FJ 410379 RT
                             STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                            JAMAICA, NEW YORK   11433

      ----------------------------------X     S.J.R. 6281
      APPEAL OF                               DOCKET NOS.: FJ 410379 RT
                                                           FJ 410249 RO

             ARTHUR ROWE, OWNER,
                                              DISTRICT RENT ADMINISTRATOR'S
                                              DOCKET NO.: BK 410551 R

                              ADMINISTRATIVE REVIEW

      On October 4, 1991 the above-named tenant filed a Petition for 
      Administrative Review against an order issued on September 3, 1991, by 
      a Rent Administrator concerning the housing accommodation known as 
      Apartment 2C, 500 West End Avenue, New York, New York.

      On October 7, 1991, the above-named owner filed a petition against the 
      same order.

      Subsequent thereto the petitioner-tenant 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 of 
      Housing and Community Renewal (DHCR) for a determination of the 
      petitioner's appeal.

      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 appeals.

      The original proceeding was initiated by the tenant on November 27, 
      1987, by filing an overcharge complaint, stating that she believed that 
      the prior tenant mentioned in the lease rider of her original lease was 
      illusory and did not exist, and that she was being overcharged.  The 
      tenant also stated that to her knowledge, the only prior tenant was the 
      Scientology Center.  The tenant had assumed occupancy pursuant to a two 
      year vacancy lease effective September 1, 1984 at a rent of $2,200.00 

          FJ 410379 RT

      per month.

      The owner was served with the complaint, and answered that the 
      complainant was in fact the first stabilized tenant and that since she 
      had not objected to the initial stabilized rent within 90 days of her 
      receipt of the DC-2 notice, she could no longer challenge it.  Enclosed 
      with the answer was a copy of the front side of a DC-2 notice, signed by 
      the tenant.  The notice stated that the 1974 maximum legal rent for the 
      subject apartment was $475.00.

      Subsequently, in response to an inquiry from the Administrator 
      concerning other items, the owner submitted another copy of the same DC- 
      2 notice and a copy of the back of the notice, which contained the 90 
      day filing requirement and which was signed by the owner on August 24, 
      1984.  In response to a DHCR letter concerning the DC-2 notice the 
      tenant acknowledged in a letter dated October 14, 1990, that the 
      signature on the DC-2 was her own, that she signed it the same day she 
      signed her lease but that she was contesting the amounts on the form.  
      The tenant also alleged that she never received the initial apartment 
      registration in 1984 nor the 1985 registration.

      The DHCR subsequently received a letter from the complainant's newly 
      retained counsel dated May 10, 1991 which stated that the copy of the 
      DC-2 notice given to her had no writing on the reverse side, and that as 
      a result she was never informed of the 90 day time limitation for filing 
      a fair market rent appeal.  Upon request, the owner then submitted a 
      copy of the apartment registration for 1985, and a postal receipt dated 
      September 26, 1984 which was alleged to verify proof of service of the 
      initial registration (RR-1) on the tenant.  No copy of the initial 
      registration was submitted, however.

      In a supplement to the owner's reply, dated July 19, 1991, the owner 
      submitted an affidavit from a staff member of the Scientology Center of 
      New York, signed and dated July 16, 1991, wherein the affiant stated 
      that the Scientology Center occupied the subject premises from December, 
      1973 through March, 1984 as a place of business exclusively and that it 
      served no residential purpose throughout that period.

      On September 13, 1991, the Administrator issued the order under appeal 
      herein, wherein it was determined that because the subject apartment was 
      decontrolled in 1972, the DC-2 notice has no bearing on this case; that 
      the subject apartment was vacant on April 1, 1984 and the September 1, 
      1984 rent of $2,200.00 was the initial legal regulated rent; that 
      because of the owner's failure to file registrations for the apartment 
      for 1984 and 1985 the owner was barred from collecting any increase over 
      the September 1, 1984 rent of $2,200.00; that the apartment was 
      registered with the Division for 1984 on July 23, 1991, but has not been 
      registered for 1985 and the rent remains frozen until the owner 
      registers for 1985; and that the tenant was overcharged in the amount of 
      $47,129.04 for the period from September 1, 1984 to August 31, 1991, 
      including treble damages.

