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
------------------------------------X S.J.R. NO.: 6604
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: EB 430295-RO
:
STANLEY REIFER, EDWARD VILANI, RENT ADMINISTRATOR'S
AND DAVID GOLDSTICK DOCKET NO.: BL 420004-OH
PETITIONERS :
------------------------------------X
ORDER AND OPINION DENYING ADMINISTRATIVE APPEAL
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
denied.
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
uncertainty.
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.
ISSUED:
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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