STATE OF NEW YORK
DIVISION OF HOUSING AND COMMUNITY RENEWAL
OFFICE OF RENT ADMINISTRATION
92-31 UNION HALL STREET
JAMAICA, NEW YORK 11433
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: GA 430166-RO
PETER SHARP, et al DRO DOCKET NO.: FG 420040-RP
c/o ROSENBERG & ESTIS, P.C. (AL 420008-OH)
ORDER AND OPINION GRANTING, IN PART, PETITION FOR ADMINISTRATIVE REVIEW
AND REMANDING PROCEEDING
On January 9, 1992 the above-named petitioner-landlord filed a Petition
for Administrative Review against an order issued on December 31, 1991 by
the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning housing accommodations known as 444 East 52nd Street, New York,
New York, Various Apartments.
The landlord herein, as owner of the unsold shares in the subject
cooperatively owned building, filed an application in December 1986
pursuant to the Return on Capital Value ("hardship") provisions of the
Rent Regulations, Section 2202.8, seeking an increase in the maximum
rents of the various apartments occupied by rent controlled tenants who
had not purchased the shares allocated to their respective accommodations.
On August 21, 1990, the Rent Administrator issued orders which adjusted
the rents for the subject apartments by various amounts and over various
periods of time in order to yield an 8 1/2 percent return on the valuation
of the property (computed on a per share basis).
Both the landlord and various tenants filed administrative appeals against
said orders which resulted in the issuance, on July 15, 1991, of an order
and Opinion (EI 430186-RO; EI 420141-RT) which remanded the proceeding to
the Rent Administrator to explain why an equalization ratio of 1.754 was
used in calculating the building's equalized assessed value (rather than a
large equalization ratio claimed by the landlord) and to further review
the landlord's claimed operating expenses.
On December 31, 1991 the Administrator issued the orders here under review
wherein the capital value of the subject premises was determined to be
$3,551,920.00. Said capital value amount was arrived at by utilizing the
transitional assessed valuation of $1,531,000.00 for the 1986/87 tax year
(reduced from $1,541,000.00 by the Tax Commissioner) multiplied by the
equalization factor applicable to New York City of 2.32 (rather than
1.754) at the time the instant application was filed. Said orders further
adjusted the maximum rents of the subject accommodations by varying
amounts governed by the limitation of no increases being greater than
7 1/2 percent per year (with the exception of apartment 3-F where a
DOCKET NUMBER: GA 430166-RO
greater increase was necessary to make the property equal its operating
expenses) in accordance with the applicable provisions of the Rent Law and
Regulations, Sections 2201.6 and 2202.3(d).
In this petition for administrative review the landlord contends, in
substance, that there is no lawful basis for using the transitional
assessed value (rather than the actual assessed value) for purposes of
calculating the capital value of the subject premises; that pursuant to
statute the equalized assessed value of the property must equal the true
fair market value of the property; and that the DHCR should have
calculated the capital value of the subject premises by multiplying the
actual assessed value of $1,950,000.00 by the current equalization ratio.
After a careful consideration of the entire record, the Commissioner is of
the opinion that this petition should be granted, in part, and the
proceeding remanded to the Rent Administrator for further processing in
accordance with this order and opinion.
Section 2202.8 of the Regulations provide, in pertinent part, that a
landlord may seek rent increases where the property is not providing "...
a return of 8 1/2 percent on capital value which, except as provided in
subdivisions(b) and (c) of this section, shall be the equalized assessed
value obtained by multiplying the current assessed value of the property
by the current equalization ratio established by the New York State Board
of Equalization and Assessment pursuant to Article 12-A of the Real
Property Tax Law."
The use of the "equalized" assessed value as a measure of capital value is
premised on the grounds that real property in New York is assessed, for
tax purposes, at less than full value; and that use of an equalization
multiplier represents the fair market value of the property.
In this connection the Commissioner notes that the "transitional" assessed
value of a property is not reflective of the full actual assessed value
of the property but rather is a function of the taxing process created by
Section 1805 of the Real Property Tax Law as a means of phasing, in over a
five year period, increases in assessed value so as to mitigate the effect
of increased real estate taxes on property owners.
The Commissioner is thus constrained to find that the Rent Regulations
mandates the use of the current full value assessment of the property (as
opposed to the transitional assessed value) multiplied by the current
equalization factor for purposes of computing the capital value of the
subject premises pursuant to the "hardship" provisions of the Regulations.
The Commissioner notes that a related "hardship" proceeding, predicated
upon a previously filed application (LC 000008-OH) is currently pending
before the Administrator to consider the appropriate equalization ratio to
be applied in computing and allocating rent increases based on the capital
value at the time that application was filed. Since the rent increases to
be computed therein will impact upon any may overlap rent adjustments
under the instant application the Commissioner deems it appropriate to
remand this proceeding to the Rent Administrator for the purposes of
DOCKET NUMBER: GA 430166-RO
consolidating both proceedings and the issuance of appropriate rent
adjustments therein consistent with the determination herein. For
purposes of the instant application capital value shall be computed by
multiplying the 1986/87 actual assessed value of $1,900,000.00 (reduced
from $1,950,000.00 by the Tax Commission) by the 1986/87 equalization
factor of 2.32. See 50 Holding corp. v. Gabel, 244 N.Y.S 2d 80; Hopewell
Properties v. Weaver, 165 N.Y.S. 2d 899, affd 199 N.Y.S 2d 438, appeal
THEREFORE, in accordance with the provisions of the Rent and Eviction
Regulations for New York City, it is
ORDERED, that this petition be, and the same hereby is granted, in part,
and the proceeding remanded to the Rent Administrator for further
processing in accordance with this order and opinion. The orders of the
Rent Administrator remain in full force and effect until new orders are
issued upon the remand.
JOSEPH A. D'AGOSTA