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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