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

      ------------------------------------X  S.J.R. NO.: 6604
      APPEAL OF                              DOCKET NO.: EB 430295-RO
        AND DAVID GOLDSTICK                  DOCKET NO.: BL 420004-OH
                            PETITIONERS   : 


      On February 22, 1990 the above-named petitioner-landlords filed an 
      Administrative Appeal against an order issued on January 18, 1990 by the 
      Rent Administrator, 92-31 Union Hall Street, Jamaica, New York, concerning 
      the rent-controlled housing accommodations known as 522 West End Avenue, 
      New York, New York, Apartments 6A, 6B and 13A.

      Subsequent thereto, the petitioners filed a petition in the Supreme Court 
      pursuant to Article 78 of the Civil Practice Law and Rules requesting that 
      the "deemed denial" of their administrative appeal be annulled.  The 
      proceeding was then remitted to the Division pursuant to court order for an 
      expeditious determination of the petitioners' administrative appeal.

      The Administrative Appeal is being determined pursuant to the provisions of 
      9 NYCRR 2202.8.

      The issue herein is whether the Rent Administrator properly denied the 
      landlords' application for a hardship rent increase.

      The Rent Administrator's order, appealed herein, denied the landlords' 
      application based upon a finding that the landlords had failed to submit 
      information/evidence necessary to process the case, as requested on October 
      20, 1989, November 14, 1989 and December 19, 1989.

      On appeal, the petitioner-landlords allege, in substance, that the Rent 
      Administrator denied the landlords due process of law by dismissing the 
      application, despite the landlords' best efforts to obtain the documents 
      requested by the Rent Administrator, and the submission of certified 
      written evidence which, as a matter of law, satisfied the request made by 
      the Rent Administrator.

      The petitioners further assert that on December 30, 1987, they filed an 
      application seeking hardship rent adjustments pursuant to 9 NYCRR 2202.8; 
      that on October 20 and November 14, 1989, the Rent Administrator requested 
      certain information which the Rent Administrator represented was necessary 
      in order to process the landlords' application; that on December 1, 1989, 
      the landlords submitted the cooperative offering plan and the certified 
      accountant's statement of operations for the subject building for calendar 
      year 1986; that in said submission, the landlords explained that the other 


          ADMIN. REVIEW DOCKET NO.: EB 430295-RO

      information requested by the Rent Administrator, i.e., bills and invoices, 
      was not available; that the subject building is owned by a residential 
      apartment cooperative corporation; that the petitioners are shareholders in 
      that corporation; that the petitioners are therefore not responsible for 
      building-wide operations nor do they have in their possession the bills, 
      invoices and other documents relating to the operation of the building; 
      that such documents should be in the possession of the managing agent that 
      operates the building on behalf of the corporation; that the petitioners 
      set forth in their response that they would make good faith efforts to 
      secure such documents, but if those documents could not be obtained, the 
      certified accounting statement submitted satisfied the request for 
      information; that on December 19, 1989, the Rent Administrator reiterated 
      its request for bills, invoices and other documents relating to the 
      operating costs during the base year of operation; on January 8, 1990, the 
      petitioners explained in writing that they had requested the subject 
      building's past two managing agents to produce the requested documents, but 
      that neither of those agents were in possession of those records; that the 
      petitioners also attempted to obtain the records from the accountants who 
      prepared the certified accounting statement and the attorney for the 
      cooperative corporation; that neither professional organization had copies 
      of the requested documents; that the documents were completely unavailable 
      and quite possibly no longer existed; that the petitioners therefore 
      satisfied the requirements of the Rent and Eviction Regulations by 
      submitting the certified accounting statement for the 1986 test year; that 
      while the petitioners herein are the owners of the subject apartment units, 
      they do not have in their personal possession documents relating to 
      building-wide operations, such as bills, invoices and tax bills, which were 
      the documents requested by the Rent Administrator; that the petitioners 
      made good faith inquiries in an attempt to obtain copies of those 
      documents; that they established for the record their "best efforts" to 
      obtain said documents; that the certified accounting statement which was 
      submitted contained all of the information requested by the Rent 
      Administrator's notice, including payroll information, utilities, fuel, 
      real estate tax payments, and miscellaneous income from the operation of 
      the building's laundry machines; that such submission qualified as a 
      complete and proper response; that upon information and belief, the 
      certification contained in the accounting statement indicates that the 
      accountants reviewed the very documents requested by the Rent 
      Administrator; that said certified financial statement is a true and 
      unbiased report of the income and expenses for the subject building in 
      1986; that the Rent Administrator's refusal to accept the certified 
      accounting statement was arbitrary and capricious and violated the 
      petitioners' right to equal protection; that as the original documents 
      requested by the Rent Administrator were unavailable after a diligent 
      search, the Rent Administrator was required, as a matter of law, to accept 
      the "secondary evidence" in the form of the certified accounting statement; 
      that said accounting statement is a business record kept in the regular 
      course of business and is therefore admissible in a judicial proceeding 
      under CPLR Rule 4518; that upon information and belief, the Division 
      accepts such a certified accounting statement in processing hardship rent 
      adjustment applications for rent-stabilized apartments; and that there is 
      no rational basis for the Rent Administrator to reject the certified

