FJ 410379 RT
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
----------------------------------X S.J.R. 6281
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NOS.: FJ 410379 RT
FJ 410249 RO
PATRICIA PANELLA, TENANT
AND
ARTHUR ROWE, OWNER,
DISTRICT RENT ADMINISTRATOR'S
DOCKET NO.: BK 410551 R
PETITIONER
----------------------------------X
ORDER AND OPINION DENYING OWNER'S AND TENANT'S PETITIONS
FOR
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
thereafter.
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
sustained.
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.
ISSUED:
------------------------
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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