FH 410042 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. FH 410042 RO

                                          :  DISTRICT RENT OFFICE
                                             DOCKET NO. FB 410231-R
           21 West 58th Street Corp.,       
                                             TENANT: Martin F. Cardone        
                   
                               PETITIONER : 
      ------------------------------------X                             

          ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                 IN PART AND MODIFYING THE ADMINISTRATOR'S ORDER


      On August 2, 1991, the above-named owner filed a petition for 
      administrative review of a District Rent Administrator's order  issued 
      on July 5, 1991, concerning the housing accommodations known as  21 West 
      58th Street, Apartment 5E, New York, New York, wherein the Administrator 
      determined that the owner had overcharged the tenant.

      The Commissioner has reviewed all of the evidence in the record and has 
      carefully considered that portion of the record relevant to the issues 
      raised by the administrative appeal.  

      This proceeding was commenced by the filing of an overcharge complaint 
      on February 12, 1991.  In his complaint, the tenant stated that he took 
      occupancy of the subject apartment in August 1988 pursuant to a sublease 
      agreement with a corporate entity, Ryan International Enterprises, Inc.  
      The tenant alleged that the prime tenant was a dummy corporation with an 
      express purpose of creating illusory prime tenancies.  He further 
      alleged that two other apartments in the same building paid rent to the 
      same corporate prime tenant and that he actually rented the subject 
      apartment directly from the owner.

      In its answer to the complaint, the owner acknowledged that a prior 
      managing agent had mismanaged the subject building unbeknownst to the 
      owner.  This mismanagement included a failure to register the subject 
      apartment until 1989.  The owner asserted that the new agents had 
      attempted to correct past failures to the extent that prior faulty 
      record keeping would allow.  The owner alleged that the tenant ceased 
      paying rent in May 1990 and had vacated the subject apartment on or 
      about June 1991.

      The owner then computed a refund and tendered a check to the tenant 
      dated June 26, 1991.  In its calculations of the amount of the refund, 
      the owner used April 1, 1986 as the base rent date, included guideline 
      increases, undocumented vacancy improvements and deducted the rents 
      withheld by the tenant.  The amount tendered to the tenant was $3,001.36 
      which included excess security and 9% interest.








          FH 410042 RO

      In the order here under review, the Administrator determined that the 
      original sublease agreement between the tenant and Ryan International 
      Enterprises was an illusory prime tenancy.  The Administrator further 
      stated that the record indicates that the tenant had failed to pay rent 
      beginning in June 1990.  The Administrator ended his calculations as of 
      May 31, 1990 and assessed treble damages on overcharges occurring after 
      February 12, 1989, which was two years before the filing of the 
      complaint.  The lawful stabilization rent was established at $631.78 per 
      month and the total overcharge was $35,522.23 including treble damages.

      In its petition for administrative review, the owner asserts that it 
      complied with the Division of Housing and Community Renewal (DHCR) 
      Policy Statement 89-2 by tendering what the owner believed to be a full 
      refund within the time afforded to interpose an answer and therefore no 
      treble damages should have been assessed.  The owner alleges that it 
      acted in good faith in tendering a check for the overcharges while the 
      tenant acted in bad faith by holding the refund check until the 
      Administrator's order was issued and then returning it to the owner.  
      Further, the owner alleges that the Administrator gave no consideration 
      to the equities.  The owner asserts that the acknowledged mismanagement 
      by the previous managing agent was caused by the previous agent's mental 
      and physical incapacity before she died in 1988.  Also, the owner 
      asserts that the tenant stopped paying rent on May 15, 1990 and the 
      Administrator should have offset the arrearages due the owner against 
      the overcharges.  To support the claim that the Administrator should 
      have offset arrearages, the owner cites DHCR precedent.  In addition, 
      the owner also notes that in a non-payment proceeding in New York 
      Housing Court under Index No. L & T 122807/90 a so-ordered stipulation 
      was agreed to wherein the tenant agreed to vacate the subject apartment 
      and it was further stipulated that "all money issues and claims by both 
      parties are withdrawn, without prejudice."  The owner further alleges 
      that the Administrator improperly failed to consider the cost of new 
      equipment and improvements installed in the subject apartment.  Finally, 
      the owner asserts that its legal representative was not served with a 
      copy of the final order resulting in a denial of due process.

