FH 110139 RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                              JAMAICA, NEW YORK   11433

          APPEAL OF                               DOCKET NO.:  FH 110139-RO

                  THE CIAMPA BELL CO.,            DISTRICT RENT OFFICE
                                                  DOCKET NO. ZCK-110439-R
                                  PETITIONER      TENANT:  GLORIA ROA

                                       IN PART

          On August 16, 1991 the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on July 
          12, 1991 by the Rent Administrator, 92-31 Union Hall Street, 
          Jamaica, New York concerning the housing accommodations known as 
          139-81 35th Avenue, Flushing, New York, Apartment No. 6K wherein 
          the Rent Administrator determined that the owner had overcharged 
          the tenant.

          The issue herein is whether the Rent Administrator's order was 

          The applicable sections of the Law are Section 26-516 of the Rent 
          Stabilization Law and Sections 2520.11(e), 2520.11(p), 2522.5(e)(2) 
          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 November, 
          1988 of a rent overcharge complaint by the tenant, in which she 
          stated that she had commenced occupancy on June 15, 1988 at a rent 
          of $795.00 per month.

          The owner was served with a copy of the complaint and was requested 
          to submit rent records to prove the lawfulness of the rent being 
          charged.  In answer to the complaint, the owner contended that the 
          subject apartment was destabilized in November, 1984 due to a 
          vacancy after the expiration of Real Property Tax Law (RPTL) 

          FH 110139 RO

          Section 421-a tax abatement benefits.  The owner also stated that 
          the apartment was not registered for 1985 because the Division of 
          Housing and Community Renewal's (DHCR's) 1985 apartment 
          registration instructions did not require that of apartments not 
          subject to the Rent Stabilization Law.

          In an order issued on July 12, 1991 the Administrator calculated 
          the lawful stabilization rent on the basis of the April 1, 1984 
          rent of $553.00, and found an overcharge of $28,610.99, including 
          treble damages, as of June 30, 1991.  The order noted that the 
          lawful rent was frozen at the March 31, 1985 rent because the owner 
          had not registered the apartment for 1985, and that the owner had 
          failed to submit a copy of a 421-a Certificate of Eligibility.

          In this petition, the owner contends in substance that the subject 
          apartment is not subject to rent regulation because it was granted 
          tax abatement benefits pursuant to RPTL Section
          421-a, which was amended (relevantly in Section 421-a[2][f][i]) by 
          Chapter 346 of the Laws of 1984, Section 1 to deregulate apartments 
          vacated after the expiration of the benefits, and because the 
          complainant commenced occupancy after a vacancy that occurred 
          subsequent to the expiration of the Section 421-a benefits on 
          January 31, 1982; that the expiration of the benefits is a matter 
          of public record; that even if the apartment is subject to rent 
          stabilization, the rent should not have been frozen based on a lack 
          of a 1985 registration, because the DHCR's 1985 registration 
          instructions provided that those apartments not subject to the Rent 
          Stabilization Law did not have to be registered; that there was a 
          good faith basis in 1985 for the owner's belief that the subject 
          apartment did not have to be registered; that the apartment was in 
          fact registered in 1984, since the November, 1984 vacancy that 
          deregulated the unit had not yet occurred; that the apartment was 
          registered again beginning in 1986, since the DHCR's instructions 
          for that year contemplated for the first time the registration of 
          units exempt because of the expiration of 421-a benefits; that 
          there would have been no overcharge found but for the 
          Administrator's freezing of the rent; that treble damages should 
          not have been imposed in any case, since the overcharge found by 
          the Administrator was a "legal fiction", and not the result of any 
          willful behavior on the owner's part; that the Rent Stabilization 
          Code does not provide for treble damages as a penalty for a failure 
          to register; and that the owner had a good faith basis for 
          believing the subject apartment to be exempt from rent regulation, 
          since the DHCR had, prior to the complainant's tenancy, dismissed 
          complaints by tenants in two other apartments belonging to the 
          owner because vacancies had occurred after the expiration of 421-a 

          In answer, the tenant asserts in substance that the overcharge 
          began with a 36% increase in the year when the owner did not 
          register the apartment; that such increase did not constitute a 
          fair market value; and that the owner's annual registration of the 

          FH 110139 RO

          apartment indicates that it is rent stabilized.

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

          The Commissioner finds that the subject apartment is within the 
          jurisdiction of the Rent Stabilization Law despite the fact that 
          the owner's tax abatement benefits expired and a subsequent vacancy 
          occurred.  Originally, the subject building was rent-regulated 
          solely by virtue of the owner's receiving 421 benefits.  In 1974, 
          Section 5 of the Emergency Tenant Protection Act (Section 8625 of 
          McKinney's Unconsolidated Laws) also furnished a separate basis for 
          the subject building to be rent regulated.  Currently, Section 
          2520.11(p) of the Rent Stabilization Code is the applicable law.  
          This section states that in order for an apartment building to 
          become deregulated it must have been completed after January 1, 
          1974 and was subject to regulation solely because the owner was 
          receiving tax benefits.  Clearly, the subject premises in the 
          instant case, completed prior to January 1, 1974, do not qualify as 
          an exception and remain rent regulated.

