FK 410287 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



          ------------------------------------X  S.J.R. 6311
          IN THE MATTER OF THE ADMINISTRATIVE    ADMINISTRATIVE REVIEW
          APPEAL OF                              DOCKET NO.: FK 410287 RO

                    PAN AM EQUITIES,             DRO DOCKET NO.: AA 401248 R

                                                 TENANT: MINDY GOLDMAN        
                                   PETITIONER    
          ------------------------------------X                             



            ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
                                        IN PART


          On November 1, 1991, the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on      
          October 17, 1991, by a Rent Administrator, concerning the housing 
          accommodations known as 200 East 81st Street, New York, Apartment 
          No. 4A, wherein the Rent Administrator determined that the owner 
          had overcharged the tenant.

          Subsequent thereto, the petitioner owner 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 DHCR for a determination of the petitioner's 
          appeal.

          The Administrative Appeal is being determined pursuant to the 
          provisions of Sections 2526.1 and 2522.4 of the Rent Stabilization 
          Code.

          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.  

          The tenant originally commenced this proceeding by filing a 
          complaint of rent overcharge on December 30, 1985. The owner was 
          served with a copy of the complaint and was directed to submit a 
          complete rental history.  The owner was advised that if it claimed 
          a rent increase for the installation of new equipment, it was 
          required to submit invoice(s) showing the cost and date of 
          installation.

          The owner initially responded that it was reviewing its records to 







          FK 410287 RO

          find full documentation of the costs of improvements, and would 
          submit a more detailed answer at a later time.

          Subsequently, on March 3, 1987, the owner submitted a rent history.  
          It recorded that the initial registered tenant who had paid a rent 
          of $446.65 per month, had vacated the apartment on or about May 31, 
          1985; that prior to the complainant's occupancy on July 15, 1985, 
          the owner had entered into a contract with a general contractor for 
          improvements to the subject apartment costing an estimated 
          $16,000.00 - $18,000.00; that, unable to find verification of 
          payment for the full amount, the owner was only claiming $7,198.00, 
          as documented by a cancelled check; that, since May, 1986, the 
          owner had returned the tenant's rent checks uncashed pending the 
          resolution of the complaint, resulting in a balance of $10,516.28.

          In a letter to the Division of Housing and Community Renewal (DHCR) 
          dated March 13, 1987, the tenant acknowledged the return of the 
          rent checks since May 1986.  She stated that she had been 
          depositing them in a separate savings account.  The tenant also 
          stated that the owner offered the tenant a $75.00 per month 
          reduction in rent in October 1986.

          In a letter to the tenant dated March 19, 1987, the owner announced 
          that it was rolling back the tenant's rent and crediting 
          overcharges against current rent due and future rent payments.  As 
          a result, the owner claimed a total balance of $6,110.65 due  for 
          all rent due up to March 31, 1987.

          The owner then submitted a letter to the DHCR dated October 20, 
          1987, wherein the owner claimed that it had relied "in good faith" 
          on the first set of bills from the general contractor, Arch 
          Construction, totaling $16,000.00, in calculating the tenant's 
          rent.  Upon further review of its records, the owner stated that it 
          was reducing the rent by an additional $3.15 per month, as based on 
          the elimination of the cost of venetian blinds because it was a 
          required service.

          In a letter to the tenant dated December 7, 1987, the owner 
          announced the new balance for rent due, in the amount of $6,047.59.  
          The owner informed the tenant that the rent effective January 1, 
          1988 would be $819.85, as adjusted to the new legal base.

          In a letter to the DHCR dated January 27, 1988, which was in 
          response to a request for a more detailed description of 5 circled 
          items from the construction contract, totalling $3,755.00 out of 
          the claim for $7,198.00, the owner submitted a one page statement 
          from Arch Construction Company, dated January 13, 1988, which more 
          fully detailed the renovation work.


          Subsequently, in a letter dated March 12, 1991, the tenant listed 
          the amount of rent paid for each month for the period from April 
          1987 through September 1989, totalling $24,527.05.  She further 
          stated that rent was not accepted prior to April 1987, and had not 
          been accepted after October 1989.

          On March 26, 1991, the owner submitted its own schedule of rent 
          payments purportedly received from the tenant.


          FK 410287 RO


          In the order appealed herein, issued on October 17, 1991, the 
          Administrator determined that the tenant had been overcharged in 
          the amount of $9,421.41 for the period from July 15, 1985 through 
          September 30, 1989, including treble damages.  The order noted that 
          overcharges were not assessed for the period after September 30, 
          1989 because the owner had refused to accept rent payments 
          thereafter.  In addition, the Administrator determined that the 
          owner had proven the cost of apartment improvements totalling 
          $6,989.36, thus allowing a monthly rent increase of $174.73.  
          Finally, the order noted that the rental payments for May, June and 
          July, 1986 were deposited in an escrow account.

