FJ 210047 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
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
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 :
------------------------------------X
ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART AND MODIFYING RENT ADMINISTRATOR'S ORDER
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
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.
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
apartment.
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
rents.
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
herein.
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
apartment.
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
increases.
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
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
|