DHCR Decisions
FD 510244-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 : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO. FD 510244-RO
(reopened)
: DISTRICT RENT OFFICE
Roy Agoney, Agent for DOCKET NO. ZCC-510517-R
92 Morningside Realty, Inc.,
TENANT: Rodney Epperson
PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART AFTER REOPENING UPON RECONSIDERATION
On April 24, 1991 the above-named petitioner-owner filed a Petition for
Administrative Review against an order issued on April 12, 1991 by the
Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning the housing accommodations known as 92 Morningside Avenue,
New York, New York, Apartment No. 61 wherein the Rent Administrator
determined that the owner had overcharged the tenant. On August 8, 1991
the appeal was rejected for procedural reasons, and the owner was given
35 days to refile. On February 7, 1992 the owner's attorney requested
reconsideration and reopening of the proceeding, contending that the
owner had just become aware of the August 8, 1991 rejection. The DHCR
granted the request on March 27, 1992, and the owner's appeal is herein
considered on the merits.
The issue herein 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 2520.6(i) and 2526.1(a) 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 March, 1988 of
a rent overcharge complaint by the tenant, in which he stated that he
FD 510244-RO
had commenced occupancy on January 1, 1987 at a rent of $500.00 per
month, and that he was required to pay the prior tenant's rent arrears
of $1,700.00 before he was given the apartment.
The owner was served with a copy of the tenant's complaint, and
requested to submit leases from 1984 as well as proof of registration
from 1984 to 1990. The owner submitted the requested leases, as well as
registration worksheets from the Rent Stabilization Association
("R.S.A.") and proof of mailing of the worksheets to the R.S.A. The
owner did not respond to a request for proof of service of the 1985 to
1990 registrations on the DHCR, or for an explanation of the $1,700.00
"key money" charge. The tenant did not respond to a notice asking if
there was any relationship between him and the prior tenant Stephen
Epperson, or if he had lived in the apartment with the previous tenant.
In an order issued on April 12, 1991 the Administrator found an
overcharge of $22,620.00 from January 1, 1987 to December 31, 1988 as a
result of freezing the rent due to the owner's failure to register after
1984, and imposing treble damages on the resulting overcharge as well as
on the $1,700.00 fee collected by the owner.
In this petition, the owner contends in substance that the $1,700.00
"key money" was refunded to the tenant on June 19, 1989 pursuant to a
court stipulation; that it was not "key money," but rather back rent
from the time when the tenant lived in the apartment with his brother
Stephen Epperson, whom the tenant referred to in his complaint only as
the "prior tenant"; that the apartment registrations for 1985 through
1989 were submitted under Docket No. CC-610518-R; that the tenant
refuses access for repairs; that he has never signed a renewal lease;
and that he last paid rent in September, 1989, with that payment only
being made when forced by a judge. The owner also asserts in substance
that the tenant's lease was entered into by James Harrell, a 7A
Administrator directed by the Court to charge the maximum rent; that the
owner only renewed existing leases inherited from Mr. Harrell, using
Guidelines percentages of increases, since Mr. Harrell was acting as an
agent of the Court and the owner could not challenge the rents that he
had set; that the owner has put in new windows, a new burner and a new
roof without asking for any M.C.I. increases; and that the tenant's
challenge to the rent, if allowed to stand, could upset every single
lease in the 48-unit building since Mr. Harrell had tried in 1986 to
obtain rents which would help the building survive.
With his petition the owner has enclosed a stipulation dated June 19,
1989 providing that $1,200.00 of the $1,700.00 fee would be applied
toward the $4,313.00 arrears remaining after the $1,000.00 which the
tenant had paid that day; and that $500.00 would be used for security.
[The tenant's lease had provided for zero security.] The owner has also
enclosed a December 29, 1987 letter from Omnia Properties, agent to
Manhattan Avenue Association Corp. stating that she had visited the
tenant's apartment four times in the past two months, that his brother
had been there each time, and he was not making arrangements to allow
repairs to be made. The owner has also enclosed September 19, 1990 and
FD 510244-RO
October 17, 1990 notices from the DHCR, each bearing a computer
generated label for Docket No. CC-610518-R [concerning a case at a
building in The Bronx, with a different owner], rather than for No. CC-
510517-R, which is the order under appeal. [It is possible that the
answer forms enclosed with those notices also had labels for No. CC-
610518-R, and that the owner's submissions therefore never made it t to
the correct case file]. The owner has also enclosed a copy of a
November 28, 1990 answer, with the correct docket number on the answer
form, which is not contained in the case file.
In answer, the tenant submitted an October 1, 1991 rent bill from the
owner listing $19,988.70 total rent due, with a notation from the owner
that "[a] PAR was filed with DHCR - you must pay rent until a decision
is made." [This is partially correct. The tenant was supposed to pay
rent, but at a reduced amount based on the Administrator's order, rather
than at the $500.00 lease rent which the owner was billing.]
