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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
--------------------------------X S.J.R. 6442 (MANDAMUS)
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: FG 210185-RO
DRO DOCKET NO.: ZDD-210353-R
SLOCUM REALTY CORP.,
C/O LIMAN MANAGEMENT, TENANT: ARTHUR SCHNEIDER
PETITIONER
---------------------------------X
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On July 24, 1991 the above-named petitioner-owner filed a Petition
for Administrative Review against an order issued on June 20, 1991
by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New
York concerning the housing accommodations known as 10 Ocean
Parkway, Brooklyn, New York, Apartment No. B6 wherein the Rent
Administrator determined that the owner had overcharged the tenant.
Subsequent thereto, the owner filed a petition pursuant to Article
78 of the Civil Practice Law and Rules seeking an expeditious
determination of its petition for administrative review. On July
30, 1992 the Supreme Court, Kings County ordered the Division to
issue a determination on or before October 30, 1992.
The Administrative Appeal is being determined pursuant to the
provisions of Sections 2523.4(a) and 2526.1 of the Rent
Stabilization Code.
The issue herein is whether the Rent Administrator's order was
warranted.
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 of a rent
overcharge complaint by the tenant in April, 1989 in which he
stated that he had commenced occupancy on September 15, 1977 at a
rent of $300.00 per month, that he was currently paying $580.26 per
month, and that the owner had failed to reduce his rent to $478.00
as of March, 1986 as directed in Docket No. KS-003704-S on October
14, 1986.
In answer, the owner contended that it had never received a copy of
any order in Docket No. KS-003704-S, and that it received a copy of
a March 16, 1989 letter from the Division of Housing and Community
Renewal's (DHCR's) Compliance Bureau to the tenant stating that the
service decrease case was considered closed because the tenant had
indicated that the owner had complied with the directives in the
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order.
In Order No. ZDD-210353-R, issued on June 20, 1991 the
Administrator froze the collectible rent at the $459.62 rent
registered on April 1, 1985, and determined an overcharge of
$20,671.82 as of June 30, 1991, including treble damages beginning
two years prior to the date of the tenant's complaint.
In this petition, the owner contends in substance that it received
the tenant's service decrease complaint on February 21, 1986; that
it promptly submitted an answer which established that all repairs
had been completed; that in July, 1986 it moved its offices from 16
Court Street, Brooklyn to 10 Ocean Parkway, Brooklyn; that the 1986
registration advised the DHCR that the owner's mailing address was
P.O. Box 255, Brooklyn [Note: this was the address of the managing
agent, Michael Diamond, c/o Liman Management. Slocum Realty
Corporation at 16 Court Street, Brooklyn 11241 was registered as
the owner. The rent reduction order was sent to the owner at 16
Court Street, Room 1004, Brooklyn 11241]; that it did not receive
a copy of the rent reduction order, Docket No. ZKS-003704-S,
purportedly issued on October 14, 1986, from either the DHCR or the
tenant; that no copy of the order was sent to the owner at either
P.O. Box 255 or 10 Ocean Parkway; that the owner believed the
matter to be closed, until it received a March 16, 1989 letter from
the DHCR's Compliance Bureau, stating that the matter was "closed"
because the owner had complied with the directives in the order,
and advising the owner to file an application to restore the rent;
that the March 16, 1989 letter, which was the owner's first notice
that an order had been issued in Docket No. ZKS-003704-S, did not
enclose a copy of the order or advise of its contents; that the
owner immediately filed a rent restoration application, which was
received by the DHCR on March 23, 1989; that the DHCR has not even
assigned a docket number to it; that the owner therefore filed
another application, which was assigned Docket No. FE-210801-OR;
that it has still not, to date, received a copy of the rent
reduction order and was unaware of the amount of the reduction;
that the rent records submitted in answer to the complaint
established that, but for the rent reduction, all rents charged the
tenant have been lawful; that the May 3, 1991 Final Notice from the
DHCR proposing the imposition of treble damages was the owner's
first notice of the amount of the rent reduction in Docket No. ZKS-
003704-S; that it could have filed a successful rent restoration
application in October, 1986 if it had been served with the rent
reduction order when it was issued in that month; that the DHCR
should have at least processed and granted its 1989 rent
restoration application, particularly since the Compliance Bureau
had already found that the owner had restored the services whose
reduction was complained of in Docket No. ZKS-003704-S; that the
owner's answer to the overcharge complaint apprised the DHCR that
the owner was unaware of the amount of the rent reduction and was
unable to comply with the order; that the DHCR's order finding an
overcharge is therefore arbitrary and capricious; that there was no
willful overcharge collected from the tenant; that any overcharge
collected was based solely on the multitude of errors committed by
the tenant and the DHCR in not furnishing a copy of the order
despite the owner's repeated statements that it had not seen it,
and by the DHCR's arbitrary failure to process the 1989 rent
restoration application even though the DHCR had already found that
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services had been restored; and that treble damages should not be
imposed.
