FJ 210047 RO

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

      APPEAL OF                              DOCKET NO. FJ 210047 RO

                                          :  DISTRICT RENT OFFICE
                                             DOCKET NO. ZK 006246-R
           Leon Goldstein,                   
           c/o Slope Realty Co.,             TENANT: Valle and Rodriguez      

                            PETITIONER    : 


      On October 17, 1991, the above-named petitioner-owner filed a Petition 
      for Administrative Review against an order issued on September 13, 1991 
      by the Rent Administrator, Gertz Plaza, Queens, New York, concerning the 
      housing accommodations known as 417 40th Street, Brooklyn, New York, 
      Apartment No. C-1, wherein the Rent Administrator determined that the 
      owner had overcharged the tenant.

      The Administrative Appeal is being determined pursuant to the provisions 
      of Sections 2526.1, 2523.7, and 2523.4 of the Rent Stabilization Code.

      The issue herein is whether the Rent Administrator's order was 

      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.  

      This proceeding was originally commenced by the filing on December 13, 
      1985 of a rent overcharge complaint by the tenant who stated in 
      substance that she first moved to the subject apartment on June 1, 1976 
      at a rental of $160.00 per month pursuant to a two year lease; that her 
      rent was increased from $206.36 to $255.00 per month effective April 1, 
      1983 pursuant to a three year renewal lease; that she did not receive 
      the initial Apartment Registration Form (hereafter RR-1 form) until 
      November 21, 1985 and that the owner claimed that the tenant did not 

          FJ 210047 RO

      have a lease.  In support of such contentions, the tenant submitted a 
      copy of the RR-1 form in which the RR-1 form was listed as prepared on 
      November 13, 1985, the April 1, 1984 rent was listed as $255.00 and the 
      owner was listed as Zenaida Birog.

      A copy of the tenant's complaint was sent to the prior owner Zenaida 
      Birog on February 27, 1986.  No response was received.  

      On February 5, 1987 and April 29, 1988 the current owner was afforded an 
      opportunity to prove service of the RR-1 form on the tenant.  On April 
      29, 1988 the current owner was also directed to submit copies of all 
      leases for the subject apartment executed after March 30, 1986 and 
      advised that if it was unable to provide proof of service of the RR-1 
      form on the tenant, a rental history of the subject apartment from April 
      1, 1980 would be required.  

      In a response dated May 9, 1988, the current owner stated in substance 
      that it "assumed responsibility for this building as of November 1986 
      and acquired title to this building as of January 19, 1988 at a 
      foreclosure sale," that it did not receive any documentation from the 
      prior owner; that it requested copies from DHCR of all rent 
      registrations on file with DHCR but received no response on the record 
      from DHCR; that in view of the foregoing it was not able to supply a 
      copy of the 1984 registration and that it has not been served with a 
      copy of the tenant's complaint.

      On January 20, 1987, the current owner was sent a "Notice of Non- 
      Compliance to the Initial Rent Registration Requirements" and advised 
      that since it did not submit proof of service of the RR-1 form on the 
      tenant, the tenant's complaint would be treated as a timely challenge to 
      the Initial Registration Statement and that the owner was directed to 
      submit a rental history from April 1, 1980.  On July 10, 1991 the 
      current owner was served with a copy of the tenant's complaint and 
      advised that treble damages would be imposed on any willful overcharges.  
      In a response dated July 31, 1991, the owner stated in substance that it 
      did not have a rental history since it purchased the subject premises at 
      a foreclosure sale but noted that in the tenant's original complaint, 
      the tenant acknowledged receiving a copy of the RR-1 form.

      On July 10, 1991, the tenant was directed to submit a rental history 
      from April 1, 1980.  In a response received on July 17, 1991 the tenant 
      submitted copies of her initial lease commencing June 1, 1976 at a 
      rental of $160.00; a renewal lease commencing November 22, 1980 at a 
      rental of $206.36; a renewal lease commencing April 1, 1983 at a rental 
      of $255.00; a 1987 apartment registration form listing a renewal lease 
      commencing March 1, 1987 at a rental of $292.95; a renewal lease 
      commencing March 1, 1989 at a rental of $347.32; and a DHCR order issued 
      November 24, 1986 under docket ZKS 003301-S which decreased the rent 
      effective October 1, 1985 due to a service decrease in the subject 

      An examination of DHCR computerized rent records immediately prior to 

          FJ 210047 RO

      the issuance of the Rent Administrator's order indicated that the 
      subject apartment had not been registered in 1986.

