FD 610055-RO; FD 610185-RT
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 NOS.:
FD 610055-RO
MRS. SUB/PAUM SALES AND FD 610185-RT
YVETTE LUCIANO MENDEZ,
DRO DOCKET NO.:
PETITIONERS CI-610297-R
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ORDER AND OPINION GRANTING TENANT'S PETITION FOR ADMINISTRATIVE
REVIEW IN PART AND DENYING OWNER'S PETITION FOR
ADMINISTRATIVE REVIEW
On April 6, 1991, the above named petitioner-owner filed a
Petition for Administrative Review against an order issued on
March 7, 1991, by a Rent Administrator concerning housing
accommodations known as Apartment 5-E at 4055 Carpenter Avenue,
Bronx,
New York, wherein the District Rent Administrator determined that
the tenant had been overcharged in the amount of $2,341.37 for
rent and illegal broker's fee, including treble damages and
excess security.
On April 6, 1991, the above named petitioner-tenant filed a
Petition for Administrative Review of the same order.
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 appeals.
This proceeding was originally commenced by the filing of a rent
overcharge complaint by the tenant on September 8, 1988.
The complaint stated that the tenant took occupancy pursuant to a
one-year lease commencing May 1, 1988, and expiring April 30,
1989, at a monthly rent of $456.57. The complaint also stated
that the tenant paid one month's security and one month's rent as
a broker's fee.
The owner was served with a copy of the complaint and directed to
submit an answer, including copies of all leases for the period
commencing four years prior to the filing of the complaint. The
owner submitted an answer dated October 27, 1988 wherein it was
stated that the broker's fee was deposited in a bank and only
collected by the owner in case the tenant broke the lease and the
apartment had to be painted before three years were up. The
money would be returned with the interest, however, if the lease
was "lived up to in full."
On November 3, 1988, the tenant wrote the Administrator that the
owner recently sent her a copy of her initial one-year lease, and
that it had been altered to be a two-year lease. Enclosed in the
letter were copies of the front sides of two leases for that
lease term. They were different: One lease had "1 yr." written
next to the word "term" and had an expiration date of "April 30,
1989," while the other had "2 yr." next to "Term" and an
expiration date of April 30, 1990. The "90" on the two-year
lease was written over another number.
On January 31, 1991, the owner submitted additional material,
including its copy of the tenant's initial lease, which was
identical to the one the tenant said was altered, and the two-
year renewal lease, dated February 1, 1990, setting forth a rent
of $497.66, effective May 1, 1990. The accompanying letter
stated that the broker's fee was legitimate, and that the owner
sometimes returns it when the tenant moves. The owner concluded,
however, that the complainant had not been a "very responsible
tenant."
Also received on January 31, 1991 were the tenant's own records
of rent payment, including money order receipts dating from June,
1988. For the initial month of the lease, May, 1988, the tenant
submitted a copy of a hand-written receipt on the stationary of
Elsie Hermann of Woodhaven Realty in the amount of $913.14 for
rent and security, dated April 21, 1988; for the broker's fee,
the tenant submitted a printed receipt form for Elsie Hermann, at
the same address as the owner, which was signed by "Paum Sales,"
in the amount of $456.57, but which did not state what the
receipt was for.
In a letter dated February 7, 1991, in response to a notice from
the Administrator informing the owner of the possibility of
treble damages, the owner stated that the broker's fee was paid
to a broker and not to its office. Furthermore, the owner
objected to the allegation that the tenant's rent was an
overcharge, since the only issue on the complaint was whether the
tenant had paid an excessive security deposit. The owner also
objected to the Administrator's making a determination of the
legal rent without asking for the owner's calculations, which
were submitted along with the letter. Finally, the owner
enclosed invoices for construction work and/or equipment that was
installed in the subject-building, including $1,450.00 for work
that was specifically designated for the subject-apartment, on a
bill dated March 23, 1988.
