GD210124RO
                             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. GD210124RO

                                          :  DISTRICT RENT OFFICE
           Woodland Realty,                  DOCKET NO. EA210232R
                                            
                                             TENANT: Moshe Hershkovich        
                  
                            PETITIONER    : 
      ------------------------------------X                             

           ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW


      On April 17, 1992, the above-named owner filed a Petition for 
      Administrative Review against an order of a Rent Administrator dated 
      March 19, 1992, which determined that the owner of the housing 
      accommodations known as  1440 Ocean Parkway, Brooklyn, New York, 
      Apartment No. 1K, had overcharged the tenant thereof.

      The tenant had commenced this proceeding in January, 1990, by filing a 
      complaint of rental overcharge stating, inter alia, that he had 
      commenced occupancy on May 1, 1987, at a monthly rental of $325, while 
      the previous tenant had paid $230; attached was a copy of a check dated 
      December 29, 1986, drawn on the account of Bruce Gershner to the order 
      of the owner, bearing the "memo": "Jan. 87 rent."

      The complaint was served on the owner in February, 1990.  In November of 
      the same year the owner filed with the above-named Division (the "DHCR" 
      herein) the required apartment-registration forms for the subject 
      accommodations for the years 1985 through 1990.  In December of 1991 the 
      owner, responding to two requests for information from the 
      Administrator, submitted a copy of the front of its check to the tenant 
      for $2497.32, along with the tenant's notarized statement that, having 
      received a refund of the entire overcharge, he was withdrawing his 
      complaint, which he asked to be marked "settled and closed."

      That same month, however, the tenant wrote to the Administrator 
      mentioning the refund, pointing out the late filing of the 
      aforementioned registration forms, and asking how much more of a refund 
      he would receive.

      Effective January 1, 1992, the owner lowered the rent consistently with 
      the refund it had made.  Later that month the Administrator sent the 
      owner a Final Notice that "treble damages" were contemplated, indicating 
      inter alia that the lawful rent had been $202.01 from May 1, 1987 
      through November 30, 1990, and stating that the owner had not filed the 
      apartment registrations for 1985 through 1990 until November 9, 1990.  
      Then in March, 1992, the owner submitted a copy of the front of its 
      check for $4024.55, written that month to the tenant, along with a copy 
      of a letter to the tenant stating: "We have just discovered that an 
      additional $3,548.51 had been inadvertently collected from you.  







          GD210124RO

      Accordingly, we enclose . . . the full amount of the additional excess 
      rent collected, plus interest."

      The ensuing order, here appealed, states inter alia that the overcharge 
      herein was willful, and therefore trebles the amount thereof for refund.  
      In attacking that determination, the instant petition states: that upon 
      reviewing the rental history after receiving the complaint herein, the 
      owner discovered a mistakenly collected overcharge and refunded it with 
      interest, also adjusting the rent to the lawful amount; that the 
      aforementioned Final Notice caused the owner to realize that the lawful 
      rent had been frozen until the aforementioned 1990 filing of annual 
      registration forms; that a "willful" overcharge is one collected 
      intentionally and knowingly; that the owner's answer to the Final Notice 
      established, by a preponderance of the evidence, that there had been no 
      willful overcharge; that the owner's failure to register the apartment 
      from 1985 through November of 1990 had been inadvertent; that the first 
      of the aforementioned refunds had been of all "actual" overcharges plus 
      interest, with the second representing the "penalty" for not registering 
      annually; that the owner has adjusted the rent to the lawful amount; 
      that having registered the apartment in 1984, the owner had no reason 
      deliberately to refrain from registering it thereafter; that in trebling 
      the damages herein, the Administrator has violated the DHCR's Policy 
      Statement 89-2; that by encouraging owners to retain overcharge proceeds 
      for several years (pending completion of the administrative appeal 
      process), the imposition of treble damages in situations like this one 
      would violate important policy considerations; and that the Rent 
      Stabilization Code "provides a specific penalty," freezing of the rent, 
      for failure to register an apartment annually, "imposition of treble 
      damages on top of that penalty constitut[ing] an impermissible penalty 
      upon a penalty."

