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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
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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 :
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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.
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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
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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
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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
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