FB 410136 RO
                                  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     SJR 5854 (DEEMED DENIAL)
          APPEAL OF                               ADMINISTRATIVE REVIEW
                                                  DOCKET NO.: FB 410136-RO
                     WARD WALLAU,
                                                  DRO DOCKET NO.: ZBL-410422-R
                                                                                 
                                                  TENANT: NANE CHEUNG
                                 PETITIONER
          ----------------------------------X


            ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                       IN PART

          On February 13, 1991 the above  named  petitioner-owner  filed  a
          Petition for Administrative Review against  an  order  issued  on
          January 11, 1991 by the  Rent  Administrator,  92-31  Union  Hall
          Street, Jamaica, New York concerning housing accommodations known 
          as Apartment 5 at  294  Elizabeth  Street,  New  York,  New  York
          wherein the Rent Administrator  determined  that  the  owner  had
          overcharged the tenant.

          Subsequent thereto, the petitioner-owner filed a petition in  the
          Supreme Court pursuant to Article 78 of the  Civil  Practice  Law
          and Rules requesting that the "deemed denial" of its Petition for 
          Administrative Review be annulled.  The proceeding  was  remitted
          to the Division of Housing and Community Renewal (DHCR), and  the
          owner's petition is herein decided on the merits.

          The issue in this appeal  is  whether  the  Rent  Administrator's
          order was warranted.

          The applicable sections of the Law are Section 26-516 of the Rent 
          Stabilization Law and Sections 2526.1(a) and 2528.4 of  the  Rent
          Stabilization Code.

          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 appeal.

          This  proceeding  was  originally  commenced  by  the  filing  in
          December, 1987 of a rent overcharge complaint by the  tenant,  in
          which she stated that she had commenced occupancy on July 1, 1982 
          at a lease rent of $750.00 per month, that she received a  3-year
          renewal lease commencing July 1, 1983 at a rent of $825.00 and  a
          2-year renewal lease  commencing  July  1,  1986  at  a  rent  of
          $878.63, that she actually paid a rent of $500.00  from  July  1,
          1982 to June 30, 1984 and of $700.00  commencing  July  1,  1984,
          that she believed the lease rents  were  meant  to  defraud  Ward






          FB 410136 RO
          Wallau, who bought the building in December, 1986 on the basis of 
          the $878.63 per month rental representation, that Mr. Wallau  was
          demanding that she now pay the full  lease  rent,  and  that  she
          believed the base rent should be the $500.00  she  actually  paid
          rather than the lease rent.

          In answer, the owner stated that he was aware  before  purchasing
          the building on December 30, 1986 that  the  then-current  owners
          were giving the tenant a rent concession  which  the  tenant  was
          aware would not continue after the change of ownership, and  that
          the tenant began paying the actual lease rent  one  month  before
          the building was sold.

          The owner enclosed a statement by the  prior  owner,  who  stated
          that he had developed a relationship with  the  tenant  when  she
          lived elsewhere in the building; that they  had  moved  into  the
          subject apartment together; that the $500.00 paid for the subject 
          apartment resulted from his arrangement with his  co-owner  based
          on compensation for managing the property; that he reimbursed the 
          tenant for all but $170.00 of each $500.00 rent check;  that  the
          preferential rent continued after he moved out in February, 1984; 
          that Mr. Wallau was occupying his former apartment  at  the  time
          that he entered into a contract  to  sell  the  building  to  Mr.
          Wallau; that Mr. Wallau was fully aware of the financial  aspects
          of his relationship with the tenant; that the  tenant  was  aware
          that payment of the full lease rent would be  required  when  the
          building was sold; and that the tenant had the only copy  of  the
          handwritten agreement as to the actual rent.   The  tenant  later
          enclosed a copy of such notations.

          The  current  owner  later  stated  that  the  prior  owner   had
          registered the subject  apartment  in  1984  and  1985,  and  had
          mailed the initial registration to the tenant on July  14,  1984,
          but had not registered the apartment in 1986.  The  owner  stated
          that he had filed registrations properly each year  since  buying
          the building on December 30, 1986, and  that  the  tenant  had  a
          signed lease for the year in question that reminded her what  the
          true rent was.  He submitted a April 7, 1988  stipulation  signed
          in Housing Court whereby the tenant agreed to  pay  an  increase,
          not to exceed $40.00, of 1/40th of the cost of an air conditioner 
          with heating supplement.

          In an order issued on January 11, 1991  the  Rent  Administrator,
          based on the lack of a 1986 registration, froze the  lawful  rent
          at the last rent registered prior to April 1,  1986  (this  being
          the $825.00 rent as of April 1, 1985), and found an overcharge of 
          $19,008.72 as of January 31, 1991, including treble damages.