      The tenant has responded to this petition (in the course of an initial 
      Answer and three subsequent letters, all of which have been served on 
      the petitioner) with the following points, inter alia.  (1) The owner 
      "knew pretty well" that the rent was excessive because the tenant had 
      shown him a recent rent check from the previous tenant and the owner's 
      agent had ignored it.  (2) There are other overcharge complaints pending 
      against this owner.  (3) The tenant -- in possession of the 
      aforementioned previous tenant's check -- made "numerous" requests to 
      the owner for review of the rental history, all of which the owner 
      "refused or ignored" (the tenant's "last resort" being to complain to 
      this Division).

      The owner has not responded to the above.

      After careful consideration of the record, the Commissioner is of the 
      opinion that this petition should be denied.

      Under the Rent Stabilization Code, treble damages are the norm, the 
      exception to their imposition being when the owner establishes by a 
      preponderance of the evidence that the overcharge was not willful.  An 
      owner is charged with a knowledge of the duly promulgated and published 
      laws, regulations and guidelines of Rent Stabilization, so that if it 
      collects rents, and those rents are clearly inconsistent with the 
      aforementioned provisions, that owner is overcharging knowingly and its 
      act is thus willful.

      The Commissioner will address petitioner's last point first, as it 


          GD210124RO

      constitutes a challenge to the very notion of trebling the portion of an 
      overcharge that results from freezing the lawful rent for periods in 
      which the apartment was not registered.  Such frozen rent is the only 
      lawful rent unless and until the owner registers, so that any rent 
      exceeding it is to that extent an overcharge.  And there is no dispute 
      that if an overcharge is not proven nonwillful (see below), it is 
      trebled for refund purposes.  As petitioner has cited no controlling 
      judicial decision holding impermissible the trebling of such freeze- 
      related overcharges, and as the Commissioner is aware of none, there is 
      no basis for upsetting the Administrator's order in this regard.  

      Turning to Policy Statement 89-2 (which states inter alia that "where 
      the evidence is equally balanced, the overcharge is deemed to be 
      willful") it is cited by petitioner for the proposition that no treble 
      damages are to be imposed where a rental adjustment and refund(s) like 
      those herein have been made.  The relevant portion of that Statement, 
      however, precludes treble damages 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 . . .  that he or she has tendered . . . a 
      full refund . . . ."  The words to which emphasis has been added 
      indicate a major problem with the owner's position.  The Notice 
      accompanying service of the complaint herein advised the owner that it 
      had 20 days to file an answer.  Later the Administrator sent two 
      requests for certain documents (e.g., "major capital improvement 
      order"); the second, requesting a response within 21 days, was mailed on 
      November 19, 1991.  Subsequently the owner lowered the rent as mentioned 
      above.  That decrease thus took place, not only more than 20 days from 
      service of the complaint, but beyond the latest subsequent deadline 
      imposed by the Administrator for any purpose.  Clearly the owner did not 
      "adjust[] the rent . . . within the time afforded to interpose an answer 
      to the proceeding"; for that reason alone (assuming without granting 
      that all other criteria are met here), the portion of Policy Statement 
      89-2 to which petitioner adverts does not match the instant 
      circumstances and thus cannot aid this appeal.  

      There remain the owner's assertions that it had no idea there was an 
      overcharge until the tenant's complaint caused it to review the rental 
      history, that its failure to register between 1984 and 1990 had been 
      inadvertent, that it was only the aforementioned Final Notice that had 
      apprised the owner that said failure had caused the lawful rent to be 
      frozen and that therefore -- in view of the policy consideration that 
      refunds, rather than litigation, should be encouraged -- the overcharges 
      herein must be deemed not willful.  It is the owner's duty to know the 
      rental history and the correct rent for an apartment and to charge such 
      correct rent.  Further the owner is required to annually register the 
      rents with the DHCR.  In the instant case, the owner's failure to comply 
      with these requirements constitutes willfulness, for which the 
      imposition of treble damages was warranted. 




      The 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 determinations made in 
      this order.  The owner is further directed to adjust subsequent rents to 







          GD210124RO

      an amount no greater than that determined by this order plus any lawful 
      increases.

      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, 
      this order may be filed and enforced in the same manner as a judgment, 
      or not more than 20 percent per month of the overcharge 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 be, and the same hereby is, denied.  The 
      amount of the overcharge through March 31, 1992, including excess 
      security, is $10,927.42, taking into account the prior refunds made by 
      the owner.



      ISSUED:



                                                                    
                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner
    

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