EJ110288RO
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.: EJ110288RO
EK110035RT
Dominick D'Alleva & DRO DOCKET NO.: 059134
Thomas Bucci, owners,
and
David Panichi, tenant,
PETITIONER
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ORDER AND OPINION GRANTING OWNER'S PETITION FOR ADMINISTRATIVE
REVIEW IN PART AND GRANTING TENANT'S PETITION FOR ADMINISTRATIVE
REVIEW IN PART
On October 31, 1990, the above-named petitioner-owner refiled a Petition
for Administrative Review against an order issued on October 5, 1990 by
the Rent Administrator, concerning the premises known as 23-05 30th
Avenue, Astoria, New York, Apartment No C3, wherein the rent
Administrator determined the fair market rent pursuant to the special
fair rent guideline promulgated by the New York City Rent Guidelines
Board for use in calculating fair market rent appeals. On November 5,
1990 the above-named petitioner-tenant filed a Petition for
Administrative Review against the same order.
In his administrative appeal, the owner enclosed a photocopy of his
answer to a DHCR notice, along with supporting documents, which was date-
stamped received by the DHCR on October 2, 1990. A review of the record
of the proceeding before the Administrator indicates that the owner's
submission of October 2, 1990, including comparability data, although
received by the DHCR, did not reach the file of the Rent Administrator
prior to issuance of the order. Inasmuch as it was not considered by the
Administrator, that submission will be considered during administrative
review.
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 appeals.
This proceeding was originally commenced in January, 1986 by the filing
of a fair market rent appeal by the tenant, who took occupancy pursuant
to a lease which commenced October 1, 1985 at a monthly rental of
$700.00.
In response to various notices from the DHCR, the owner stated, among
other things, that all other apartments in the subject line were rent
controlled as of November, 1985 and therefore those apartments would not
be useful as comparable apartments. The owner submitted copies of rent
rolls for the subject building and neighboring buildings. The owner also
asserted that under the holding in the case of JRD Management Corp, the
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owner was not required to provide rent records prior to 1984, four years
prior to the most recent apartment registration.
By notice dated August 2, 1990, the owner was afforded an opportunity to
submit data for other lines of apartments.
The record indicates that the owner responded by a submission received by
the DHCR on October 2, 1990, but that submission did not reach the
Administrator prior to issuance of the Administrator's order. In this
submission the owner listed rental information for three lines of
apartments in neighboring buildings, indicating that the following
apartments have the same number of rooms as the subject apartment and
were rented to a first stabilized tenant within four years prior or one
year subsequent to the renting of the subject apartment: Apartment 6D at
25-90 35th Street; Apartment 1B at 23-30 31st Road; Apartment 4D at 34-20
32nd Street. The owner asserted that no comparable apartments were
available within the subject building and therefore these apartments in
neighboring buildings should be used as comparables. The owner submitted
the following supporting documents:
For Apartment 6D, above, the owner submitted a renewal lease commencing
on February 1, 1986 and terminating on January 31, 1987 at a monthly
rental of $806.00, carrying a rider which provided that rent adjustments
were to conform with the lease dated January 14, 1985. The owner further
submitted a copy of the Form DC-2 dated March 27, 1985 for said housing
accommodation, which stated that it became vacant on January 1, 1985, and
that the negotiated first rent was $775.00 per month, based on "rent
comparables". The form was signed "Received" by the tenant on January
10, 1986.
For Apt. 1B, above, the owner submitted a vacancy lease commencing on
June 1, 1986 and terminating on May 31, 1987 at a monthly rental of
$775.00, along with a copy of the Form DC-2 dated July 10, 1986 for said
housing accommodation, which states that it became vacant on May 14,
1986, and the 1974 Maximum Rent was $191.82 per month. Appended thereto
was a copy of a certified mailing addressed to the tenant, returned
undelivered on September 3, 1986, following two attempted deliveries.
For Apartment 4D above, the owner submitted a vacancy lease commencing on
January 1, 1986 and terminating on December 31, 1986 at a monthly rental
of $800.00, along with a copy of Form DC-2 dated December 20, 1985 for
said housing accommodation, which states that it became vacant on
November 21, 1985, and that the initial legal regulated rent of $800.00
was based on comparability. This was signed "Received" by the tenant on
December 20, 1985.
In Order No. 059134 dated October 5, 1990, the Rent Administrator
adjusted the initial legal regulated rent by establishing the fair market
rent of $384.24 effective October 1, 1985, based on the special fair
market rent guideline. The owner was directed to refund to the tenant
excess rent payments totalling $17,489.75, and to adjust the rent to the
lawful stabilized rent consistent with that decision.
