Docket Number: FG 410292-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
----------------------------------X
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: FG 410292-RO
MURRAY SCHACTMAN, DRO DOCKET NO.: ZDG-410380-R
ARTICLE 7-A ADMINISTRATOR,
TENANT: Karyn Lynn Dale
PETITIONER OWNER: H.O. Realty Corp.
----------------------------------X
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
AND MODIFYING RENT ADMINISTRATOR'S ORDER
On July 24, 1991 the above-named petitioner filed a Petition for
Administrative Review against an order issued on June 26, 1991 by
the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning housing accommodations known as Apartment 20 at 66 West
10th Street, New York, New York wherein the Rent Administrator
determined that the Article 7-A Administrator had overcharged the
tenant.
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 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 July,
1989 of a rent overcharge complaint by the tenant, in which she
stated that she had commenced occupancy on August 4, 1985 at a rent
of $323.01 per month. Although she named H.O. Realty Corp. as the
owner, the lease commencing November 15, 1985 which she submitted
was made with the petitioner herein, as was the November 15, 1983
lease of the prior tenants, which lease was assigned to her on
August 4, 1985. She also contended that her rent should be based
on the rent established by a prior Order No. CDR 34147 (Docket No.
T/C-79164-G) issued on October 24, 1988.
A copy of the tenant's complaint was sent to H.O. Realty. No reply
was received from it.
In an order issued on June 26, 1991 the Rent Administrator, making
use of an order which had set the prior tenants' default rent at
$240.36 through November 14, 1985, found that the complainant had
been overcharged in the amount of $2,330.07 as of the time of the
order. (The petitioner had reduced the complainant's rent to a
Docket Number: FG 410292-RO
lawful amount as of the first rent payment date following his
receipt of the October 24, 1988 order reducing the lawful rent in
the prior tenants' lease, so no overcharge was collected after
November 14, 1988.) The order named the petitioner herein as the
owner.
In this petition, the petitioner - Article 7-A Administrator
contends in substance that:
1) He was appointed as 7-A Administrator for the subject
building by a Housing Judge of the Civil Court on May 2,
1983.
2) The Division has no jurisdiction to order the 7-A
Administrator to refund monies from his "administrative
fund" to the tenant, as he is not an "owner" under the
Rent Stabilization Code and as the Order and Judgment of
the Civil Court which resulted in the appointment of such
Administrator states, in pertinent part, that such rental
monies "shall be used, subject to the Court's direction,
... to remedy... violations of record placed by any
Office of the Department of Housing Preservation and
Development (HPD)... and any other conditions as required
or authorized by law". As a result, the only proper
authority to order rental overcharge payments to the
tenant is the judge who appointed the Administrator.
3) The purpose of the appointment of a 7-A Administrator
is to assure that when the Court has found that dangerous
and hazardous conditions exist in a building that all the
income from the premises is used to abate those serious
conditions before funds are diverted for other purposes,
such as refunding monies pursuant to a rent overcharge.
The Division Order thus impermissably frustrates the 7-A
Administrator's ability to preserve the rental income of
the subject building to make court-ordered crucial
repairs.
4) To compel the 7-A Administrator to pay thousands of
dollars as a consequence of complaints of rental
overcharges results in depleting and wasting the funds
allocated for maintenance and repair of the building - a
function which the Administrator is duty bound to perform
(see Real Property Action and Proceedings Law Section
778). The Division's Order cripples the activities of
the 7-A Administrator by depriving him of additional
rent payments and, based thereon, promotes the further
deterioration of the subject building.
Docket Number: FG 410292-RO
5) The owner of the subject building, not the 7-A
Administrator, is responsible for all rent overcharges in
the subject building. The proper procedure in the
instant matter would be to defer payment of the rent
overcharge amount until the period of administration ends
and the owner has possession of the building. Or, in the
alternative, the affected tenant or the Division could
make an application to the Civil Court for a
determination by the judge who appointed the 7-A
Administrator to ascertain whether the Administrator's
funds are presently adequate to make such payment,
without conflicting with the very purpose of RPAPL
Section 778, the preservation and rehabilitation of the
building.