On June 1, 1992 the owner was requested to submit evidence of
registration of the apartment for 1985 through 1989. In response, the
owner submitted mailing lists and mailing receipts from the R.S.A. to
establish the mailing of the registrations to all of the stabilized
apartments in the building in 1986 through 1989, and an affidavit of
service from the R.S.A. Director of Finance, as well as a 1985
registration date-stamped by the DHCR. In addition, information
furnished by the R.S.A. concerning the computer tapes on which it
originally submitted the registrations to the DHCR has enabled the DHCR
to locate the registrations, and to confirm that the owner had in fact
registered for 1986 through 1989.
In response the tenant questions why the matter was reopened.
The Commissioner is of the opinion that this petition should be granted
in part after reopening upon reconsideration.
Section 2520.6(i) of the Rent Stabilization Code defines an owner, in
pertinent part, as a "person or entity receiving or entitled to receive
rent for the use or occupation of any housing accommodation, or an
agent" of the owner. In the instant matter, the 7-A Administrator,
James Harrell, received the monthly rents from the tenants of the
subject building, including the prior tenants of the subject apartment.
In addition, such Administrator by law must remit to the owner any
monies received from the tenants that exceed the cost of building-wide
rehabilitative and repair work, real property tax liens and payment for
the Administrator's services [see RPAPL Sect. 778, subd. 1(e)]. The
Commissioner also notes that a 7-A Administrator has an interest in the
rents that he receives in the form of the fee he collects which is based
on the monthly rent roll. Therefore the Commissioner finds that the 7A
Administrator is considered the owner of the subject building, as that
term is defined in Section 2520.6(i) of the Code, during the time that
he managed the building and entered into leases.
FD 510244-RO
The Commissioner rejects the owner's claim that a stabilized apartment
becomes exempt from the Rent Stabilization Law upon the appointment of
a 7-A Administrator. The apartment remains stabilized. Neither the
Rent Stabilization Law of 1969 nor the Emergency Tenant Protection Act
of 1974 expressly excludes from the Rent Stabilization Law apartments
managed by 7-A Administrators. The Rent Stabilization Law's failure to
mention 7-A Administrators is significant because this program was
established prior to the enactment of the Rent Stabilization Law and the
legislature could have expressly provided for an exemption from
stabilization had it chosen to do so.
The owner's attempt to include a building managed by a 7-A Administrator
in the language of the ETPA exempting "housing accommodations owned or
operated by the ... State of New York,... agency or instrumentality
thereof" fails. Given the remedial nature of the Rent Stabilization
Law, exemptions to this law are to be construed narrowly. In such a
building, since the title continues to be held by the private owner,
neither the 7-A Administrator nor the Civil Court owns the building.
Since the day-to-day operation is conducted by the 7-A Administrator, a
private individual, the building is not operated by New York State. The
Civil Court's supervision over the 7-A Administrator is too intermittent
to constitute a government operation of the building.
The Commissioner finds that a tenant, pursuant to the Rent Stabilization
Code and the Emergency Tenant Protection Act, is not required to remit
rent in excess of lawful stabilized amounts even if the 7-A
Administrator's funds would thereby be reduced. To determine otherwise
would destroy the very foundation of the stabilization system which was
created "to insure that the level of rent adjustments authorized under
(the EPTA) will not be subverted and made ineffective" [see Century
Operating Corp. v. Marrero, 425 N.Y.S.2d 464, 465; Section 10 of Chapter
576 of the Laws of 1974 (EPTA)]. Moreover, as the condition of the
subject building is in no way the fault of the tenant, such tenant
should not be required to subsidize the rehabilitation of this building
at an illegal rent. The Commissioner also notes the case of Schactman
v. State Division of Housing and Community Renewal, 531 N.Y.S. 2d 804
(App. Div. 1st Dept., 1988), motion for leave to appeal to the Court of
Appeals denied, 540 N.Y.S. 2d 238, involving another Manhattan building
with a 7-A Administrator. The Commissioner's order in the proceeding
(Docket No. ARL 01824-K) had found that the 7-A Administrator was an
"owner" under the Rent Stabilization Code; that the tenant was not
required to remit a rent in excess of the lawful rent, and that the
tenant should not have to wait and collect the refund of overcharges
from the actual owner, although the refund she could collect from the 7-
A Administrator was limited to the overcharges actually collected by
him. The trial court upheld the order except to the extent that it
remanded the matter for a determination as to whether the building owner
was financially able to refund the overcharges and as to whether the
amount of overcharge should be offset against future rents in the event
that the building owner was not financially sound. The Appellate
Division reversed the trial court and upheld the Commissioner's order as
having a rational basis.