      In Order Number ZK-006246-R, the Rent Administrator determined that the 
      owner failed to provide proof of service of the initial RR-1 form to the 
      tenant; failed to register the subject apartment for 1986; established 
      the rent as $160.00 effective April 1, 1980 based on the submission of 
      the rental history by the tenant; froze the rent at $205.92 effective 
      April 1, 1984 due to the failure to establish service of the RR-1 form 
      and later due to the failure to register in 1986; determined that the 
      tenant had been overcharged and directed a refund to the tenant of 
      $24,045.08 including treble damages on that portion of the overcharge 
      collected on and after April 1, 1984.

      In this petition, the owner alleges in substance that after a prolonged 
      mortgage foreclosure proceeding, an in rem action by New York City and 
      judicial sale, it acquired title to the subject premises by Referee's 
      Deed in Foreclosure, dated January 19, 1988, that prior thereto 
      following purchase of the mortgage and note it advised the DHCR on March 
      31, 1987 that it had recently taken over the subject premises; that on 
      March 31, 1987 it also asked the DHCR for copies of all the rent 
      registrations for the subject premises but received no response; that it 
      could not respond to DHCR's requests for the RR-1 form because it did 
      not receive documentation from the prior owner or from DHCR as alleged 
      in the proceeding before the Rent Administrator; that the Rent 
      Administrator's order should not have been issued without responding to 
      the owner's many requests for rent registrations; that the subject 
      apartment was registered by the prior owner in 1984; that the tenant 
      acknowledged in writing that she was served with the initial RR-1 form; 
      that in 1986 New York City had title to the subject premises so that the 
      current owner could not have been responsible for the failure to file 
      the 1986 registration: that the current owner has since filed the 1986 
      registrations; that the Rent Administrator improperly deemed the 
      overcharge complaint as a timely challenge to the initial registration 
      in that the Administrator failed to establish for the record the date 
      upon which the 1984 RR-1 form was served on the tenant and so failed to 
      establish when the 90 day period for filing a challenge began to run; 
      and that the imposition of treble damages was not warranted in that the 
      subject premises was purchased at a judicial sale where complete prior 
      rent records were not available.

      On September 30, 1992 the owner was served with copies of the tenant's 
      original complaint, RR-1 form and rental history for the subject 
      apartment including copies of the leases and service decrease order 
      received from the tenant or July 17, 1991 and afforded an opportunity to 
      respond to such submission.
      In response to the September 30, 1992 opportunity to submit evidence the 
      owner submitted an answer dated January 6, 1993.  In such answer, the 
      owner agreed with the lease history submitted by the tenant except that 
      it submitted one additional renewal lease effective May 22, 1978 to June 
      22, 1980 at a rental of $174.00 per month.  Said renewal lease had not 
      been submitted by the tenant.  In addition the owner submitted a copy of 

          FJ 210047 RO

      an M.C.I. rent increase order (ZDL230111OM) dated November 8, 1971 and 
      stated that pursuant to such order it had increased the rent by $9.66 
      per month as of December 1, 1991 and by an additional $3.00 per month 
      effective May 1, 1992.  The owner further stated that it did file the 
      1986 apartment registration although it did not do so until January 
      1987.  In support of such contention, the owner submitted a copy of the 
      1986 apartment registration, proof that it mailed something to the 
      tenant herein on January 16, 1987 and proof that it mailed something to 
      the DHCR in January 1987.

      The owner also listed amounts of rent paid by the tenant from January 
      1988 through January 1993.  Some of these amounts different slightly 
      from the lease amounts, but the owner submitted no proof that the 
      amounts it listed rather than the lease amounts were correct.  The owner 
      stated that it was not liable for refunding overcharges prior to January 
      1988 when it acquired title to the building after a judicial sale 
      although it claims it had registered for 1986 in January 1987 as a 
      "mortgagee in possession" of the subject premises.  With regard to the 
      1984 registration acknowledged as received on November 14, 1985, the 
      owner stated that such registration form listed on the top" Old 1984 
      filing by S. Pikus never rec. by state" so that an earlier registration 
      was apparently filed by the prior owner.  Further the owner urges that 
      any overcharge was not willful; that DHCR is not proceeding properly, 
      that the issuance of the Rent Administrator's order was not proper and 
      that said order should be revoked.

      The Commissioner is of the opinion that this petition should be granted 
      in part and that the Rent Administrator's order should be modified.

