FH 420259 RO

                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          ------------------------------------X  SJR NO. 6144
          APPEAL OF                              DOCKET NO. FH 420259 RO
                                              :  DRO DOCKET NO.ZEB-420002-OE
               JOEL COHEN                     

                                PETITIONER    : 

               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 

          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 

          FH 420259 RO
          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 

          FH 420259 RO
          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 

          FH 420259 RO
          proceeding to the Rent Administrator for further processing in 
          accordance with this order and opinion.


                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner



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