GD 410237 RO

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

      APPEAL OF                              DOCKET NO. GD 410237 RO

                                          :  DISTRICT RENT OFFICE
           AMG Management Co., Inc.,         DOCKET NO. FH 410458-R
                                             TENANT: Neil Cohen               
                            PETITIONER    : 


      On April 28, 1992, the above-named petitioner-owner filed a Petition for 
      Administrative Review against an order issued on April 3, 1992, by the 
      Rent Administrator concerning the housing accommodations known as 244 
      East 79th Street, New York, New York, Apartment No. 1C, wherein the Rent 
      Administrator determined that the owner had overcharged the tenant.

      The Administrative Appeal is being determined pursuant to the provisions 
      of Section 2526.1 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 in August, 1991 
      of a rent overcharge complaint by the tenant.

      The tenant took occupancy pursuant to a lease commencing January 1, 1991 
      and expiring on December 31, 1991 at a monthly rental of $650.00.

      In answer to the tenant's complaint, the owner alleged that following a 
      rent stabilized tenancy in 1984 at $350.00 per month, the apartment was 
      registered as "vacant/exempt" and that the super/maintenance man used 
      the apartment as an office/store room; that pursuant to DHCR advice, the 
      owner applied the "gapping" principle to compute the rent through 1991; 
      and that various renovations to the apartment totalling more than 
      $5,000.00 warranted a 1/40 rent increase.  The owner submitted various 
      invoices and cancelled checks to document the alleged improvements.

      GD 410237 RO

      In response, the tenant contended that no improvements had been made, 
      but acknowledged that a new fireproof door had been installed.

      In response to a DHCR Final Notice prior to imposition of treble 
      damages, the owner reasserted that it was entitiled to an increase for 
      improvements and upgrading, now stated to total more than $4000.00, and 
      that treble damages were not warranted.

      By order dated April 3, 1992 the Rent Administrator established the 
      lawful stabilization rent as $410.08 effective January 1, 1991, 
      determined that the tenant had been overcharged and directed a refund to 
      the tenant of $8,637.12, including treble damages.  In her calculations, 
      the Administrator deemed a two year lease for the superintendent for the 
      period from April 2, 1984 to March 31, 1986 and did not allow any 
      increases thereafter until the complainant's tenancy commencing in 1991. 

      In its Petition for Administrative Review, the owner contends, among 
      other things, that the apartment had been exempt, used as superintendent 
      living quarters and building office, and that "gapping" should have been 
      utilized by the Administrator; that treble damages were assessed before 
      the Administrator considered the owner's response to the final notice, 
      thereby depriving the owner of due process; that treble damages should 
      not have been assessed based on the owner's good faith belief that the 
      vacancy improvements submitted warranted a 1/40 rent increase; and that 
      those improvements merited the increase.

      During the pendency of the PAR, the owner submitted a letter from the 
      tenant requesting that his original complaint be withdrawn with 
      prejudice; that the Administrator's order be vacated; and that an order 
      be issued granting the owner's PAR.  The tenant's letter stated, among 
      other things, that he had entered into an agreement with the landlord in 
      Housing Court.  In response to a Division request, the owner submitted 
      a photocopy of the Housing Court determination dated July 30, 1992.

      The owner was afforded a final opportunity to present evidence 
      substantiating the alleged "exempt" status of the apartment from 1985 
      through 1990.  In response, the owner resubmitted the documents 
      enumerated above and stated that the settlement was in accordance with 
      Section 2520.13 of the Rent Stabilization Code and that, accordingly, 
      the tenant's original complaint should be considered withdrawn and the 
      owner's PAR should be granted.  The requested evidence regarding the 
      apartment's status was not provided.

      The Commissioner is of the opinion that the owner's petition for 
      administrative review should be denied. 

      Section 2520.13 of the Rent Stabilization Code states, in pertinent 
      part, that a tenant may withdraw any complaint pending before the DHCR, 
      but that such settlement shall not be binding upon any subsequent 
      tenant.  To the extent that the Stipulation of Settlement purports to 

      GD 410237 RO

      settle arrearages, the Commissioner notes that this is a contractual 
      matter between the parties not within the purview of the Rent 
      Stabilization Law and Code, and not subject to the jurisdiction of the 
      DHCR.  However, the stipulation will not be binding on future tenants. 
      Accordingly, the legal regulated rent established by the Administrator 
      in Docket No. ZFH410458R remains in full force and effect.  The 
      Commissioner further notes that the tenant was not, as required by the 
      statute, represented by counsel.

      The Commissioner finds that the argument of the owner that the apartment 
      was "exempt" is not supported by the evidence.  DHCR registration 
      records filed by the owner during the period 1986 - 1990 indicate that 
      the subject apartment was vacant.  The Administrator properly denied 
      allowing increases; the apartment wasn't "exempt," but vacant.  
      Therefore, the owner was not entitled to increases bridging the gap 
      between tenancies.

      Concerning the contention of the owner that vacancy improvements merited 
      a rent increase under Section 2522.4 of the Rent Stabilization Code, the 
      Commissioner is of the opinion that the Administrator correctly 
      determined that the work that was done to bring the apartment up to 
      living condition constituted ordinary maintenance and repairs, rather 
      than improvements.  Consequently, no rent increase for this work was 

      The Commissioner notes that the Administrator failed to grant a rent 
      increase to the owner for the fireproof door.  However, the 
      Administrator also erred in allowing a two-year lease for the 
      superintendent, absent documentation of a two-year period of occupancy 
      by the superintendent.  The Commissioner finds that application of the 
      correct processing procedure would more than negate any benefit to the 
      owner based on the claimed improvement.  In the absence of the filing of 
      a timely petition for administrative review by the tenant, this portion 
      of the owner's petition is denied.

      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 plus interest from the date of the first overcharge on or 
      after April 1,1984.

      With regard  to the owner's contention that his reliance on a rent 
      increase based on vacancy improvements subsequently disapproved negates 
      the presumption of willfulness, the Commissioner finds that since a 
      substantial portion of the claimed improvements constitutes ordinary 
      maintenance and repairs, the owner's reliance on its providing a basis 
      for a rent increase is not reasonable, especially since the tenant 
      disputes that the work was ever performed.  Accordingly, the penalty of 

      GD 410237 RO

      treble damages is warranted.

      With regard to the owner's assertion that its answer below was not 
      considered by the Administrator, and that it therefore was denied due 
      process, the Commissioner has examined the record of the proceeding 
      before the Administrator, and finds therein a careful, thorough analysis 
      of the answering documents received by the Division from the owner on 
      March 26, 1992.  The Commissioner affirms the decision derived 

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

      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, denied, and, that the order of the Rent Administrator be, and 
      the same hereby is, affirmed.  The amount of the rent overcharge through  
      December 31, 1991 is $8,637.12.

                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner

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