      Section 2523.7(d) of the Rent Stabilization Code provides in pertinent 
      part that in the absence of collusion or any relationship between a 
      prior owner and an owner who purchases upon a judicial sale, such 
      purchaser shall not be required to comply with the record keeping 
      provisions of this section for the period prior to such sale, except 
      where records sufficient to establish the legal regulated rent are 
      available to such purchaser.  This subdivision (d) shall not be 
      construed to waive the purchaser's obligation to register pursuant to 
      Part 2528 of this Title.

      Section 2526.1(f) of the Rent Stabilization Code provides in pertinent 
      part that for overcharge complaints filed or overcharges collected on or 
      after April 1, 1984, a current owner shall be responsible for all 
      overcharge penalties, including penalties based upon overcharges 
      collected by any prior owner.  However, in the absence of collusion or 
      any relationship between such owner, and any prior owner, where no 
      records sufficient to establish the legal regulated rent were provided 
      at a judicial sale, a current owner who purchases upon such judicial 
      sale shall be liable only for his or her own portion of the overcharges 
      and shall not be liable for treble damages upon such portion resulting 
      from overcharges caused by any prior owner.

      Section 2523.4 of the Rent Stabilization Code provides in pertinent part 

          FJ 210047 RO

      that an order reducing the rent for a failure to maintain required 
      services shall further bar the owner from applying for or collecting any 
      further increases in rent until such services are restored.

      Section 2526.1(a)(3)(ii) of the Rent Stabilization Code provides in 
      pertinent part that as to complaints filed within ninety 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.

      In the instant case, the tenant in her original complaint stated that 
      she received the initial RR-1 form on November 21, 1985 and submitted a 
      copy of such form in which it was stated that the form was prepared on 
      November 13, 1985.  The owner was served with a copy of the complaint 
      during the proceeding before the Rent Administrator and afforded an 
      opportunity to prove that the tenant had been served with the RR-1 form 
      at an earlier date than November 21, 1985.  The owner did not do so and 
      conceded that it was not able to do so.  Further the tenant submitted a 
      rental history for the subject apartment in the proceeding before the 
      Rent Administrator including copies of leases and a copy of an order 
      decreasing the rent due to service decreases.  During the course of the 
      appeal proceeding, the owner was served with copies of the rental 
      history submitted by the tenant and a copy of the RR-1 form submitted 
      with the original compliant.  Based on the foregoing, it must be 
      considered that the tenant received the initial RR-1 form on November 
      21, 1985.  Since the tenant's overcharge complaint was filed on December 
      13, 1985, it was filed within ninety days of the initial registration 
      (November 21, 1985) and must be considered timely.  Therefore pursuant 
      to Section 2526.1(a)(3)(ii) it was proper to direct the owner to submit 
      a rental history from April 1, 1980.  Since the tenant produced a rental 
      history from April 1, 1980 and the owner has not refuted such rental 
      history except that it provided an additional renewal lease dated May 
      22, 1978 which will now be considered in the rental history, it is 
      proper to use such rental history to establish the lawful stabilization 

      Further DHCR records show that a rent decrease order - docket ZKS 
      003201-S was issued on November 24, 1986 reducing the rent of the 
      subject apartment effective October 1, 1985, that no petition for 
      administrative review was taken from such order and that no rent 
      restoration order was issued due to a restoration of services.  
      Accordingly, the Rent Administrator's order herein should have reduced 
      the rent due to the service decrease order pursuant to Section 2523.4 of 
      the Rent Stabilization Code and the order is being amended herein to 
      provide for such decrease.  In addition the current owner herein has 
      conceded that it did not register the subject apartment for 1986 until 
      at least 1987.  The owner has failed to submit conclusion proof of 
      service in 1987 and DHCR records establish service of the 1986 apartment 
      registration only as of October 18, 1991.   Therefore it was proper to 
      serve the Rent Administrator's order decreasing the rent (docket 
      ZKS 003201-S) issued in November 1986 on the prior owner and it was the 
      responsibility of the current owner (even one who purchased at a 

          FJ 210047 RO

      judicial sale) to be aware of orders issued by the DHCR and implement 
      such orders.  There is no evidence in the file to indicate that the 
      current owner requested information on issued orders from DHCR or the 
      tenant, not even after the tenant had filed the overcharge complaint 

      With regard to the owner's contention that as an owner purchasing at a 
      judicial sale, it did not obtain a rental history nor registration 
      information from the prior owner, it is noted that pursuant to Section 
      2523.7(d) of the Rent Stabilization Code the purchaser's obligation to 
      register is not waived.  Further Section 2526.1(f) of the Rent 
      Stabilization Code mitigates overcharge penalties only in the case of a 
      current owner purchasing at a judicial sale who is not able to obtain 
      rent records.  Here the current owner could have acquired rent records 
      from the tenant who had moved to the subject apartment in 1976 and who 
      supplied a rental history from April 1,1980 to the Rent Administrator 
      upon request.