          When the subject building was constructed in 1972, the Rent 
          Stabilization Law provided that only buildings of six or more units 
          constructed before March, 1969 were subject to rent regulation.  
          The building was subject to the Rent Stabilization Law beginning in 
          1973 solely by virtue of the owner's participation in the 421 
          partial tax exemption program.  However, with the passage of the 
          Emergency Tenant Protection Act of 1974, all buildings built before 
          January 1, 1974 became subject to the Rent Stabilization Law.  The 
          fact that this building had first become subject to the Rent 
          Stabilization Law by virtue of the 421 program did not now 
          distinguish this building from any other building built before 
          January 1, 1974.  The continuing receipt of the 421 benefits no 
          longer had any relevance to the building's rent regulation status.

          The owner's argument regarding the exemption of the subject 
          apartment from rent regulation rests upon Section 1 of Chapter 346 
          of the Laws of 1984, which modified RPTL Section 421-a(2)(f) to 
          read in pertinent part that:

               (f) Notwithstanding the provisions of any local law for 
               the stabilization of rents in multiple dwellings or the 
               emergency tenant protection act of nineteen seventy-four, 
               the rents of a unit shall be fully subject to
               control under such local law or such act, unless exempt 
               under such local law or such act from control by reason 
               of the cooperative or condominium status of the unit, for 
               a period of ten years or for the period any such 
               applicable law or act is in effect, whichever is shorter.  
               Thereafter, such rents shall continue to be subject to 
               such control to the same extent and in the same manner as 

          FH 110139 RO

               if this section had never applied thereto, except that 
               such rents shall be decontrolled if:

                    (i) with respect to units subject to the 
                    provisions of this section on the effective 
                    date of this subparagraph such a units becomes 
                    vacant after the expiration of such ten year 
                    period or applicable law or act.

          It is the position of the DHCR that the words "with respect to 
          units subject to the provisions of this section on the effective 
          date of this subparagraph" were not meant to deregulate apartments 
          which were built prior to the effective date of the amendment and 
          were independently subject to regulation by virtue of being in a 
          building completed before January 1, 1974 and containing six or 
          more units (particularly where, as in the present case, the tax 
          benefits expired before the effective date of the 1984 amendments 
          so the apartment was not one of the "units subject to the 
          provisions of this section on the effective date of this 
          subparagraph...").  This position is reflected in the current Rent 
          Stabilization Code, effective May 1, 1987, nearly three years after 
          Chapter 346 of the Laws of 1984.  The only relevant mention of RPTL 
          Section 421-a is in Section 2520.11(p), which exempts from 

               (p) housing accommodations in buildings completed or 
               substantially rehabilitated as family units on or after 
               January 1, 1974 or located in a building containing less 
               than six housing accommodations, and which were 
               originally made subject to regulation solely as s 
               condition of receiving tax benefits pursuant to section 
               421-a of the Real Property Tax Law, as amended, and:

                    (1) the housing accommodations which were 
                    subject to the RSL pursuant to section 421-a 
                    became vacant.

          This exempts from regulation, upon a vacancy, only apartments which 
          would not otherwise have been stabilized except for the receipt of 
          421-a benefits.  Because the subject building was completed on July 
          28, 1972, and because it contains at least six apartments, this 
          exemption does not apply.

          This is the same interpretation held by the agency responsible for 
          administering RPTL Section 421-a.  Section 2.7 of the regulations 
          promulgated by the New York City Department of Housing Preservation 
          and Development on August 27, 1987, also three years after Chapter 
          346, provides in pertinent part that:

               To be eligible for partial tax exemption the land upon 
               which the eligible project is located must meet the 
               following letting, rental and occupancy requirements:

          FH 110139 RO


               (2) Notwithstanding the provisions of any local law for 
               the stabilization of rents in multiple dwellings or the 
               emergency tenant protection act of 1974, the rents of a 
               unit shall be fully subject to regulation under such 
               local law or such act, unless exempt under such local law 
               or such act from regulation by reason of the cooperative 
               or condominium status of the unit, for the entire period 
               during which the property is receiving tax benefits 
               pursuant to the Act, or for the period any such 
               applicable local law or such act is in effect whichever 
               is shorter.  Thereafter such rents shall continue to be 
               subject to such regulation to the same extent and in the 
               same manner as if this section had never applied thereto, 
               except that for dwelling units in buildings completed, as 
               that term is defined herein, on or after January 1, 1974, 
               such rents shall be deregulated if:

                    (a)  with respect to dwelling units 
                         located in multiple dwellings 
                         completed after January 1, 1974 such 
                         unit becomes vacant after the 
                         expiration of the lease for the unit 
                         in effect when such benefit period 
                         or applicable law or Act expires . . 