On March 7, 1991, the Rent Administrator issued an order under
Docket No. CI-610297-R, wherein the tenant was awarded a total of
$2,341.37 for rent overcharges and an unlawful broker's fee,
including treble damages and excess security. A monthly
overcharge of $8.91 was found for the tenant's two-year vacancy
lease, and of $9.71 in the subsequent lease. The Administrator
approved a total of $1,450.00 for improvements to the subject
apartment.
In its petition, dated April 3, 1991, the owner contends that the
lawful rent for the prior tenant's two-year vacancy lease
commencing January 1, 1985 was really $331.45 instead of $309.55,
as was stated on the lease in the record below. The owner en-
closed a different lease for that period which the owner explains
was signed by the prior tenant as an "adjustment" to the
incorrect lower rent. This lease, like the one submitted in the
record below for the same period, is undated. The owner then
explains that "subsequent management was not aware of this
correction" and based renewals on the lower rent. The owner then
challenges the calculation of the increase for the equipment
because it omitted a charge for new windows, and questions the
meaning of "temporary increase" on the rent calculations chart.
The owner also contends that any miscalculations on its part were
not done willfully and that to impose treble damages was
improper. Finally, the owner contends that the broker's charge
had been paid to Mr. Seymour Sub, an attorney licensed in New
York State, and was therefore a lawful fee. Enclosed with the
petition is an order of the Division under Docket No. AD 630165-
OM, issued February 5, 1988, authorizing an MCI increase for a
new boiler and burner.
The tenant's petition challenges the $1,450.00 allowed for
improvements, since she knew of no improvements to the apartment
other than painting. The tenant states that she should have had
the opportunity to review the claim by examining the bills and
cancelled checks. Then the tenant objects to the owner's
collection of the MCI increase retroactive to November, 1985,
when the order was only effective as of August 1, 1986,
especially since the MCI was not mentioned in her lease.
Similarly, the tenant demands a written breakdown of the
temporary and permanent increases. The tenant further claims
that the vacancy allowance for her initial lease was incorrectly
credited at 10% instead of 7 1/2%. Finally, the tenant restates
her contention that her initial lease was for one year and not
two, and that the revised two year lease submitted by the owner,
which purportedly had her signature, was fraudulent.
The Commissioner is of the opinion that the tenant's petition
should be granted in part, and that the owner's petition should
be denied.
Although both of the petitions raise numerous issues on which the
parties take opposing positions, the record below contains
evidence that is sufficiently clear to resolve them all. With
respect to the MCI increases, the rent calculations chart in the
order indicates that although the Administrator correctly
computed the amounts of both the permanent ($2.92 per room x 3 =
$8.76) and temporary (6% limit on November 1985 rent = $3.0955 x
6 = $18.58) increases, he improperly attributed payment of the
(retroactive) temporary increase to the complainant, who was not
even in occupancy during the period covered by that increase.
Conversely, the owner's position is correct with respect to the
base rent used to calculate the complainant's vacancy lease,
since the permanent increase, being effective prior to the
expiration of the previous guidelines period, was improperly
omitted from the base. However, this is more than offset by the
erroneous inclusion of the temporary increase in the base for the
complainant's renewal lease effective May 1, 1990.
The tenant's challenge to the increase for the cost of
improvements is also correct. Although the owner's petition
makes only a generalized allegation that the claim was
undervalued, the record shows the exact opposite: the only
"improvements" that are documented for the subject-apartment
include a new ceiling and new walls in the living room and a new
bathroom floor, all of which are more properly designated as
normal maintenance and repair of the structure, for which no rent
increase can be granted. Therefore, the owner's entire claim
must be dismissed.
