GC410241RO

                                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. GC410241RO

           Hart Realty,                   :  DISTRICT RENT OFFICE
                                             DOCKET NO. AK410475R
                                            
                                             TENANT: Niegowski & Lucas;
                                                     & Amann & Rao        
                            PETITIONER    : 
      ------------------------------------X                             

          ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW,
                               UPON RECONSIDERATION


      On March 25, 1992, the above-named owner filed a Petition for 
      Administrative Review ("PAR") against an order issued on February 19, 
      1992, by the Rent Administrator, 92-31 Union Hall Street, Jamaica, 
      New York, concerning the housing accommodations known as Apartment 2D at 
      82 East 3rd Street, New York, New York,wherein the Rent Administrator 
      determined the fair market rent pursuant to the special fair market rent 
      guidelines promulgated by the New York City Rent Guidelines Board for 
      use in calculating fair market rent appeals.

      This proceeding was commenced by a Complaint of Rent Overcharge filed in 
      November, 1986, in which the tenants stated that they had assumed 
      occupancy on September 1 of that year as the first "rent-stabilized 
      tenants" of the subject premises, at a monthly rental of $885.00, while 
      the fair rental value was between $650.00 and $725.00.

      The owner responded that the subject apartment had been renovated at a 
      cost of $26,602.40, and that even before that renovation, it had been 
      worth $1000 per month; attached to the response were: ten clipped 
      newspaper advertisements for apartments; a letter from the owner's real- 
      estate broker giving his opinion as to the rental value of the 
      accommodations; and copies of the cancelled check with which the owner 
      had paid for the aforementioned renovations.  The Administrator sent a 
      copy of that response to the tenants, but it came back marked "moved, 
      not forwardable." 

      After the Administrator had sent the owner a request for further 
      information and a "Summary Notice," the owner submitted copies of bills 
      and receipts pertaining to the aforementioned renovation, and a copy of 
      its agreement with the "general contractor" thereof.

      In the course of determining the initial stabilized rental for this 
      apartment in the ensuing order (here appealed), the Administrator ruled 
      inter alia: that the 1984 Maximum Base Rent for the subject apartment 
      had been $134.06; that because the owner had "failed to submit 
      sufficient rental data for consideration as required by Section 
      2522.3(e)(1) of the [Rent Stabilization] Code," the rent examples it had 







          GC410241RO

      submitted could not be considered for purposes of comparing the rent for 
      the subject apartment with rents of similar accommodations; and that 
      because the owner had "failed to submit documentation" of its agreement 
      with the general contractor (although the owner had "submitted an 
      agreement"), the $20,000 in renovation costs involved in that contract 
      would not be included in the total from which a rental increase for 
      improvements would be calculated.  The owner then appealed those three 
      rulings, contending: that the Administrator had erred in treating the 
      tenants' overcharge complaint as a fair market rent appeal; that said 
      complaint itself had estimated the market rate for this apartment to be 
      $725.00; that "the 1986 rent controlled rent was $143.06 plus the 1986 
      fuel cost adjustment of $8.37 plus 1/40 of the owner's cost of 
      renovating the apartment"; that the order erroneously excluded from the 
      calculation of the amount spent on renovation, the $20,000 submitted as 
      paid to the general contractor; and that it erroneously excluded six 
      other items (discussed below) from the same calculation.  The owner also 
      stated that comparable apartments should have been included, submitting 
      an appraisal and a New York Times advertisement in support of that 
      contention.

      In the absence of a response from the tenants, the Commissioner granted 
      that petition in part, stating in pertinent part:

      "Regarding the contention that it was improper to treat this matter as 
      a fair market rent appeal, the Commissioner notes that the tenants were 
      clearly questioning the lawfulness of their rent.  As the first tenants 
      after "decontrol" of the subject apartment, they were of course 
      challenging the initial market-determined rent; it was within the 
      Administrator's discretion to recognize that that challenge was 
      identical to a fair market rent appeal, and therefore to process it as 
      such.  Moreover, petitioner makes no claim that it had served a "DC-2" 
      form on the complainants, notifying them that they, as the first 
      stabilized tenants, had the right to file a fair market rent appeal; 
      petitioner therefore must fail in claiming that the tenants, left thus 
      unaware of their status, should not have been allowed to challenge their 
      initial rent.  Finally, the Commissioner notes that throughout the 
      pendency of this matter before the Administrator, the owner made no 
      objection to, and attempted fully to cooperate with, the Administrator's 
      treatment thereof as a fair market rent proceeding; as the present 
      objection to such treatment is not jurisdictional in nature, the owner 
      cannot be allowed to press it for the first time on this appeal.