          FJ 410379 RT

      In her petition, the tenant contends that the Administrator improperly 
      determined the lawful stabilized rent to be $2,200.00, which was her 
      rent upon occupancy, since case law has established that when there has 
      been no initial registration, the legal rent is the last rent under rent 
      control, which in this case was $475.00.  The tenant cites two recent 
      cases  Smitten v 56 MacDougal Street Co., N.Y.L.J., November 16, 1990, 
      p. 24 col. 3; 167 A.D. 2d 205 (App. Div. 1st Dep't. 1990) and  310 West 
      End Avenue Owner's Corp. v Rosenberg, N.Y.L.J., August 28, 1991, p. 21 
      cols. 4-6 (App. Term. 1st Dep't. 1991) as precedent.  The tenant also 
      contends that the Administrator failed to specify whether the order was 
      a fair market rent determination.  If so, the tenant contends that the 
      order failed to explain how the rent of $2,200.00 was found to be a fair 
      market rent.

      In response to the tenant's petition, the owner contends that the 
      Administrator properly determined the initial legal regulated rent to be 
      $2,200.00 because the tenant's failure to timely challenge that rent 
      after receiving the DC-2 notice precluded any challenge by the tenant 

      The owner also disputes the tenant's claim that her copy of the DC-2 
      notice had no reverse side, and offers to produce its own copy at a 
      hearing to prove it, if necessary.

      Although the owner disputes that it failed to file an initial 
      registration, it contends that the initial rent would not be determined 
      in accordance with the Smitten and 310 West End Avenue cases and become 
      the last controlled rent, because, unlike in the instant case, in 
      neither of those cases was the initial stabilized rent established by 
      the service of the DC-2 notice upon the tenant.

      In its own petition, the owner contends that the determination that it 
      had not properly registered the subject apartment in 1984 and 1985 was 
      erroneous.  However, if this finding is not overturned, the owner 
      contends the  Administrator erred by denying a rent increase after the 
      owner served and filed an Initial Registration prior to the issuance of 
      the order.  The owner also challenges the finding of willfulness, 
      stating that all rent increases were in accordance with the guidelines 
      and that overcharges only resulted because of the owner's sincere belief 
      that the apartment had been properly registered.

      In response to the owner's petition, the tenant asserts, among other 
      things, that she did not receive the initial registration until July 
      1991 and that she did not receive the 1985 registration until September 
      6, 1991, three days after issuance of the Administrator's order, and 
      therefore the Administrator's determination not to grant rent increases 
      for the entire period under review was correct.  The tenant further 
      asserts that the imposition of treble damages was proper as the owner 
      failed to establish lack of willfulness.

      The Commissioner is of the opinion that the owner's petition should be 
      denied, that the tenant's petition's should be denied and that the 

          FJ 410379 RT

      Administrator's order should be affirmed.  

      Section 2526.1(a)(3)(ii) of the Rent Stabilization Code provides that as 
      to complaints filed within 90 days of the initial registration of a 
      housing accommodation, the legal regulated rent for purposes of 
      determining an overcharge shall be deemed to be the rent charged and 
      paid on April 1, 1980, or for a housing accommodations not required to 
      be registered by June 30, 1984, four years prior to the date the housing 
      accommodation was first required to be registered (or if the housing 
      accommodation was subject to the RSL and this Code for less than four 
      years prior to such initial registration, the initial regulated rent) 
      plus in each case, any lawful increase and adjustments.  The 
      circumstances in the instant case fall within the purview of this 
      provision.  The tenant's overcharge complaint - having been filed prior 
      to the initial registration - was properly deemed a timely challenge to 
      the April 1, 1980 rent.

      However, since it is undisputed that the subject apartment was occupied 
      by the Scientology Center for business purposes exclusively on April 1, 
      1980, and that no residential tenancy was commenced until the 
      complainant's occupancy on September 1, 1984, it must follow that the 
      initial regulated rent for the purposes of determining all future rents 
      under the Code must be the rent agreed to by the owner and the 
      complainant in her initial lease.