          In this petition, the owner contends in substance that the tenant 
          did not complain about a failure to register; that the issue  was
          not introduced into the proceeding until three years later,  when
          the DHCR sent a "Final Notice  to  Owner;  Imposition  of  Treble
          Damages on Overcharge"; that the DHCR should not  add  causes  of
          action on the tenant's behalf;  that  the  imposition  of  treble
          damages for failure to register is not a penalty permitted by the 
          Rent Stabilization  Code;  that  treble  damages  should  not  be
          imposed for the prior owner's  failure  to  register  during  the
          impending sale of the building, particularly since the  1987  and
          later Registration Receipt Reports  sent  to  the  owner  listing






          FB 410136 RO
          registration errors did not mention the fact  that  the  building
          was not registered for 1986; that  any  technical  non-compliance
          with registration requirements was fully remedied  prior  to  the
          issuance of the Administrator's order by the filing of  the  1986
          registration on January 9, 1991; that all of the  tenant's  rents
          have been lawful, since a "sweetheart" rent is not  effective  to
          establish  the  true  legal  rent  for  an  apartment;  that  the
          Administrator's order did not consider a 1988 increase  based  on
          an improvement, for which the tenant agreed in a stipulation in a 
          non-payment proceeding to pay an increase of  $40.00  per  month;
          and that  the  DHCR's  delay  in  processing  the  complaint  has
          compounded the tenant's windfall.  With his  petition  the  owner
          has included invoices for  the  purchase  and  installment  of  a
          heating/cooling unit and for additional electrical wiring for the 
          unit, at a total cost of $1660.95.

          In answer, the tenant asserts in  substance  that  her  complaint
          was meant  to  spur  a  complete  investigation  of  the  records
          regarding  her  apartment;  that  anyone  buying  a  building  is
          responsible for any legal requirements that have  not  been  met;
          that her moving from Apartment 1  o  Apartment  5  with  the  co-
          owner was not a "sweetheart" deal, since  it  allowed  a  vacancy
          increase on Apartment 1 and since it resulted in a rent  increase
          for the subject apartment from $265 to $825, based on  some  real
          and some fabricated renovations including the  co-owner's  charge
          for his own labor; and that the owner's failure to  register  the
          apartment was willful.

          In response, the owner contends in substance  that  the  tenant's
          answer does not address the issues raised in his  petition;  that
          the failure to register  in  1986  was  an  oversight;  that  the
          tenant was paying a "sweetheart  rent";  and  that  the  document
          submitted  by  the  tenant  stated  "rent   paid   as   long   as
          Pfeiffer/Chung occupy #5 would be $500.00."

          The Commissioner is of the opinion that this petition  should  be
          granted in part.

          The Commissioner initially  finds  that  the  rent  increase  for
          renovations in 1982 is not at issue.  Based on Section  2526.1(a)
          of the Rent Stabilization Code, the Administrator found that  the
          Initial Legal Regulated Rent was the $825.00 rent in the lease as 
          of April 1, 1984  (regardless  of  what  previous  increases  had
          resulted in that rent).  The owner's petition does not  challenge
          that aspect of the Administrator's order so  the  tenant  cannot,
          without  filing  her  own  Petition  for  Administrative   Review
          against the order, raise that issue in answer to the  contentions
          in the owner's petition.

          Section  2528.4  of  the  Rent  Stabilization  Code  provides  in
          pertinent part that:
                                          
               The failure to  properly  and  timely  comply  with  the
               initial or annual rent registration as required by  this
               Part shall, until such  time  as  such  registration  is
               completed, bar an owner from applying for or  collecting
               any rent in excess of:
                                        .
                                        . 






          FB 410136 RO
                                        .
                                          
               b) the legal regulated rent in effect on April first  of
               the year for which an annual registration  was  required
               to be filed...

               The late filing of a registration shall  result  in  the
               elimination prospectively of such penalty.

          It is not disputed that the subject apartment was not  registered
          for  1986  until  January  9,   1991,   two   days   before   the
          Administrator's  order.   It  was  therefore   proper   for   the
          Administrator's order to disallow any rent increases for  periods
          prior to that time, including increases for  new  equipment.   It
          does not matter that the owner finally registered  the  apartment
          for 1986 before the Administrator's order; the Rent Stabilization 
          Code specifically provides for  a  bar  on  collecting  increases
          until after an owner has finally registered.   While  the  tenant
          agreed in a "so ordered" stipulation to pay an increase of 1/40th 
          of the cost of new equipment, with the  increase  not  to  exceed
          $40.00, the judge in that case was not  purporting  to  determine
          the lawful rent of the subject  apartment  but  was  rather  just
          following the customary guideline for increases above  the  lease
          rent.  He could not have known of a missing registration  in  the
          DHCR's  records  which  prevented  (as  of  the   time   of   the
          stipulation) the owner from actually collecting an increase  that
          would have otherwise been allowable. 