In this petition, the owner alleges that the Division failed to consider
the evidence submitted by the owner with regard to comparability and that
the DHCR is constrained to apply the holding in In Re JRD Management Corp
to this case.
EJ110288RO
In response to the owner's petition for administrative review, the tenant
states, among other things, that the information submitted by the owner
regarding comparability of neighboring apartments is highly suspect and
inconclusive; that the owner did not supply any formal rent history for
those apartments, and therefore that it is possible that those tenants
are being overcharged; and that treble damages should be imposed.
In his petition, the tenant alleges that the Administrator made an error
in computations for the lease period October 1, 1988 to September 30,
1990. Additionally, the tenant seeks treble damages, or, in the
alternative, interest and legal fees. In response to the tenant's
petition, the owner restated his position that the Administrator erred in
disregarding the comparable rents he submitted, and stated that judicial
and administrative precedent prohibit the awarding of treble damages in
a fair market rent appeal.
The Commissioner is of the opinion that the owner's petition for
administrative review should be granted in part, and that the tenant's
petition should be granted in part.
Pursuant to Sections 2522.3(e) and (f) of the Rent Stabilization Code
effective May 1, 1987, applicable to fair market rent appeals filed after
April 1, 1984, comparability will be determined based on the following:
(e)(1) Legal regulated rents, for which the time to file a fair
Market Rent Appeal has expired and no Fair Rent Appeal is then
pending, or the Fair Market Rent Appeal has been finally
determined, charged pursuant to a lease commencing within a
four year period prior to or a one-year period subsequent to,
the
commencement date of the initial lease for the housing
accommodation involved; and
(2) at the owner's option, market rents in effect for other
comparable housing accommodations on the date of the initial
lease for the housing accommodation involved; and
(f) where the rents of the comparable housing accommodations
being considered are legal regulated rents, for which the time
to file a fair market rent appeal has expired, and such rents
are charged pursuant to a lease ending more than one year prior
to the commencement date of the initial lease for the subject
housing accommodation, such rents shall be updated by
guidelines increases for year renewal leases, commencing with
the expiration of the initial lease for the comparable housing
accommodation to a date with 12 months prior to the renting of
the housing accommodation involved.
The owner has submitted data for the subject line which indicates that
all of those apartments were subject to rent control as of November, 1985
and therefore none of those apartments are useable as comparables.
However, the Commissioner has reviewed the owner's October 2, 1990
submission of comparable rents, which includes data for three lines of
apartments in neighboring buildings, and finds that the comparability
data submitted by the owner is adequate to warrant the use of one of the
apartments submitted by the owner as a comparable in determining the fair
EJ110288RO
market rent for the subject apartment.
For Apartment 1B at 23-30 31st Road, the owner has submitted adequate
documentation of the initial stabilized rental in the form of a lease,
and has documented service of the DC-2 notice on the initial stabilized
tenant of that apartment. That apartment was rented to the initial
stabilized tenant within one year of the initial rental of the subject
apartment. There was no tenant challenge to the initial rent; therefore
the initial rent is no longer subject to challenge, and may be used in
the comparability study. The Commissioner notes that the owner complied
with the statutory requirements of service of the DC-2 notice by mailing
the notice by certified mail, although the notice was unclaimed. Since
the requirement was thus fulfilled, the initial stabilized rent of
$775.00 for that apartment may be utilized in the comparability study.
Regarding apartment 6D at 25-90 35th Street and apartment 4D at 34-20
32nd Street, the Commissioner finds that the owner failed to submit proof
of service of the DC-2 notice by certified mail and that the signature of
the tenant on the notice is not adequate to meet the statutory
requirements. It is also noted that the owner improperly indicated on
the DC-2 form that the initial rent was based on comparability. Since
the owner has not fulfilled the requirements for proper service of the
DC-2 notice for those apartments, the apartments may not be utilized in
the comparability study.
The fair market rent is determined as follows: the result of the special
guidelines formula, $384.24, is averaged with the comparable rent amount
of $775.00, resulting in the fair market rent of $579.62, effective
October 1, 1985. Since the $700.00 per month initial legal regulated
rent challenged by the tenant exceeds the $579.62 fair market rent
established in this order, the initial legal regulated rent is adjusted
from $700.00 to $579.62 effective October 1, 1985, the date of
commencement of the initial rent stabilized lease. The resultant excess
rent to be refunded to the tenant has been computed on the attached rent
calculation chart, which is hereby made a part of this order.
