FJ 510195 RO

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

          APPEAL OF                               ADMINISTRATIVE REVIEW
                                                  DOCKET NO.: FJ 510195-RO
                    TERRY TSAFATINOS 
                    PETER KOKOLIS,
                                                   DRO DOCKET NOS.: ZDF-510032-R
                                                  TENANT: MARTHA DIXON
                                                       (AKA MARTHA DIX)

                                       IN PART

          On October 18, 1991 the above named petitioner-owners filed a 
          Petition for Administrative Review against an order issued on 
          September 16, 1991 by the Rent Administrator,  92-31 Union Hall 
          Street, Jamaica, New York concerning housing accommodations known 
          as Apartment 3C at 614 West 157th Street, New York, New York 
          wherein the Rent Administrator determined that the owner had 
          overcharged the tenant.

          Subsequent thereto, the petitioner-owners filed a Petition in the 
          Supreme Court pursuant to Article 78 of the Civil Practice Law and 
          Rules requesting that the Court mandate an expeditious 
          determination of their administrative appeal.  The proceeding was 
          remitted to the Division of Housing and Community Renewal (DHCR), 
          and the owners' petition is herein decided on the merits.

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

          The applicable sections of the Law are Section 26-516 of the Rent 
          Stabilization Law and Sections 2523.4(a) and 2526.1(a) of the Rent 
          Stabilization Code.

          The Commissioner has reviewed all of the evidence in the record and 
          has carefully considered that portion of the record relevant to the 

          FJ 510195 RO

          issue raised by the administrative appeal.

          This proceeding was originally commenced by the filing in June, 
          1989 of a rent overcharge complaint by the tenant, in which she 
          stated that she had commenced occupancy on June 1, 1988 at a rent 
          of $850.00 per month.

          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 September 16, 1991 the Rent Administrator 
          determined that the tenant had been overcharged in the amount of 
          $42,902.83 as of May 31, 1990, including treble damages, and 
          directed the owner to refund such overcharge to the tenant as well 
          as to reduce the rent.  The overcharge was solely the result of the 
          disallowance of any Guidelines increases after the July 1, 1985 
          effective date of a rent reduction order in Docket No. USC-001483- 
          B, issued on August 14, 1986.

          In this petition, the owners contend in substance that the lawful 
          rent of the complainant should not have been frozen by the rent 
          reduction order, since it stated that it applied only to those 
          stabilized tenants who joined in the complaint of service decrease; 
          that a prior tenant was the party to such complaint; that indeed 
          the subject apartment was vacant from 1986 to 1988, during which 
          time it was extensively renovated; that the basis for the rent 
          reduction order was "elevator does not stop level" and "defective 
          door entrance lock"; that the elevator was replaced in 1985 at a 
          cost of more than $60,000.00; that the owners did not apply for a 
          Major Capital Improvement (MCI) rent increase, but in fact gave the 
          tenants (including the prior tenant) a credit of one and one-half 
          month's rent for any interruption in service due to the upgrading 
          of the elevator; that a Final Order of Eligibility, received May 
          12, 1987, modifying a September 12, 1986 order, granted 1986-87 
          Maximum Base Rent (MBR) increases upon a finding that an inspection 
          order from the H.P.D Department of Code Enforcement indicated that 
          the owners had cleared the required number of violations; that the 
          owners reasonably relied upon this representation by the DHCR and 
          the DHCR's grant of the right to collect MBR increases that the 
          rent reduction was no longer in effect; that there is therefore no 
          evidence of a willful overcharge; that a Petition for 
          Administrative Review was filed against the rent reduction order on 
          September 16, 1986; that such petition has not yet been determined; 
          that the tenant owes $8,485.25 rent to date; that many of her rent 
          payments were made by the Department of Social Services; that she 
          paid rent sporadically throughout the course of her tenancy; that 
          her windfall refund should not include amounts that she did not pay 
          out of pocket for rent or did not pay at all; and that the 
          circumstances of the case indicate that any overcharge was not 