Section 2525.1 of the Rent Stabilization Code provides:
"It shall be unlawful, regardless of any
contract, lease or other obligation
heretofore or hereafter, entered into, for
any person to demand or receive any rent for
any housing accommodation in excess of the
legal regulated rent...the term rent, as
hereinbefore defined, shall also include the
pay-ment by a tenant of a fee or rental
commission to an owner or to any person or
real estate broker where such person or real
estate broker is an agent or employee of the
owner employed by the owner in connection
with the operation or management of the
building in which the housing accommodation
is located, or where the owner or his or her
employee refers the tenant to such person or
such real estate broker employed by the owner
in connection with the operation or manage-
ment of the building, for the purpose of
renting the housing accommodation, or where
there is common ownership, directly, or
indirectly, or a financial interest between
the owner and such person or real estate
broker."
Insofar as the owner provides no credible explanation for the
collection of the "broker's fee" and does not even attempt a
disassociation from the "attorney licensed by the State of New
York," with the surname in common with the owner, the
Administrator's determination that the fee was an overcharge must
be is upheld. Furthermore, there is nothing in the record to
indicate that this unlawful fee, or in fact any other of the
overcharges determined below and sustained on appeal, was not
willful and, therefore, appropriate for the treble damages
penalty. In fact, the owner conceded in submissions to the
Administrator that it had control of the "broker's fee" and would
return it if the tenant did not break the lease.
Section 2526.1 of the Rent Stabilization Code mandates treble
damages on overcharges unless the owner establishes by a
preponderance of the evidence that the overcharge was not
willful. While it has been held that an owner's failure to
document the cost of improvements does not warrant treble
damages, in this case there was not a failure of proof but rather
an attempt to collect a rent increase for items that do not
qualify as improvements. The overcharges in this case are also
attributable to the improper application of the appropriate
guidelines and the collection of an illegal broker's fee. With
regard to the owner's illegal compounding of guidelines during
the same guidelines period, such action was willful given that
the Rent Stabilization Code effective May 1, 1987 specifically
proscribed such "piggy backing," as noted in the rent
calculations chart. Although DHCR's Policy Statement 89-2 states
that since "piggy backing" is in violation of a technical rule of
rent computation, overcharges resulting therefrom are not
willful, the "piggy backing" referred to is for compounding
occurring prior to the promulgation of the new Code on May 1,
1987. Before May 1, 1987, the rule prohibiting the compounding
of guidelines was contained in individual administrative
decisions. Given this rule's lack of publicity, its violation
could not be considered willful. Policy Statement 89-2 does not
apply because the leases of both the prior tenant and the
complainant were executed after the owner received notice that
compounding was illegal through the promulgation of the new Code.
Furthermore, when examining the entire record in this case, one
cannot help but be struck by a pattern of behavior that
repeatedly relies on the tenant's inferior position, whether by
charging an illegal broker's fee or changing the duration of a
lease. Therefore, the Commissioner finds that the record
sustains treble damages for the totality of overcharges in this
case (Accord: ARL 03105-L).
The owner's approach is also evidenced in its submission, on
appeal, of a second version of the prior tenant's renewal lease
effective January 1, 1985. Whether the prior tenant actually did
"acknowledge" that she should pay more money to her landlord need
not be pondered further, however, since the owner's failure to
submit this "evidence" below prevents its admission into the
appellate record.
Pursuant to Guidelines 19, the owner was eligible for a vacancy
allowance of 10% for vacancy leases executed in that period
(October 1, 1987 through September 30, 1988), and the tenant-
petitioner's contention that only 7 1/2% was allowed is
incorrect.
The tenant's challenge to the order is upheld, however, on the
issue of the duration of her initial lease. The copy submitted
by the tenant is unmarked, while the copy submitted by the owner
contains unacknowledged handwritten alterations of dates. The
Administrator thus had sufficient evidence in the record to treat
it as a one-year lease.
A recomputation of the lawful rent incorporating the adjust-ments
mentioned in this order and opinion results in an increase of
total overcharges to $9,579.57, as is documented in a rent
calculations chart affixed to this Order and made a part hereof.
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 Rent Stabilization Law and Code, it is
ORDERED, that the owner's Petition be, and the same hereby is
denied, that the tenant's Petition be, and the same hereby is
granted in part, 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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