FH 420259 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 420259 RO
: DRO DOCKET NO.ZEB-420002-OE
JOEL COHEN
PETITIONER :
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ORDER AND OPINION REMANDING PROCEEDING ON APPEAL
On August 27, 1991, the above-named petitioner-landlord filed
a Petition for Administrative Review against an order issued on July
29, 1991, by the Rent Administrator, 92-31 Union Hall Street,
Jamaica, New York, concerning the housing accommodations known as
323 West 88th Street, New York, New York, Apartment No. 4, wherein
the Rent Administrator determined that the issuance of a
certificate of eviction was not warranted.
Subsequent thereto, the petitioner-landlord filed a petition
in the Supreme Court pursuant to Article 78 of the Civil Practice
Law and Rules requesting that the "deemed denial" of the
petitioner's administrative appeal be annulled. The proceeding
was then remitted to the Division for consideration of the
petitioner's administrative appeal.
The Administrative Appeal is being determined pursuant to the
provisions of 9NYCRR 2204.4(g) and 2204.9(a) (4).
The issue herein is whether the Rent Administrator's order
was warranted.
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.
In February 1990, the landlord filed an eviction application
pursuant to 9NYCRR 2204.9 alleging in substance that he is seeking
to withdraw the subject apartment from the rental market because
its continued operation imposes an undue hardship on him and that
he plans to use the subject apartment in conjunction with the rest
of the subject premises as a single family dwelling for himself
and his family. Currently the landlord and his family reside in
the rest of the subject premises with the exception of the subject
apartment.
In response to the landlord's application, the tenant stated
in substance that when the landlord initially purchased the
subject premises in 1981, there were 11 rental units in the
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subject premises; that the landlord is receiving rental income
from only one apartment due to the fact that the landlord has
chosen not to rent any of the other units; and that the landlord
had previously sought a certificate of eviction for the subject
apartment due to owner-occupancy and the issuance of such
certificate was denied under D.R.O. Docket 2E 12489 and CPLE 4068.
The denial was then affirmed in court under Index No. 29357/82.
An accounting audit was conducted to determine if there was a
reasonable possibility that the landlord could make a net annual
return of 8 1/2 percent of the assessed value of the subject
premises. In such audit, it was found that an 8 1/2 percent
return was realizable based on the following findings: 8 1/2
percent of the assessed value of the subject premises was found to
be $8447.73; the subject apartment was found to be approximately
1/6th (.167) the size of the subject premises; the rent of the
subject apartment was developed by imputing all maximum base rent
(hereafter MBR) increases the landlord could have obtained if MBR
increases had been granted from 1976 through 1991 - that is
$344.82 per month. This figure was then multiplied by six for a
total of $24,827.04 which was determined to be the net income the
landlord could have realized for the subject premises.
Applicable operating expenses for the subject premises was
determined to be $27,091.87 based on documentary evidence
submitted by the landlord. However this figure was then
multiplied by .167 to obtain applicable operating expenses of
$4524.34. The operating expense figure of $4524.34 was then
subtracted from the net income figure of $24,827.04 to get a net
return figure of $20,302.70 which was found to be in excess of
$8447.73 - 8 1/2 percent of the assessed value of the subject
premises. Based on the foregoing, the Rent Administrator issued
the order under appeal herein finding that the landlord had failed
to meet the requirements of Section 2204.4(g) of the Rent and
Eviction Regulations and was therefore not entitled to the
issuance of a certificate of eviction pursuant to Section
2204.9(a)(4) of the Rent and Eviction Regulations.
In this petition, the landlord alleges in substance that the
documentary evidence submitted establishes conclusively that
there is no possibility that the tenant's rent will be sufficient
to produce an 8 1/2 percent return on the assessed valuation so
that the Rent Administrator's order was not warranted.
The Commissioner is of the opinion that this proceeding must
be remanded for further consideration.
Section 2204.9(a)(4) of the Rent and Eviction Regulations
provides in pertinent part for the issuance of a certificate of
eviction where a landlord establishes that he seeks in good faith
to permanently withdraw occupied housing accommodations from both
the housing and nonhousing markets, without any intent to rent or
sell all or any part of the land or structure; and that the
continued operation of the housing accommodation would impose
other undue hardship upon the landlord.
Section 2204.4(g) of the Rent and Eviction Regulations
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provides in pertinent part that no application for a certificate
of eviction shall be granted under Section 2204.9(a)(4) unless the
Administrator determines, after a hearing, that there is no
reasonable possibility that the landlord can make a net annual
return of 8 1/2 percent of the assessed valuation of the subject
property without recourse to the eviction sought; and that neither
the landlord nor immediate predecessor in interest has
intentionally or willfully managed the property to impair the
landlord's ability to earn such return.
In the instant case, the accounting audit incorrectly used a
net income figure for the whole building and an operating expense
figure for only .167 of the building in determining whether an 8
1/2 percent return on the assessed value could be realized.
Rather a net income figure for the whole building and an operating
expense figure for the whole building should have been used. In
addition, the Commissioner is of the opinion that while it was
correct to use a rental figure for the subject rent controlled
apartment incorporating all MBR increases for which the landlord
and his predecessor could have applied, it was not correct to
multiply the resulting figure by six to obtain the net income of
the building. Rather the 5/6ths of the building now occupied by
the landlord and his family should be treated as five rent
stabilized apartments and an average rent stabilized rent should
be calculated based on the size of the subject apartment and an
average current stabilized rent for an apartment the same size as
the subject apartment and in the same vicinity as the subject
apartment. Such figure should then be multiplied by five and
added to the $344.82 figure found for the subject apartment to get
a monthly net income figure for the whole building. This figure
should then be multiplied by twelve to get an annual net income
figure. In addition, the operating expense determination based
on the landlord's documentary evidence should be reexamined. If
it is then found that an 8 1/2 percent return is realizable, the
Rent Administrator's order under appeal herein should be affirmed.
If it is then found that an 8 1/2 percent return is not
realizable, a hearing must then be conducted to determine if the
landlord meets all other requirements of Sections 2204.9(a)(4) and
2204.4(g). A final order should then be issued.
THEREFORE, in accordance with the provisions of the Rent and
Eviction Regulations for New York City, it is
ORDERED, that this petition for administrative review be, and
the same hereby is, granted to the extent of remanding this
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proceeding to the Rent Administrator for further processing in
accordance with this order and opinion.
ISSUED
JOSEPH A. D'AGOSTA
Deputy Commissioner
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