          While no rent increase for new equipment is being allowed  during
          the period that the apartment was not registered for  1986,  this
          order does modify the Administrator's order to include  a  $40.00
          increase in the permanent  rent  after  it  was  installed.   The
          increase is prospective only, effective from the  time  when  the
          apartment was finally registered for 1986  on  January  9,  1991.
          The Administrator apparently did not include the increase in  the
          permanent rent because  no  invoices  were  submitted.   However,
          because the owner submitted a stipulation  in  which  the  tenant
          agreed to pay  an  increase  of  no  more  than  $40.00  for  new
          equipment, and because the owner was clearly charging the  $40.00
          increase, at least as of the lease commencing August 1, 1988, the 
          matter was sufficiently at issue that  the  Administrator  should
          have requested additional evidence if she did  not  consider  the
          stipulation to be sufficient evidence of an entitlement to charge 
          the increase.   The  Commissioner  considers  it  appropriate  to
          consider the invoices submitted on appeal as a supplement to  the
          stipulation.  The expenditure of $1,660.95 entitles the owner  to
          an increase of $41.52 (limited to $40.00 by the stipulation),  as
          increased  by  the  Guidelines,  effective  prospectively  as  of
          January 9, 1991.  Although the owner is not  allowed  to  collect
          any rent above $825.00 prior  to  January  1,  1991,  the  lawful
          permanent stabilization rent in the lease from August 1, 1988  to
          July 31, 1990 is $975.74, and in the lease from August 1, 1990 to 
          July 31, 1992 is $1,063.56.  These are both the rents  stated  in
          the respective leases.  Because the owner was entitled to collect 
          the $1,063.56 lease rent as of January 9,  1991,  the  overcharge
          for the month of January, 1991 was $62.74 rather than the $238.56 
          overcharge the Administrator  determined  by  freezing  the  rent
          through the end of the month.  The  actual  overcharge  collected
          from August  1,  1986  through  January  31,  1991  is  therefore






          FB 410136 RO
          $6,097.68, not counting interest or treble damages.

          Section 2526.1(a)(1) of the Rent Stabilization Code  provides  in
          pertinent  part  for  the  imposition  of   treble   damages   on
          overcharges unless an owner can  establish  that  the  overcharge
          was not willful, in which case interest is  imposed.   Given  the
          facts of this case, including the fact that the building co-owner 
          was occupying the subject apartment with the tenant at  the  time
          that the 1986 registration, which would have mentioned  the  same
          lease cited in the 1985 registration, should have been filed, and 
          the fact that negotiations to sell the building were going on  at
          the time that the building would normally  have  been  registered
          for 1986, the Commissioner finds that the overcharge  should  not
          be considered willful, and that interest should be imposed.   The
          total overcharge, with interest, is therefore  $6,625.71  through
          January 31, 1991.

          In her complaint, the tenant claimed that:

               1.   My  landlord  has  improperly  overcharged  me.
                    Additionally, he has perpetrated a  fraud  upon
                    me,  in  that  the  amount  of  rent   actually
                    charged  was  less  than  the  amount  on   the
                    lease.

          This complaint of overcharge is sufficient to trigger the owner's 
          affirmative obligation to  prove  the  lawfulness  of  the  rents
          charged.  One of the factors affecting an owner's right to charge 
          a particular rent is compliance with  registration  requirements.
          A general  complaint  by  a  tenant  that  she  or  he  is  being
          overcharged requires an owner to  prove  that  all   requirements
          have been met, so it is not improper for  the  DHCR  to  find  an
          overcharge resulting from the failure to register,  even  if  the
          tenant  does  not  allege  such  a  failure.   In  addition,  the
          requirement of annual registration is an ongoing requirement, not 
          one which an owner has to be put on notice of by a tenant  filing
          a complaint.  The evidence  f  an  owner's  compliance,  or  non-
          compliance, is already contained  in  the  DHCR's  records.   The
          owner's  contention  that  the  Administrator's  order  may   not
          properly be based on  an  issue  not  raised  by  the  tenant  is
          therefore rejected.

          This determination is without prejudice to any rights  the  owner
          may have to proceed  against  the  prior  owner  in  a  court  of
          competent jurisdiction for failure to register or to  inform  the
          owner of the failure to register.

          This order may, upon the expiration of the period  in  which  the
          owner may institute a proceedi g  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, in accordance with  the  Rent  Stabilization  Law  and
          Code, it is

          ORDERED, that this petition be, and the same hereby  is,  granted
          in part; and that the Rent Administrator's order be, and the same 






          FB 410136 RO
          hereby is, modified in accordance with this  Order  and  Opinion.
          The total overcharge is $6,625.71 as of January 9, 1991.  The 


          lawful stabilization rent in the lease from  August  1,  1990  to
          July 31, 1992 is $1,063.56 per month, although only  $825.00  per
          month of that is collectible until January 9, 1991.



          ISSUED:


                                                  ------------------------
                                                  ELLIOT SANDER
                                                  Deputy Commissioner
           
             
    

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