      Section 26-513 (b)(1) of the Rent Stabilization Law provides that a 
      tenant of a housing accommodation that was subject to rent control or 
      rent stabilization prior to July 1, 1971 and that became vacant on or 
      after January 1, 1974 may file a fair market rent appeal.  Section 
      2522.3 of the Rent Stabilization Code provides that a fair market rent 
      appeal may be filed by the tenant of a housing accommodation which was 
      subject to rent control on December 31, 1973.  In this case, the subject 
      apartment was decontrolled in 1972 and was thereafter exempt from 
      stabilization from July 1, 1974 based on the continuing commercial usage 
      of the subject apartment by the Scientology Center from December 1973 
      until its occupancy by the complaining tenant on September 1, 1984.  In 
      the instant case, the subject apartment does not fit within the category 
      of apartments indicated above for which the initial stabilized rent 
      would be subject to a fair market rent appeal.  Therefore the tenant was 
      not entitled to a fair market rent appeal and the Administrator properly 
      found the DC-2 notice to be meaningless, whether properly served on the 
      tenant or not.

      The tenant incorrectly relies on the holdings in the recent Smitten and 
      310 West End Avenue Owners cases, which declared that, in the absence of 
      an effective initial registration, the legal rent for a first stabilized 
      tenant after rent control is the last rent under rent control.  But the 
      Code does not permit this interpretation: Section 2528.4 states that the 
      failure to initially register should bar an owner from applying for or 
      collecting any rent in excess of the "legal regulated rent in effect on 
      the date that the housing accommodation became subject to the 

          FJ 410379 RT

      registration requirements of this Part . . ."  This is obviously not the 
      rent controlled rent because so long as the rent controlled "maximum 
      rent" was the "legal regulated rent" the housing accommodations was not 
      subject to the initial registration requirements for stabilized 
      apartments.   The legal regulated rent as defined in Section 2520.6(f) 
      of the Code is not the rent controlled "maximum rent."  The DHCR has 
      concurrent jurisdiction with the courts to interpret and apply the Rent 
      Stabilization Law and Code and the DHCR is not bound by the cited 
      determinations as the DHCR was not a party to those proceedings.

      In the instant case, it is beyond dispute that the owner was required to 
      register the subject premises on or after April 1, 1984, in accordance 
      with Section 2528.1 of the Rent Stabilization Code.  Although the owner 
      states in its petition that "the record establishes that the apartment 
      had been properly registered," the owner has failed to submit adequate 
      evidence that it was.  DHCR records indicate that the initial 1984 
      registration was not filed until July 23, 1991, and the tenant does not 
      dispute receipt of the initial 1984 registration at that time.  
      Accordingly pursuant to Section 2528.4, the failure to initially 
      register until July 23, 1991 bars the owner from receiving any rent 
      increase until at least July 23, 1991.  Further Section 2528.3(b) of the 
      Rent Stabilization Code provides that upon filing an annual 
      registration, the owner must provide each tenant then in occupancy with 
      a copy of that portion of such annual registration applicable to the 
      tenant's housing accommodation.  DHCR records also indicate that the 
      1985 annual registration was filed in July, 1991.  However, the tenant 
      contends that she did not receive a copy of that registration until 
      September 6, 1991, which was three days after the issuance of the 
      subject order.  It is also noted that the tenant's copy of the 1985 
      registration differs from the one received by the Administrator in July, 
      1991 in that it was completed by a different party.  Since the owner has 
      failed to prove that it served the tenant with a copy of the 1985 annual 
      registration prior to the issuance of the Administrator's order, and the 
      tenant only acknowledges receiving it after the issuance of the 
      Administrator's order on September 6, 1991, it was proper for the 
      Administrator to freeze the rent until the date of issuance of the order 
      pursuant to Section 2528.3(b).

      Finally, the owner provides no adequate basis on which to reverse the 
      Administrator's proper finding of willfulness, and treble damages are 

      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 owner.

      THEREFORE, pursuant to the Rent Stabilization Law and Code, it is

      ORDERED, that the owner's petition be, and the same hereby is, denied, 
      that the tenant's petition be and the same hereby is denied, and that 

          FJ 410379 RT

      the Administrator's order be, and the same hereby is, affirmed.


                                              JOSEPH A. D'AGOSTA
                                              Acting Deputy Commissioner

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