          ADMIN. REVIEW DOCKET NO.: EB 430295-RO

      accounting statement submitted by the petitioners when such a statement is 
      accepted as evidence for rent-stabilized hardship applications.

      After a careful consideration of the entire evidence of record the 
      Commissioner is of the opinion that the administrative appeal should be 

      The application which the landlords filed with the Division on December 31, 
      1987, by their attorney, Rosenberg and Estis, P.C., provides that the 
      items, schedules and amounts listed therein are to be supported by such 
      evidence as bills, cancelled checks, and books of account; and that such 
      supporting documentation is to be submitted in accordance with the detailed 
      instructions in Instruction Sheet No. 2

      It is clear that as of the time of filing of their application, the 
      landlords were on notice of the type of evidence which would be required to 
      support their application.  Yet, it appears from the record that the 
      landlords made no efforts to obtain the required documentation until after 
      receiving notices from the Division approximately two years subsequent to 
      the filing of the application.  The required evidence may no longer be 
      available because of the landlords' failure to marshall such evidence in a 
      timely fashion.  The landlords cannot rely on the "best evidence" rule 
      where, by their own failure to obtain the necessary evidence in a timely 
      manner, they are now unable to provide the Division with the material the 
      Division requires to perform the thorough audit mandated by law.

      With regard to the landlords' contention that there is no rational basis 
      for the Division to accept certified accounting statements in processing 
      rent-stabilized hardship applications and to reject such evidence in 
      processing rent-controlled hardships applications, the Commissioner notes 
      that the rent control and the rent stabilization hardship provisions were 
      promulgated pursuant to different Laws and have different standards by 
      which a hardship is determined; that "alternate" hardship relief is not 
      available as to buildings which are cooperatively owned; and that 
      "comparative" hardship applications under rent stabilization, with respect 
      to stabilized apartments in buildings converted to cooperative or 
      condominium ownership are relatively rare.  On the other hand, it is the 
      long established practice both of the predecesor rent agencies (the 
      Temporary State Housing Rent Commission and the New York City Office of 
      Rent Control) under Section 33.5 (since recodified as 9NYCRR 2202.8) of the 
      Rent and Eviction Regulations, and the DHCR, to perform its own through 
      audit of all applications filed under this Section.  To perform such 
      complete and through audit the Rent agency requires the type of evidence 
      requested herein (as outlined in the filing instructions), i.e., bills, 
      invoices, cancelled checks, contracts, insurance policies, etc.

      Even where financial statements of a cooperative have been accepted, an 
      owner has been required to supplement such statements with supporting 
      schedules breaking down expenses.  The Commissioner further notes that a 
      financial statement prepared by a certified public accountant, 


          ADMIN. REVIEW DOCKET NO.: EB 430295-RO

      retained by and for the benefit of the property owner, merely reflects a   
      statistical sampling susceptible to varying degrees of error and 

      THEREFORE, in accordance with the provisions of the Rent and Eviction 
      Regulations for New York City, it is

      ORDERED, that this administrative appeal be, and the same hereby is, 
      denied, and that the order of the Rent Administrator be, and the same 
      hereby is, affirmed.


                                           JOSEPH A. D'AGOSTA
                                       Acting Deputy Commissioner


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