      In his answer to the petition for administrative review the tenant 
      requests that additional amounts be added to the Administrator's order.  
      Among other things, the tenant states that he was required to vacate the 
      above premises on May 12, 1991 but could not because of an injury.  He 
      alleges that the owner charged him $2,600.00 for an extra 10 days in the 
      subject apartment.  The tenant submits documents supporting this claim 
      and urges that this charge should be included in the Administrator's 
      order.  Further, he disputes the owner's allegation of bad faith and 
      alleges that the refund offer by the owner was made only after the owner 
      was notified of the possible imposition of treble damages and only ten 
      days before the Administrator's order was issued.

      After careful consideration, the Commissioner is of the opinion that 
      this petition should be granted in part and the Administrator's order be 
      modified.



      The Commissioner is of the opinion that there was no violation of the 
      owner's due process rights in this case.  The alleged failure of the 
      Administrator to serve the owner's legal representative resulted in no 
      prejudice to the owner.  As evidenced by the owner's thorough petition 


          FH 410042 RO

      for administrative review and its timeliness, the owner's attorney 
      exercised its complete opportunity to be heard.  The owner also stated 
      in its petition that it reserved the right to file supplemental 
      submissions.  To ensure no violation of due process, all of the 
      submissions of both parties have been fully considered by the 
      Commissioner.

      The Commissioner finds that the so-ordered stipulation entered into by 
      the parties did not constitute a withdrawal of this action by the 
      tenant.  Section 2520.13 of the Rent Stabilization Code describes the 
      conditions under which a tenant may waive a benefit.  The stipulation 
      submitted by the owner makes no specific mention of the DHCR proceeding.  
      Further, the stipulation contains no indication that the tenant was 
      represented by counsel and DHCR received no follow-up notification from 
      the tenant that he wished to withdraw the proceeding.  Therefore, the 
      stipulation does not constitute a withdrawal of the tenant's overcharge 
      complaint.

      Regarding the owner's allegation that the Administrator failed to 
      consider the equities, the Commissioner finds that the owner's appeal 
      for equitable consideration is not persuasive.  The owner is fully 
      responsible for mismanagement by its agents.

      Further, the Administrator correctly assessed treble damages.  The owner 
      presents no evidence to contest the Administrator's finding that Ryan 
      International Enterprises was an illusory prime tenant.  In addition, 
      the Commissioner finds that the owner failed to comply with DHCR Policy 
      Statement 89-2.  The  Policy Statement requires a "full" refund "within 
      the time afforded to interpose an answer."  The owner twice requested on 
      extension of time to answer the complaint.  These requests were granted.  
      The second extension ended on May 15, 1991.  The record discloses that 
      the owner was notified of the possible imposition of treble damages an 
      May 30, 1991 and the refund check was not dated until June 26, 1991.  
      Clearly, the owner did not tender the refund check "within the time 
      afforded to interpose an answer."  Even if the refund check had been 
      tendered in a timely manner, it still would have been insufficient to 
      avoid treble damages  because the amounts offered by the owner did not 
      constitute a full refund.  

      The Commissioner finds that the Administrator correctly disallowed any 
      rent increase for vacancy improvements.  The owner failed to submit any 
      documentation in support of this claim.

      Finally, the Commissioner finds that the Administrator did not act 
      incorrectly by computing the overcharges and treble damages through May 
      31, 1990.  Section 2526.1(a)(1) of the Code state that an owner that has 
      "... collected any rent or other consideration in excess of the legal 
      regulated rent shall be ordered to pay a penalty equal to three times 
      the amount of such excess ...."  Since the collection of excess rents by 
      the owner terminated on or before May 31, 1990, the Administrator 
      computed overcharges and treble damages through that date only.

      However, the Administrator's order must be updated to include the 12 
      month period, which was prior to the Administrator's order, and where 
      both parties acknowledge no rent payments occurred.  The Administrator 
      determined that the lawful stabilization rent for this period should 
      have been $631.78.  Accordingly, the overcharge determination is reduced 
      by $7,581.36 ($631.78 x 12 = $7,581.36) resulting in a total overcharge 







          FH 410042 RO

      of $27,940.87.

      Because the tenant has not filed a petition for administrative review, 
      his request for a modification of the Administrator's order by 
      increasing the amount of the overcharge will not be considered by the 
      Commissioner.  Further, the tenant's request to increase the amount of 
      the overcharge will not be considered because it is outside the scope of 
      review.  Section 2529.6 of the Code limits review "... to facts or 
      evidence before a Rent Administrator as rasied in the petition."  The 
      facts which serve as the basis for the tenant's request for an upward 
      modification were not presented to the Administrator in the proceeding 
      below.

      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 as a judgment.  The amount of the rent 
      overcharge is $27,940.87.

      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 order of the Administrator be, and the same hereby is, 
      modified in accordance with this order and opinion.


      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner




                 























          FH 410042 RO
















    

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