FH 110139 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.: FH 110139-RO
THE CIAMPA BELL CO., DISTRICT RENT OFFICE
DOCKET NO. ZCK-110439-R
PETITIONER TENANT: GLORIA ROA
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
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
warranted.
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)
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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
benefits.
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
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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
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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
regulation:
(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:
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.
.
.
(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
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apartment was no longer subject to the Rent Stabilization Law. The
instructions for the 1985 registration provided in pertinent part
that:
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
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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-
occupancy.
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
ISSUED:
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JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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