          FJ 510195 RO

          With its petition the owners have enclosed a copy of a Petition for 
          Administrative Review, dated September 11, 1986, against the August 
          14, 1986 order in Docket No. USC-001483-B; a copy of a Housing 
          Court stipulation, dated May 21, 1986, wherein the owner agreed to 
          give all tenants affected by the stipulation a credit of one and 
          one-half month's rent; and a copy of rent bills showing the tenant 
          failing to pay any rent for periods of up to seven months, and then 
          paying up to 15 "welfare checks each $425.00" [$425.00 being one 
          half of the $850.00 rent] at a time.  Although the rent bills go 
          through September 5, 1991, at which time the tenant owed $7,575.75, 
          the amount owing on May 31, 1990 was $2,550.00.  (Because the 
          Administrator's order concerned overcharges only through that date, 
          this means that the owners had collected $3,400.00 less rent by 
          that date than calculated by the Administrator.)

          In her answer, in which her name is typed and signed as Martha E. 
          Dix, rather than Dixon, the tenant asserts in substance that the 
          overcharge was willful, and that overcharge calculations should be 
          extended to all rents due and/or paid through September, 1991.

          The Commissioner is of the opinion that this petition should be 
          granted in part.

          It is important initially to note that the validity of the rent 
          reduction order in Docket No. USC-001483-B is not at issue here.  
          Although the owners enclosed with their petition a copy of the 
          first page of a Petition for Administrative Review against that 
          order, the DHCR case tracking system does not indicate that such an 
          appeal was ever received.  On September 24, 1987 an order was 
          issued in Docket No. BC-530029-OR denying the owner's application 
          for a restoration of the rents, other than for a $5.00 per month 
          partial restoration of rent controlled rents.  The owner did not 
          appeal that order.  On March 3, 1992 an order was issued in Docket 
          No,. FI-530163-OR, restoring the stabilized rents as of October 16, 
          1991 and the controlled rents as of April 1, 1992.  The owner 
          appealed that order in Docket No. GD 530223-RO, contending that the 
          rent should be restored as of October 1, 1987.  That appeal was 
          denied on June 25, 1992 on the grounds that the owner should have 
          appealed the original order reducing the rent.  The order in Docket 
          No. USC-001483-B is therefore a final order of the DHCR, and it was 
          correct for the Administrator to make use of it to disallowing any 
          Guidelines increases after its effective date of rent reduction.

          Section 2523.4(a) of the Rent Stabilization Code provides in 
          pertinent part that:
               A tenant may apply to the DHCR for a reduction of the 
               legal regulated rent to the level in effect prior to the 
               most recent guidelines adjustment, and the DHCR shall so 
               reduce the rent for the period for which it is found that 
               the owner has failed to maintain required services.  The 
               Order reducing the rent shall further bar the owner from 

          FJ 510195 RO

               applying for or collecting any further increases in rent 
               until such services are restored. . .