In answer, the tenant asserts in substance that he presented a copy
of the rent reduction order to Kate Norman, the Executive Secretary
of Slocum Realty, and that a copy of the order was on file in the
office of his Congressperson, Charles Schumer, who sent several
letters to the owner.
In reply Kate Norman, the office manager for Slocum Realty
Corporation, submitted an affidavit stating that no person employed
by Slocum Realty had seen or received a copy of the order, that the
tenant had not provided her with a copy of the order at any time,
and that Congressperson Schumer's letters did not mention or
forward a copy of the order.
The Commissioner is of the opinion that this petition should be
denied.
The Commissioner initially notes that this order does not consider
whether the order (Docket No. ZKS-003704-S) reducing the rent for
a service decrease was warranted. That issue was considered in the
Commissioner's order issued under docket number FL 210060-RO on
September 30, 1992. When the owner's 1991 rent restoration
application (Docket No. FE-210301-OR) was denied on November 13,
1991, the owner filed a Petition for Administrative Review (Docket
No. FL 210060-RO) against the denial. The order denying that
appeal found that the 1986 rent reduction order was mailed to the
owner at the address registered by the owner on the 1986
registration statement; that the owner did not file a Petition for
Administrative Review of that order after becoming aware of its
existence; that the March 16, 1989 letter from the Compliance
Bureau clearly stated that the rent would not be restored until the
owner filed a rent restoration application and it was approved by
the DHCR; that the tenant's oral statement to the Compliance Bureau
that repairs had been completed, such statement later being
repudiated when the repairs proved to be ineffective, would not
have been sufficient to warrant rent restoration; that even if the
owner did file a rent restoration application in 1989 there is no
evidence to indicate that the application would have been granted;
and that the owner had not established that the conditions on which
the rent reduction was based had been repaired prior to the
issuance of the November 13, 1991 order denying a restoration of
the rent.
Section 2523.4(a) of the Rent Stabilization Code provides in
pertinent part that "[a] tenant may apply to the DHCR for a
reduction of the legal regulated rent to the level in effect prior
to the most recent guidelines adjustment, and the DHCR shall so
reduce the rent for the period for which it is found that the owner
has failed to maintain required services. The order reducing the
rent shall further bar the owner from applying for or collecting
any further increases in rent until such services are restored."
The Administrator's order under appeal herein correctly found an
overcharge beginning March 1, 1986 based upon Order No. ZDD-210353-
R, since that order is now administratively final. The only issue
remaining is whether it was appropriate to impose treble damages.
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Absent some unusual circumstance which would cause the DHCR to
grant an owner's request for a stay, the filing of a Petition for
Administrative Review ("PAR") against a rent reduction order does
not stay the mandate to reduce the rent, although it does stay the
refund of the excess rent [based on the difference between the
actual rent charged and the reduced lawful rent] prior to the date
of the order. That is, when a rent reduction order is issued, an
owner must begin charging the reduced rent. In addition, the
filing of a rent restoration application does not stay the rent
reduction. Thus, even if the owner had filed both a PAR and a rent
restoration application in 1986, it would have been obligated to
collect no more than $459.62 per month until a DHCR order allowed
a higher amount. [As noted earlier, the owner's contentions about
the correctness of the initial and continuing rent reduction were
recently rejected on the merits.] Section 2526.1(a) of the Rent
Stabilization Code provides in pertinent part that treble damages
shall be imposed on overcharges unless an owner establishes by a
preponderance of the evidence that they were not willful. Policy
Statement 89-2 provides in pertinent part that "the burden of proof
in establishing lack of willfulness shall be deemed to have been
met... [w]here an owner adjusts the rent on his or her own within
the time afforded to interpose an answer to the proceeding and
submits proof to the DHCR that he or she has tendered, in good
faith, to the tenant a full refund of all excess rent collected,
plus interest." When the owner received the March 16, 1989 letter
from the Compliance Bureau it was, at least by that time if not
also in October, 1986, on notice that an order had been issued in
Docket No. KS-003704-S reducing the rent, and that the rent was
still reduced and would not be restored until the DHCR granted an
application to do so. When the owner received the tenant's
overcharge complaint two months later it was put on notice that the
order in Docket No. KS-003704-S had reduced the rent effective
March, 1986. [The tenant was incorrect in citing $478.00, which
was his rent on the effective date of the rent reduction. The
order actually reduced the collectible rent to the rent in effect
on April 1, 1985, which was $459.62.] At that point the owner
could have avoided the possibility of treble damages by refunding
the overcharge since March, 1986. The owner did not do so.
Further, the owner has not established that the overcharge was not
willful. Accordingly, the imposition of treble damages was
warranted.
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 not in excess of twenty percent per month
thereof 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, denied and
that the Rent Administrator's order be, and the same hereby is,
affirmed.
FG 210185 RO
ISSUED
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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