, and had never lived in it himself.  Because  of  his
delay  in  closing the sale, the owner agreed to  pay  a  monthly
"accommodation  fee" or "closing adjustment fee" to  the  sponsor
which   was   considerably  less  than  the  rent  of  comparable
apartments.   Furthermore, the fair market rent for a  comparable
apartment  was greater than the $825.00 he charged  the  tenants.
The owner maintained that the initial rent, including the cost of
improvements,  was  negotiated in good  faith.   The  owner  also
claimed that, as a 21 year old high school dropout at the time of
purchase,  he  had  no  knowledge that  the  apartment  was  rent
stabilized and that even his attorney never told him.   If  there
were   overcharges,  he  claimed,  they  were  not   willful   or
attributable  to  his  negligence.  Finally,  the  owner  claimed
improvements  for  carpeting,  flooring  and  refinished  kitchen
cabinets  at  a  cost of $4,950.33 and a new stove  for  $425.00.
Enclosed  was a copy of an invoice from Consumers Carpet  Outlet,
dated  March 28, 1984, indicating total payment of $4,950.33  for
the above items, except for the stove.

The  tenants replied on June 2, 1990 that the owner purchased the
apartment at an insider's price offered to tenants of record, and
could  not  have gotten that price unles he or a  member  of  his
family was an actual tenant in residence.  The letter also stated
the  tenants'  intention  not  to accept  the  latest  offer  for
settlement  of  the  issue, or to purchase  the  apartment  after
several  months of negotiations with the owner. The tenants  also
disputed  the  claim  that  new kitchen  cabinets,  flooring  and
appliances  had  been installed and proposed that  the  bill  for
carpeting was fraudulent.  Finally, the tenants stated that  they
had received anonymous threatening phone calls.

The  owner sent a reply dated August 27, 1990, which claimed that
the  actual rent paid at the time he purchased the apartment  was
$728.00  per month, which included one parking space.  Since  the
tenants  had  two  parking spaces from the beginning,  the  owner
added  an additional $25.00 per month, for an initial legal  rent
of  $753.00.   The  owner again stated that he was  a  tenant  in
another apartment at the time the tenants moved in, and the  rent
on  the  subject-apartment  was  artifically  low.   Finally,  he
contended that his attempts to settle the dispute had been met by
the  tenants'  increasing demands, forcing  him  to  abandon  his
efforts.   He stated that, once aware of his possible  overcharge
under  the ETPA, he reduced a proposed "fair market rental" lease
to  $950.00,  from $1,025.00, and requested that no penalties  or
interest  should  be  asessed against  him.   Enclosed  with  the
owner's  answer  was  a letter from Marie T.  Adams  as  "General
Comptroller",  dated August 27, 1990, stating  that  the  subject
apartment,  7-B, contained two bedrooms, two baths,  no  terrace,
and was comparable to apartments in the H-b line in the building.
The letter also stated:

              "Highest rent for above apartment 200-7-B
          at  $728.00 includes one parking space. Prior
          to   co-op  conversion  June  15,  1984  Loan
          Associates Manager and Controller."
          
In  its  reply  of September 28, 1990, the tenants disputed  that
there  had  been any renovations in the apartment  since  it  was
built.

In  Order  KCL-8-1-0091/R, issued on October 29, 1990,  the  Rent
Administrator  determined tha the tenant had been overcharged  in
the amount of $17,096.87, including interest since April 1, 1984.
The Administrator found that the tenants' initial lawful rent for
a  two-year  lease term was $646.00, including a parking  fee  of
$25.00,  which had been the lawful rent of the premises prior  to
the  complainant's lease, resulting in overcharges for the period
commencing  December 1, 1984 of $1,094.34 ($825.00  -  $646.00  =
$179.00 x 6 months + interest = $1,094.34), and $2,864.24 in

overcharges for the second year of the lease commencing on  April
1,  1985  ($875.00 - 646.00 = $229.00 x 12 months  +  interest  =
$2,864.24).  For the third year of the complainant's  lease,  the
Administrator added a guideline increase of 6%, for a lawful rent
of  $684.76,  which  resulted in overcharges totalling  $3,004.82
($925.00 - $684.76 = $240.24 x 12 months + interest = $3,004.82).
For  the  one-year lease commencing April 1, 1987,  the  Adminis-
trator  added a 3% guidelines increase ($684.76 + 3% =  $705.30),
resulting  in  overcharges of $3,373.30.  For the one-year  lease
commencing April 1, 1988, the Administrator added a 3%  guideline
increase  ($705.30  + 3% = $726.46) resulting in  overcharges  of
$4,046.70 ($1,050.00 - $726.46 = $323.54 x 12 months + inerest  =
$4,046.70).  Finally, for the two-year lease commencing April  1,
1989, the Admiistrator added a 5% guidelines increase ($727.46  +
$5% = $762.78) for overcharges of $3,807.81 ($950.00 - $762.78  =
$187.22  x  19  months + interest = $3,807.81).  The  order  also
found that the claimed cost of capital improvements had not  been
substantiated  by  cancelled checks, as required.   Finally,  the
order  stated  that  the  escalating rents  during  the  tenants'
initial lease was contrary to the regulations.