The petitioner also contends that, while the Administrator ordered
the refund of $48.21 ($366.01 minus $317.80) in excess security,
the current rent of $351.39 means that there is now a smaller
excess, and that the new rent in the lease renewal commencing
November 15, 1991 will mean that there will no longer be any excess
security being held as of that time.
In answer, the tenant asserts in substance that the issues have
already been decided in Docket No. TC-79164-G, which set the rent
and directed a refund of overcharges to the prior tenants in the
subject apartment; and that the 7-A Administrator indeed paid the
prior tenants the full amount of the ordered refund.
The Commissioner is of the opinion that this petition should be
denied.
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,
it is uncontroverted that the 7-A Administrator receives the
monthly rents from the tenants of the subject building. In
addition, such Administrator by law must remit to the owner H.O.
Realty 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 the 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 petitioner-7A
Administrator is considered the owner of the subject building as
that term is defined in Section 2520.6(i) of the Code. Based
thereon, the Commissioner further finds without merit the 7-A
Administrator's contention that the Agency is without jurisdiction
in this matter.
Docket Number: FG 410292-RO
The Commissioner finds without merit the petitioner's assertion
that all income from the subject building must be used to
rehabilitate the existing structure before such funds may be
"diverted" to, for example, rent overcharge refunds to tenants who
have been remitting a rent in excess of stabilized guidelines. The
Commissioner notes that this position in effect discriminates
against tenants by forcing them to subsidize the cost of their own
housing (see Dept. of Housing Preserv. Dev. v. Sartor, 487
N.Y.S.2nd 1 [A.D. 1st Dept. 1985]) by compelling tenants to pay for
housing at a rent that is unlawful.
Concerning the petitioner's contention that deprivation of the
additional rental payments cripples the activities of the 7-A
Administrator 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 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
(ETPA)].
Finally, the Commissioner rejects the petitioner's suggestion that
the payment of rent overcharge amounts to the tenant should be
deferred until the owner, H.O. Realty, reassumes control over the
subject building or in the alternative, that the Division should
make application to the Civil Court for permission to attach the
7-A Administrator's funds. As hereinabove stated, a tenant is not
required to remit an unlawful rent. 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.
While the petitioner has cited a number of court cases in support
of his contentions, he has neglected to mention 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. That case, significantly,
involved the petitioner and concerned the same issue of rent
overcharge at another apartment in the subject building. 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
Docket Number: FG 410292-RO
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.
The Commissioner notes that the Appellate Division proceeding in
Schactman involved an apartment in the subject building whose
tenants had been in occupancy prior to the time the 7-A
Administrator took over management responsibilities. A default
rent was set by the Rent Administrator, and the 7-A Administrator
was held liable for those overcharges which he had collected. In
the present case not only did the complainant pay all of her rent
monies to the petitioner, but her lawful stabilized rent was
established by an order issued in an overcharge proceeding
initiated by the prior tenants, a proceeding which began after the
petitioner was already in charge of the building and the petitioner
did not appeal the determination in that proceeding.
While the 7-A Administrator was holding excess security of $48.21
as of the time of the Rent Administrator's order, subsequent lease
renewals establish that the petitioner is no longer holding that
much in excess security. To avoid unnecessary passing of security
refunds or arrears back and forth between the parties, the
Administrator's order is hereby modified to direct the refund of
any security in excess of one month's current rent. The total
overcharge refund collectible by the tenant is the actual
overcharge of $2,148.63 plus interest of $133.23.
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. The term "owner" is taken to include the 7-A
Administrator.
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,
modified in accordance with this order and opinion. The total
overcharge, not including any excess security, is $2,281.86 from
August 4, 1985 through November 14, 1988.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
|
