DOC. NO.: FH 410083-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 410083-RO
                                             :   DRO DOCKET NO. ZCC-410330-R
              219 EAST 25TH STREET REALTY CO., 
                                 PETITIONER  :   TENANT: DANIEL GOLDMAN
                                ADMINISTRATIVE REVIEW

         On August 9, 1991 the above named petitioner-owner filed a Petition 
         for Administrative Review against an order issued on March 7, 1991 by 
         the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York 
         concerning housing accommodations known as Apartment 2A at 219 East 
         25th Street, New York, New York wherein the Rent Administrator 
         determined that the owner had overcharged the tenant.  The petition is 
         considered timely as the Administrator's order was sent not to the 
         address given on the tenant's complaint, all of the tenant's leases 
         and all of the registrations, but rather to the subject building, 
         where the owner does not maintain a management office.

         The issue in this appeal is whether the Rent Administrator's order was 

         The applicable sections of the Law are Section 26-516 of the Rent 
         Stabilization Law and Section 2526.1(a) of the Rent Stabilization 

         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 March,  1988 
         of a rent overcharge complaint by the tenant, in which he stated that 
         he had commenced occupancy on November 10, 1986 at a rent of $700.00 
         per month.  He also contended that there was no Rent Stabilization 
         Rider with his first lease, that the Rent Stabilization Rider provided 
         with his second lease did not specify the prior tenant's rent, and 
         that the owner had refused to provide a rental history.

          DOC. NO.: FH 410083-RO

         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 submitted a complete rental 
         history from the base date as required.

         In an order issued on March 7, 1991 the Rent Administrator determined 
         that the tenant had been overcharged in the amount of $60,254.88, 
         including treble damages, as of March 31, 1991, and directed the owner 
         to refund such overcharge to the tenant as well as to reduce the rent.

         In this petition, the owner contends in substance that the tenant is 
         the son of a cousin of one of the owners; that he is a preferential 
         tenant; that the subject apartment is temporarily exempt from rent 
         regulation for the period of his occupancy; and that the rent was 
         lowered to $261.94 effective December 1, 1990 as a sign of good faith 
         after the owner received the DHCR's proposed order.  The owner also 
         asserts in substance that treble damages should not be imposed since 
         a $60,000 penalty will result in possible foreclosure to the small 
         subject building, since the tenant comes before the DHCR with a long 
         history of unclean hands, since no willful overcharge was intended by 
         the preferential rent, since only lawful percentages of increase were 
         taken over the tenant's initial rent, and since a hearing should be 
         held on the issue of willfulness.

         The tenant did not submit an answer to the owner's petition, although 
         given an opportunity to do so.

         The Commissioner is of the opinion that this petition should be 

         The owner is incorrect in its contention that occupancy of a rent 
         stabilized apartment by an owner's relative exempts the apartment from 
         rent regulation during the period of such occupancy.  An apartment 
         would be exempt while being occupied by a superintendent or other 
         building-service-related employee to whom the space is being provided 
         as part or all of their compensation without payment of rent, or if 
         occupied by the owner (with, of course, no rent being paid by the 
         owner to herself or himself).  This does not apply to a rent-paying 
         relative of an owner.  The idea of a preferential rent is not that a 
         relative has been given preference in obtaining an apartment and that 
         an owner may charge such relative a higher rent than might be lawfully 
         charged a stranger, but that a rent lower than otherwise permissible 
         may be charged without lowering the base on which to calculate future 
         rents.  For example, if the owner had charged the tenant a rent of 
         $150.00 per month, the owner could have

         registered a lawful rent of $309.20 for the tenant's initial lease 

          DOC. NO.: FH 410083-RO

         while noting on the registration that the tenant was being charged a 
         preferentially lower rent because he was a relative.  While an owner's 
         collection of an amount less than it is permitted to collect would 
         normally be deemed a waiver of its right to the higher amount, the 
         registration of the preference would allow the owner to calculate the 
         lawful rent in the next vacancy lease on the basis of $309.20 rather 
         than $150.00.

         Section 2526.1(a)(1) of the Rent Stabilization Code provides in 
         pertinent part that treble damages will be imposed on overcharges 
         unless the owner can establish by a preponderance of the evidence that 
         the overcharges were not willful.  The prior tenant had a rent of 
         $272.42; the owner has not submitted any evidence either in the 
         proceeding before the Administrator or on appeal to rebut the 
         presumption that the increase to $700.00 in the complainant's initial 
         lease represented a willful overcharge.  The lowering of the rent to 
         $261.94, after receiving a proposed order from the DHCR, was not a 
         sign of good faith so much as it was a prudent way to reduce the 
         amount of overcharges on which treble damages might be imposed.  In 
         any event it has no bearing on the willfulness involved in previously 
         charging rents between $700.00 and $859.73.  The fact that the owner 
         may have charged Guidelines percentages of increase in the 
         complainant's renewal leases does not make up for the fact that they 
         were being charged on the basis of a vacancy rent that was more than 
         two and a quarter times as large as was lawful.  Given the owner's 
         contention that it believed that the rents were not subject to any 
         regulation, it is interesting that the owner chose to follow the 
         Guidelines after the initial large increase.  The Commissioner is not 
         persuaded that a hearing is required on the issuance of willfulness or 
         of the tenant's purported "unclean hands", since the owner has not met 
         even a fraction of its burden of disproving willfulness, and since the 
         tenant had the right to question the lawfulness of his rent.  The 
         Administrator's determination did not rely on a balancing of the 
         equities but on a straightforward application of the Rent 
         Stabilization Code and Rent Guidelines board orders.

         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 

         THEREFORE, in accordance with the Rent Stabilization Law and Code, it 

         ORDERED, that this petition be, and the same hereby is, denied and 

          DOC. NO.: FH 410083-RO

         that the Rent Administrator's order be, and the same hereby is, 
         affirmed.  The overcharge as of March 31, 1991, including excess 
         security of $458.70, is $60,254.88.


                                                 ELLIOT SANDER
                                                 Deputy Commissioner


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