          The provision that a rent reduction is mandatory, rather than 
          discretionary, upon a finding of service decrease has been affirmed 
          by appellate Courts.  Hyde Park Gardens v. DHCR, 527 N.Y.S.2d 841 
          (A.D. 2nd Dept. 1988), motion for leave to appeal to the Court of 
          Appeals denied, 534 N.Y.S.2d 666.  This all-or-nothing rent 
          reduction for any service decrease to rent stabilized apartments is 
          different from the situation with rent controlled apartments, where 
          there is a dollar amount of rent reduction for each particular 
          service decrease.  This was evident in the September 24, 1987 order 
          in Docket No. BC-530029-OR, where the installation of a new 
          entrance door lock, without evidence of the correction of an 
          elevator problem, resulted in a partial restoration of the 
          controlled rents, but in a denial of any restoration of the 
          stabilized rents since not all service decreases had been 
          corrected.  Because a DHCR order reducing the rent must be undone 
          by a DHCR order restoring the rent, the owners were not justified 
          in assuming that an MBR Final Order of Eligibility received May 12, 
          1987 implied a restoration of rents, particularly since such order 
          required the removal of only 80% of non-rent impairing violations 
          (and all rent-impairing violations), whereas an order restoring 
          stabilized rents will not issue unless 100% of all service 
          decreases have been rectified.  In any event, any such presumption 
          that the owners may have had from the receipt of the MBR order on 
          May 12, 1987 was shown to have been unwarranted when the owners 
          later received the September 24, 1987 order in Docket No. BC- 
          530029-RO, specifically denying any restoration of stabilized 
          rents.  It was then certainly clear that the owners could not 
          collect Guidelines increases.  Because the complainant's leases, on 
          which Guidelines increases were charged, all occurred after that, 
          the Commissioner does not consider that the presumption of willful 
          overcharge has been rebutted.  However, while treble damages are 
          therefore appropriate, they should only be applied to overcharges 
          actually collected.  The tenant has not denied the accuracy of the 
          rent bills showing her owing $2,550.00 as of May 31, 1990 (or 
          $3,400.00 as of June 1, 1990, including the June rent). This 
          represents three months rents at a lease rent of $850.00 per month 
          so, as of May 31, 1990, the date through which the Administrator 
          calculated overcharges, the tenant can only be considered to have 
          actually paid rent due through February 28, 1990.  The 
          Administrator's order should therefore be modified to state that it 
          concerns overcharges through February 28, 1990.  Because the order 
          calculated an overcharge of $5,289.39 ($587.71 per month times 
          three months, trebled) for the period between February 28, 1990 and 
          May 31, 1990, the total overcharge should be reduced by that 
          amount, to $37,613.44 as of February 28, 1990.

          While the owner may be correct that Section 2523.4(a) of the Code, 
          providing that "[a] tenant may apply to the DHCR for a reduction of 
          the legal regulated rent..." requires that a tenant actually apply 

          FJ 510195 RO

          in order for the rent to be reduced, once issued such "[o]rder 
          reducing the rent shall further bar the owner from applying for or 
          collecting any further increases in rent until such services are 
          restored..."  This provides that only a restoration of services, 
          and not a vacancy, will serve to restore the rent.  It does not 
          matter whether or not the subject apartment was renovated during a 
          vacancy, particularly since the reason for the rent reduction had 
          nothing to do with conditions in the apartment.

          While the rent payments actually made by the tenant may have been 
          made sporadically and late, this does not affect the awarding of 
          treble damages on them.   The source of the funds for paying the 
          rent, whether family, friends, or a public agency, does not matter, 
          since the contractual obligation to pay the lease rent was personal 
          to the tenant and Gary Dixon, and did not involve any other such 
          persons or entities.  However, the owners are free to bring this 
          order to the attention of any persons or agencies whom they feel 
          might have a claim to a portion of the refund.

          Because of the possibility that the rents charged were not reduced 
          after the Administrator's order, the owner is cautioned to adjust 
          the rent, in leases after those considered by the Administrator, to 
          amounts no greater than that determined by the Administrator's 
          order plus any lawful increases, and to register any adjusted rents 
          with the Administrator's order being given as the reason for the 
          adjustment.  Because of the possibility that the tenant herein may 
          have vacated by the time that this determination is issued, a copy 
          of this determination is being mailed to the tenant-in-occupancy.

          This order may, upon the expiration of the period in which the 
          owners 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 owners.

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

          ORDERED, that this petition be, and the same hereby is, granted in 
          part and that the Rent Administrator's order be, and the same 
          hereby is, modified in accordance with this Order and Opinion.  The 
          total overcharge, including excess security of $587.71, is 
          $37,613.44 as of February 28, 1990.  The lawful stabilization rent 
          is $262.29 per month in the lease from June 1, 1988 to May 31, 

          FJ 510195 RO

                                                  JOSEPH A. D'AGOSTA
                                                  Acting Deputy Commissioner

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