In his petition, dated November 21, 1990, the owner contends that
the  Administrator  did  not  adequately  consider  the  managing
agents'  letter of August 27, 1990, which stated  that  the  1984
rent  for a similar apartment was $728.00, including one  parking
space.   Furthermore, the owner contends that  the  Administrator
also  failed  to consider the "capital improvements"  which  were
sufficiently verified by the paid bills, even though no cancelled
checks  were  available; the fact that the owner  never  actually
occupied  the  premises prior to the tenancy, and,  finally,  the
failure  to add an extra $25.00 to the rent for the tenants'  use
of a second parking space.

The  Commissioner is of the opinion that this petition should  be
denied, and that the Administrator's opinion be modified.

An  examination of the record in this case establishes  that  the
Rent  Administrator  properly based the tenants'  initial  lawful
rent on the Tenant Protection Bulletin No. 37, wherein Section 35-
8  of the former Tenant Protection Regulations is explicated.  In
pertinent   part,  the  announcement  provides  that  the   legal
regulated  rent  which may be collected for  an  apartment  in  a
building which is either cooperative or condominimum-owned or for
which  an  offering  plan  to convert to  such  status  has  been
accepted  by  the  Attorney  General, where  such  apartment  was
previously subject to the ETPA, shall be:

     1.   the  rent in the last lease to the last tenant  of  the
          apartment, which was lawful under the ETPA,
     
     2.   as  increased by an amount not in excess of the  guide-
          lines  notes of increase which were filed by the County
          Rent  Guidelines  Board and which  are  authorized  for
          which  use in a lease for an apartment in the  building
          in question.
     
          Furthermore, no additional increase otherwise allowable
          under the Regulations such as for increased services to
          the tenant shall be permitted unless applied for on the
          appropriate application forms.
          
In  the  instant  case,  the owner and  the  comptroller  of  the
cooperative  sponsor both acknowledge that the rent in  the  last
lease  prior to the complainants' was the rent paid by the  owner
as  primary tenant, in the amount of $646.00 per month, including
$25.00 parking fee. Therefore, the reference to a rent of $728.00
per  month for a comparable apartment, #200-7B, is irrelevent  to
the  issue.  The owner also failed to submit any evidence to  the
Rent Administrator to show that the rent of $646.00 was unusually
low.   Furthermore, the guidelines under which the initial  lease
was  executed, on April 1, 1984, have a 0% increase for  one  and
two-year   leases,   and   prohibit   three-year   leases.    The
Administrator thus properly determined that the three-year  lease
should  be  limited to two-years only, and, since  there  was  no
increase  under the guidelines, used the owner's former  rent  of
$646.00  per  month  as the complainants' lawful  rent  for  that
entire  period.  Subseqently, on April 1, 1986, the Administrator
applied a 6% guidelines increase to the third year of the initial
lease,  as  authorized for one year leases executed  during  that
guidelines  period.  The three subsequent lease terms, commencing
on  April  1,  1987, April 1, 1988 and (for two-years)  April  1,
1988,  were  given  the  correct  guidelines  increases  by   the
Administrator.   However,  the  Administrator's  calculation   of
overcharges  was erroneous in one instance:  the  initial  period
from December 1, 1984 through March 31, 1985 is four months,  not
six, thereby reducing overcharges for that period from $1,094.34,
to  $724.10,  and reducing total overcharges from  $17,096.87  to
$16,726.63.

It  is  noted  that,  in accordance with Section  2502.5(d),  the
owner's  use of an escalation clause after the first  and  second
years  of  the  initial lease, is invalid under  that  provision,
excepting   for  the  circumstances  provided  for   in   Section
2502.5(c)(2), which are not relevant here.

The owner's claim that the Administrator should have included the
cost  of "capital improvememnts" which were "verified" by a  bill
of  sale  is also incorrect.  The claimed transaction  is  itself
questionable since it is highly unusual to pay cash for expensive

department store purchases.  Furthermore, the notation
"cash  .  . . paid in full" has been held by the Commissioner  as
insufficient to establish payment, where the owner also fails  to
submit  an affidavit from the supplier and an explanation (Accord
No. ARL 08457-Q).

Finally,  there is no evidence in the lease history  or  anywhere
else  in  the  record that the second garage space was  meant  to
entail the payment of an additional $25.00 fee.  The fee is  only
mentioned in connection with general "parking privileges," and is
never designated as the cost per parking space. Additionally, the
owner  admits that the fee is "included" in the rent,  which  the
Administrator  rightly interpreted as meaning that no  additional
payment was required.

This  order may, upon the expiration of the period in  which  the
owner  may  institute a proceeding pursuant to  Article  Seventy-
Eight  of the Civil Practice Law and Rules, be filed and enforced
by  the  tenant in the same manner as a judgment or not in excess
of  twenty  percent thereof per month may be offset  against  any
rent thereafter due the owner.


THEREFORE, pursuant to the Tenant Protection Regulations and  the
Emergency Tenant Protection Act of 1974, it is

ORDERED,  that this Petition be, and the same hereby  is  denied;
and  that  the Administrator's order be, and the same  hereby  is
amended in accordance with this order and opinion.


ISSUED:




ELLIOT SANDER
                                         Deputy Commissioner
    

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