      With regard to the owner's contention that it is not responsible for 
      overcharges occurring prior to the January 1988 judicial sale, it is 
      noted that the owner concedes that it had an interest in the building 
      prior thereto as "a mortgagee in possession" since at least January 
      1987.  Further pursuant to Section 2526.1(f) as aforementioned, for 
      overcharge complaints filed after April 1, 1984 such as the complaint 
      herein, a current owner is responsible for all overcharge penalties 
      since the owner herein could have obtained rent records for the subject 

      With regard to the owner's contention that the imposition of treble 
      damages was not warranted, Section 2526.1 of the Rent Stabilization 
      Code, provides in pertinent part that any owner who is found by the DHCR 
      to have collected a rent or other consideration in excess of the legal 
      regulated rent on and after April 1, 1984 shall be ordered to pay to the 
      tenant a penalty equal to three times the amount of such excess.  If the 
      owner establishes by a preponderance of the evidence that the overcharge 
      was not willful, the DHCR shall establish the penalty as the amount of 
      the overcharge on or after April 1, 1984.

      In the instant case, the owner has not submitted sufficient evidence to 
      substantiate its claim that the overcharge was not willful.  
      Accordingly, the imposition of treble damages was warranted.

      It is noted that DHCR rent records indicate that subsequent to the 
      issuance of the Rent Administrator's order, the owner registered the 
      rent of the subject apartment in 1986 as required.  Further the evidence 
      shows that the owner completed 1984 registration requirements on 
      November 21, 1985 when the tenant was served with the initial RR-1 form.  
      Therefore the rent of the subject apartment may be increased on a 
      prospective basis when the owner restores the services for which the 
      rent was reduced pursuant to docket ZKS-003291-S and obtains a rent 

          FJ 210047 RO

      restoration order from the DHCR to that effect. 

      Taking the above factors into account, the Commissioner has recalculated 
      the lawful stabilization rents and amount of rent overcharge for the 
      subject apartment, including treble damages on the overcharge occurring 
      on and after April 1, 1984.  The lawful stabilization rents and amount 
      of rent overcharge are set forth on the amended rent calculation chart 
      attached hereto and made a part hereof.  The amount of rent as listed in 
      the lease have been utilized since the owner has not submitted any proof 
      that slight variations in the rent collected from the tenant occurred.  
      M.C.I. rent increase have not been included because they were first 
      collected by the owner subsequent to September 30, 1991 the last day of 
      the overcharge period herein.

      he owner is directed to reflect the findings and determinations made in 
      this order on all future registration statements, including those for 
      the current year if not already filed, citing this order as the basis 
      for the change.  Registration statements already on file, however, 
      should not be amended to reflect the findings and determination made in 
      this order.  The owner is further directed to adjust subsequent rents to 
      an amount no greater than that determined by this order plus any lawful 

      If the owner has already complied with the Rent Administrator's order 
      and there are arrears due to the owner as a result of the instant 
      determination, the tenant shall be permitted to pay off the arrears in 
      twelve equal monthly installments.  Should the tenant vacate after the 
      issuance of this order or have already vacated, said arrears shall be 
      payable immediately.

      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 in the same manner as a judgment or not 
      in excess of twenty percent per month thereof may be offset against any 
      rent thereafter due the owner.

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

      ORDERED, that this petition for administrative review be, and the same 
      hereby is, granted in part, and, that the order of the Rent 
      Administrator be, and the same hereby is, modified in accordance with 
      this order and opinion to take into account the Rent Administrator's 
      Order Decreasing the Rent issued under Docket ZKS 003201-S and the 
      additional lease submitted by the owner.  The lawful stabilization rents 
      and the amount of the rent overcharge are established on the attached 
      chart which is fully made a part of this order.  The amount of the rent 
      overcharge through September 30, 1991 is $22,618.00.

          FJ 210047 RO


                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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