Further, the Commissioner is of the opinion that In Re JRD v. Eimicke,
148 A.D. 2d 610, 539 N.Y.S. 2d 667 (App. Div. 2d Dept., 1989), is not
applicable to this proceeding. The change effected by Section 14(g) of
the Omnibus Housing Act and Section 26-516(g) of the Rent Stabilization
Law, as applied in the JRD case, only involves rent overcharge
proceedings, and does not apply to fair market rent appeals.
The tenant's petition for administrative review is based on an alleged
error in computations by the Administrator. The Commissioner finds that
the Administrator erred in computing the excess rent due for the period
October 1, 1988 to September 30, 1990. That error has been corrected in
the attached rent calculation chart.
With regard to the tenant's contention that the imposition of treble
damages was warranted, Section 2526.1 of the current Rent Stabilization
Code provides that any owner found to have collected an overcharge above
the authorized rent shall be liable for a penalty equal to three times
the amount of such overcharge but that if the owner establishes by a
preponderance of the evidence that the overcharge was not willful, the
DHCR shall establish the penalty as the amount of the overcharge plus
interest. Further, treble damages may not be based upon an overcharge
EJ110288RO
having occurred more than two years before the complaint is filed or upon
an overcharge which occurred prior to April 1, 1984. This section does
not apply to fair market rent appeals. Pursuant to Section 26-512(b)(2)
of the Rent Stabilization Law, for apartments which are removed from rent
control and become subject to the Rent Stabilization Law by virtue of a
vacancy occurring after June 30, 1974, the owner is permitted to charge
an initial fair market rent as "agreed to by the landlord and the
tenant", subject to the tenant's right to challenge the initial rent as
exceeding the fair market rent. If the tenant does not challenge the
initial rent, it becomes the legal base rent. If the tenant challenges
the initial rent, a determination may be made that the tenant's initial
rent exceeds the proper fair market rent for the apartment. In such
case, the owner is required to give the tenant a refund or credit for the
amount collected in excess of the fair market rent. However, such
determination that the initial rent exceeds the fair market rent is
considered in the nature of a rent adjustment rather than a rent
overcharge and thus the imposition of treble damages is not warranted.
It is noted that rent overcharge proceedings where treble damages may be
imposed generally involve cases where an initial legal regulated rent
(fair market rent) is already established and an owner willfully charges
rents higher than permitted by the Rent Guidelines Board upon subsequent
renewal leases or refuses to submit a complete rental history thus
leading to the conclusion that rent overcharges occurred. In addition,
Section 2526.1(g) of the Rent Stabilization Code provides that "[t]he
provisions of this section [Section 2526.1, concerning overcharge
penalties and assessment of costs] shall not apply to a proceeding
pursuant to Section 2522.3 of this Title (Fair Market Rent Appeal)."
Pursuant to the above, the imposition of treble damages is not warranted.
The owner is directed to refund or fully credit against future rents over
a period not exceeding six months from the date of receipt of this order,
the excess rent collected by the owner.
In the event the owner does not take appropriate action to comply within
sixty (60) days from the date of this order, the tenant may credit the
excess rent collected by the owner against the next month(s) rent until
fully offset.
The owner is directed to reflect the findings and determinations made in
this order on all future registration statements, including those for the
current year if not already filed, citing this order as the basis for the
change. Registration statements already on file, however, should not be
amended to reflect the findings and determinations made in this order.
The owner is further directed to adjust subsequent rents to an amount no
greater than that determined by this order plus any lawful increases.
If the owner has already complied with the Rent Administrator's order and
there are arrears due to the owner as a result of the instant
determination, the tenant shall be permitted to pay off the arrears in
twenty four equal monthly installments. Should the tenant vacate after
the issuance of this order or have already vacated, said arrears shall be
payable immediately.
THEREFORE, in accordance with the provisions of the Rent Stabilization
Law and Code, it is
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ORDERED, that the owner's petition for administrative review, Docket No.
EJ110288RO be, and the same hereby is, granted in part; that the tenant's
petition for administrative review, Docket No. EK110035RT, be, and the
same hereby is, granted in part, and that the order of the Rent
Administrator be, and the same hereby is, modified to the extent
hereinabove indicated. The total amount of excess rent owed to the
tenant is $8,473.39 and the monthly lawful stabilization rent is $717.59
effective October 1, 1988.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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