          This again is exempting, upon vacancy, only apartments which would 
          have been continuously exempt from the time of their completion but 
          for the receipt of 421-a benefits.

          Because the subject apartment does not fall under any of the 
          exemptions, it is subject to regulation under the Rent 
          Stabilization Law and Code.  The tenant is entitled to 
          stabilization leases at lawful rents, and the owner is required to 
          register the building annually with the DHCR.  While the owner has 
          enclosed copies of two orders (Docket Nos. Q-003522-R and Q-003528- 
          R) issued by the Administrator in 1987, finding that two apartments 
          belonging to the owner were no longer subject to rent stabilization 
          due to the expiration of 421-a benefits, the Commissioner notes 
          that new orders (Docket Nos. BK-110036-RP and BK-110033-RP) were 
          issued in 1989, revoking the prior orders and finding that the 
          apartments were subject to rent stabilization.  (There are appeals 
          currently pending against the new orders.)  

          The owner initially registered the subject apartment for 1984.  
          When a vacancy occurred in November, 1984, subsequent to the 
          expiration of the 421-a benefits, the owner considered that the 

          FH 110139 RO

          apartment was no longer subject to the Rent Stabilization Law.  The 
          instructions for the 1985 registration provided in pertinent part 

                    These forms are to be used ONLY for rent 
                    stabilized housing accommodations in New York 
                    State for which the owner has already 
                    submitted a first-year (initial) rent and 
                    services registration to DHCR between April 1, 
                    1984 and March 31, 1985.

          The owner was not unjustified in considering that an apartment no 
          longer subject to stabilization did not have to be registered for 
          1985.  The 1986 registration instructions did provide for the 
          registration of exempt apartments in stabilized buildings.  The 
          owner registered the subject apartment in 1986 and subsequent 
          years.  Under the circumstances the Commissioner does not consider 
          it appropriate to apply the penalty of freezing the rent for the 
          owner's failure to register for 1985.  While the owner submitted a 
          copy of the 421-a Certificate of Eligibility for the first time on 
          appeal, the Commissioner notes that the owner had submitted a copy 
          of that document in Docket No. CG-110245-R, involving another 
          apartment in the subject building, some time before the issuance of 
          an order in that case on April 9,1990.  Because the document was 
          therefore in the DHCR's records prior to the July 12, 1991 issuance 
          of the order under appeal herein, the Commissioner considers it 
          appropriate to make use of its evidence of 421-a participation to 
          excuse the owner's failure to register for 1985.

          With its petition the owner submitted a proposed rent calculation 
          chart showing no overcharge.  The chart stated that four 2.2% 
          increases had been taken as of April 1, 1984, and added in three 
          others in later years.  However, Section 2522.5(e)(2) of the Rent 
          Stabilization Code provides in pertinent part that "[a]fter the tax 
          benefits end, such additional 2.2 percent charges shall no longer 
          be added but the owner may continue to collect the cumulative 2.2 
          percent increases charged prior to the termination of said tax 
          benefits."  Because the tax benefits expired prior to April 1, 
          1984, only Guidelines increases and other increases authorized by 
          the Code may be taken above the base date rent of $553.00.

          Taking the above-mentioned factors into account, the Commissioner 
          has calculated the lawful stabilization rents and the amount of 
          overcharge.  They are set forth on an amended rent calculation 
          chart attached hereto and made a part hereof.

          Because the language of Chapter 346 of the Laws of 1984 could give 
          rise to a good faith belief that the subject apartment was not 
          subject to rent regulation, and that the DHCR was without 
          jurisdiction, the Commissioner does not consider that the 

          FH 110139 RO

          overcharge should be considered to be willful.  Interest rather 
          than treble damages has therefore been imposed.

          The owner is cautioned to adjust the rent, in leases after those 
          considered in this order, to amounts no greater than that 
          determined by this order plus any lawful increases, and to register 
          any adjusted rent, with this order being given as the reason for 
          the adjustment.  Because of the possibility that the tenant herein 
          may have vacated by the time that this determination is issued, a 
          copy of this determination is being mailed to the tenant-in- 

          If the owner has already complied with the Administrator's order 
          and there are arrears due to the owner as a result of the present 
          determination, the owner is directed to allow the tenant to pay off 
          the arrears in twenty four equal monthly installments.  Should the 
          tenant vacate after the issuance of this order, or have previously 
          vacated, said arrears shall be payable immediately.

          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, 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 set 
          forth on the attached rent calculation chart, which is fully made 
          a part of this order.  The total overcharge is $545.88 as of June 
          30, 1991.  The lawful stabilization rent is $853.34 per month in 
          the lease from July 1, 1989 to June 30, 1991.

          FH 110139 RO


                                                  JOSEPH A. D'AGOSTA
                                                  Acting Deputy Commissioner

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