      "The next issue is whether the tenants' estimate of the correct rent, 
      expressed in their complaint, can control over the Administrator's 
      subsequent determination thereof, and the answer is clearly no.  The 
      complaint put the propriety of the rent in issue, and once in issue that 
      propriety had to be determined in accordance with specific procedures 
      promulgated by this Division.  The result of such compliance with agency 
      procedures cannot be overturned simply because it may consist of a 
      rental figure lower that what the tenant had opined.




      "Petitioner states that the 1986 controlled rental was "$143.06" per 
      month.  Although that figure may represent a mere typographical error -- 
      the transposition of two digits in the Administrator's order -- the 
      Commissioner will affirm (1) that under the pertinent guidelines in 


          GC410241RO

      effect for leases commencing, as did the tenants', between October 1, 
      1985 and September 30, 1986, the base for determining the initial 
      stabilization rent is the Maximum Base Rent for 1984, not 1986 as 
      petitioner seems to state, and (2) that the Administrator's computation 
      of the 1984 Maximum Base Rent is correct."  

      Regarding, finally, the cost of the renovations in question, the 
      Commissioner allowed an additional $17,675 out of the $20,000 paid to 
      the "general contractor," while  disallowing various amounts submitted 
      as having been paid to other suppliers.

      The new tenants -- who, having been apprised of the Administrator's 
      order and the owner's PAR, had unsuccessfully sought participation in 
      the latter proceeding -- then requested reconsideration of the 
      Commissioner's determination, to allow consideration of their response 
      to the PAR.

      The request for reconsideration, signed by both of the new tenants, 
      stated inter alia that one of them was a carpenter involved in 
      renovating Manhattan apartments, and that the subject apartment "was so 
      poorly renovated that I had to do months of work on it to make it 
      livable," the $26,000 claimed to have been spent by the owner being thus 
      "highly suspect."  The owner responded that the conclusion of such an 
      interested party was worthless because, inter alia, "[v]ery little of 
      the renovation cost in fact is attributable to carpentry work."

      The tenants also submitted an extensive answer to the owner's PAR, 
      contesting many specific aspects of the subject renovation increase.
      It was prefaced in pertinent part as follows.

      "[T]he actual cost of the renovation work here [amounted to] a fraction  
      of the claim.  I know ... because I renovate apartments in Manhattan for 
      a living.  Also it is obvious what in an apartment ... has been ... 
      renovated.  One looks at [various features].  Most of this apartment is 
      original ... .

      "If one notes the attached [26] photos, it is easy to see the landlord 
      has been untruthful.  * * * The landlord makes the best case to show 
      that this apartment is basically unrenovated.  In a March 23, 1992 
      letter (PAR) to DHCR, [the owner] mentions that #3D is unrenovated.  Our 
      photos show that 2D and 3D are essentially the same: unrenovated."

      The owner has not replied to the tenants' answer.

      The Commissioner is of the opinion that this petition should be denied.

      An examination of the evidence of record including the photographic 
      evidence submitted by the tenants discloses that much of the claimed 
      renovation work in the subject apartment appears not to have been done.  
      Therefore the Commissioner's prior order granting an additional rent 
      increase for renovation work must be revoked.

      The owner is directed to roll back the rent to the lawful stabilized 
      rent consistent with this decision and to refund or fully credit against 
      future rents over a period not exceeding six months from the date of 
      receipt of this order, the excess rent collected by the owner.

      The owner is directed to reflect the findings and determinations made in 







          GC410241RO

      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 determinations 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. 

      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, denied, that the Commissioner's prior order and opinion be, 
      and the same hereby is, revoked, and that the Rent Administrator's order 
      be, and the same hereby is affirmed.  The initial legal regulated rent, 
      effective September 1, 1986, was $304.49.



      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner
    

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