FD 510244-RO
The owner is contending that the 7-A Administrator was obligated, by the
Court's directive, to charge the "maximum" rent, and is implicitly
contending that the $450.00 rent charged Stephen Epperson therefore had
judicial approval. The Commissioner finds nothing in the system of
court-appointed 7-A Administrators to suggest that the Civil Court
should be considered to have established Stephen Epperson's lawful rent
at $450.00 per month. The system of 7-A Administrators was designed to
permit the restoration of services by a tenant representative where the
owner has defaulted on its duties to maintain the building. It was not
designed to permit 7-A Administrators or the Civil Court to increase the
rents above the lawful limits where either party considers the building
rent roll to be insufficient to cover the costs of its maintenance.
It is appropriate to consider information in the DHCR's records to be
part of the record of any proceeding at the time. While the
Administrator froze the collectible rent at the April 1, 1984 registered
rent of $260.00 because the DHCR's computerized rent registration system
did not show the owner as having registered for 1985 through 1988, the
owner has submitted satisfactory proof that he did serve the
registrations on the occupants of the subject apartment from 1986
through 1989, and an investigation of DHCR records has shown, as
previously mentioned on page 3 of this order, that the owner had
registered with the DHCR for those years. [The owner did not submit
new proof for 1985, since he had previously submitted that registration
date-stamped by the DHCR.] Because the owner had actualy registered,
the rent should not have been frozen due to apparent non-registration.
Taking the above-mentioned factors into account, the Commissioner has
recalculated the lawful stabilization rents and the amount of
overcharge. They are set forth on a revised rent calculation chart
attached hereto and made a part hereof. Treble damages have been
imposed on the monthly overcharge, but not on the $1,700.00 initially
collected by the owner, which was refunded two years prior to the
Administrator's order. The June 19, 1989 "So Ordered" stipulation
submitted by the owner includes the tenant's acknowledgement that he
owed $5,313.00 for the period through June 30, 1989, before any payments
or adjustments were made on the day of the stipulation. This represents
six months rent in 1989 at a lease rent of $500.00 per month, and
$2,313.00 arrears for the complainant's lease ending December 31, 1988,
with was the subject of the Administrator's order. In the stipulation
the owner acknowledged that the tenant had paid $1,000.00 that day, and
agreed to credit the tenant with the $1,700.00, with $500.00 of that
being used for security, $500.00 being used for the January, 1987 rent,
and $700.00 being used for other arrears. While the owner has contended
that the tenant has not paid rent since September, 1989 [approximately
three months after the date of the stipulation], it is presumed that the
payments made by the tenant between June and September, 1989, together
with the $1,000.00 payment and $1,200.00 credit on June 19, 1989, paid
in full the rent owing for the period from January 1, 1987 to December
31, 1988. Even though those arrears had not been paid by December 31,
FD 510244-RO
1988, the last day concerned in the Administrator's order, the tenant
was contractually obligated to pay that portion of rent, the owner was
contractually entitled to collect it, and it was eventually paid prior
to the Administrator's April 12, 1991 order, so it is appropriate to
treat it as though it was paid at the expected time. Because the
$1,700.00 fee was refunded nearly two years prior to the Administrator's
order, it is not included in the amount which the owner must refund to
the tenant.
Section 2526.1(a)(1) of the Rent Stabilization Code provides in
pertinent part that treble damages shall be imposed on overcharges
unless an owner establishes that the overcharge was not willful. An
owner has an independent duty to charge only lawful rents, based upon an
apartment's rental history. The presumption of willful overcharge is
not rebutted by the owner's setting the complainant's rent at a 9%
increase over the $425.00 rent of the prior tenant, since that rent
itself represented an unlawful increase over the $260.00 rent of the
lease in effect in the previous Guidelines period. Treble damages are
therefore imposed on the $4,243.36 overcharge occurring from January 1,
1987 to December 31, 1988.
This order may, upon the expiration of the period in which the owner may
institute a proceeding pursuant to Article 78 of the Civil Practice Law
and Rules, be filed and enforced in the same manner as a judgment, or
the tenant may apply the overcharge award against any arrears that he
owes. If he does the latter, and there is an excess of the overcharge
award remaining after being offset against the arrears, the tenant may
offset not more than twenty percent of the excess each month 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 hereby is,
modified in accordance with this Order and Opinion. The lawful
stabilization rents and the amount of overcharge are established on the
attached chart, which is fully made a part of this order. The total
overcharge is $12,897.74 as of December 31, 1988, including excess
security of $167.66. The lawful permanent stabilization rent is $332.34
per month in the lease from January 1, 1987 to December 31, 1988.
ISSUED:
FD 510244-RO
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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