          In its petition, dated October 17, 1991, the owner contends that 
          the Administrator had made several errors in the order, which are 
          as follows:  that the cost of a refrigerator and new venetian 
          blinds were omitted from the increase for new equipment, bringing 
          the total to $7,869.00 instead of $6,989.36; that a rent credit of 
          $4,232.07, covering the period from July 15, 1985 - March 31, 1987, 
          had been ignored by the Administrator, even though it had been 
          applied to the tenant's balance; that the last rent payment 
          received by the owner was for April 1986 and that the tenant's 
          assertion that she had paid rent through September 30, 1989 was 
          untrue; that the excess security as listed in the order was also an 
          error, since the aforementioned credit of $4,232.07 included 
          $210.72 in excess security.  Furthermore, the petitioner argues, 
          the imposition of treble damages was improper, since it violates 
          the "established" rule that "a record of good faith negates the 
          imposition of treble damages."  The petition then cites two 
          Commissioner's opinions, Clinton Hill Equities Group, ARU Docket 
          No. ARL 02037 K, and J & S Management, ARU Docket No. ARL 03483 L, 
          as precedent for the finding that treble damages are negated where 
          the owner has shown by its attempts to correct and refund 
          overcharges that they were not willful.  Additionally, it cites 
          Milford Management Corp. ARU Docket No. ARL 05464 L, as holding 
          that when an owner attempts to rectify any overcharges after the 
          complaint is filed, but before the order is issued, treble damages 
          are not appropriate, and that this holding has been restated in 
          DHCR Policy Statement 89-2.

          The tenant did not answer the petition.

          Upon the request of the Commissioner, both parties submitted 
          documentation of the amount of rent paid by the tenant and of the 
          amount of credit towards the rent granted by the owner.

          The Commissioner is of the opinion that this petition should be 
          granted in part.
          Section 2522.4(a)(1) of the current Rent Stabilization Code 
          provides, in part that an owner is entitled to a rent increase 
          where there has been a substantial increase of dwelling space or an 
          increase in the services, or installation of new equipment or 
          improvements, or new furniture or furnishings, provided in or to 
          the tenant's housing accommodations.  An owner may not, however, 
          collect a rent increase for work that constitutes normal 
          maintenance, painting or repairs.

          In the instant case the Administrator properly disapproved the 







          FK 410287 RO

          items that did not qualify as new equipment under the above 
          provision, and correctly calculated the rent increase for the 
          qualified items.  Although the owner contends that the refrigerator 
          and venetian blinds were disallowed, the record indicates that they 
          were approved, along with most of the listed items.  The 
          Administrator disqualified:

               (1)  replacement of front door lock, $35.00;

               (2)  painting, $280.00;

               (3)  refinishing floors, $220.00 and

               (4)  "miscellaneous" unspecified items costing 
                    $400.00.

          Since all of these items are correctly considered as normal 
          maintenance and repair, and thus do not qualify as improvements, 
          or, in the case of the "miscellaneous" items, are not sufficiently 
          identified to be evaluated, the amount of the claim approved for 
          the rent increase is correct.

          The owner's  contention that the presumed willfulness of 
          overcharges is successfully rebutted by its attempts to "rectify" 
          them before the actual issuance of the order is mistaken.  Policy 
          Statement 89-2 states the burden of proof in this regard as 
          follows:

               Where an owner adjusts the rent on his or her own within 
               the time afforded to interpose an answer to the 
               proceeding and submits proof to the DHCR that he or she 
               has tendered, in good faith to the tenant a full refund 
               of all excess rent collected, plus interest.

          The owner has clearly not met this standard.  However, the 
          Commissioner recognizes that "while treble damages are therefore 
          appropriate, they should only be applied to overcharges actually 
          collected" (ARU Docket No. FJ 510195 RO).  

          A review of the records of rent payments submitted by both parties 
          indicates that the tenant's records are consistent while the 
          owner's latest submission, dated July 7, 1992, differs from its 
          earlier submission, dated March 26, 1991.  The tenant's submission 
          of June 30, 1992 includes a copy of the owner's March 26, 1991 
          records, and indicates total agreement for all rent payments listed 
          therein.  Therefore, the Commissioner is accepting this as the 
          correct record of payment.  Its only divergence from the order is 
          for the months of May, June and July, 1986 and December, 1987 when 
          no rent was paid.  Accordingly, the computed overcharges for those 
          months, as well as the treble damages penalty, and the lawful 
          stabilization rents for the months which were unpaid are deducted 
          from the amount stated in the order resulting in a net overcharge 
          of $4,369.42, including treble damages, still due to the tenant for 
          the period under review. Contrary to the owner's contention on 
          appeal, there is no evidence that the excess security of $21.24 
          found by the Rent Administrator was ever credited to the tenant.

          Because this order only adjusts the rent through September 30, 


          FK 410287 RO

          1989, the owner is advised to adjust subsequent rents to an amount 
          no greater than that determined by this order plus any lawful 
          increases, and to register any adjusted rents with this Order and 
          Opinion being given as the explanation for the adjustment.

          If the owner has either not received or returned the rent checks to 
          the tenant in the period since September 30, 1989, until the 
          present, or for any portion thereof, any balance of rent due to the 
          owner, which either may be directly payable to the owner or which 
          may be used as an offset against the amount of overcharges, as 
          adjusted herein, must conform to the legal rent as stated in the 
          order, plus any other rent increases authorized since that date.

          This order may, upon the expiration of the period in which the 
          owner may institute a proceeding pursuant to Article 78 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 petition be, and the same hereby is granted in 
               part; and that the Administrator's order be, and the same hereby 
               modified in accordance with this Order and Opinion.  





               ISSUED

                                                                           
                                               JOSEPH A. D'AGOSTA
                                               Acting Deputy Commissioner



    

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