GD 420073 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.: GD 420073 RO

           Melohn Properties,                DRO DOCKET NO.: FE 420392 R

                                             TENANT: Martin Oltarsh           
                               PETITIONER    
      ------------------------------------X                             

          ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW


      On April 8, 1992, the above-named owner filed a Petition for 
      Administrative Review against an order issued on March 16, 1992, by a 
      Rent Administrator, concerning the housing accommodations known as 100 
      Riverside Drive, New York, New York, Apartment No. 17A, wherein the  
      Administrator determined that the tenant had been overcharged.

      This proceeding originated with the tenant's overcharge complaint of May 
      20, 1991.  The tenant there indicated: that the last change in his rent 
      had occurred on October 1, 1989, when it had been raised to $787.36; 
      that his lawful rent was $578.96; and that he had paid the higher amount 
      until he had "discovered [he] was overpaying in Dec. 1990."

      In response the owner stated that it had, before the complaint was 
      filed, lowered the rent to $578.96, that at the time it had given the 
      tenant a "credit" of $694.82, and that before its answer was due it had 
      sent the tenant a check in the amount of $12,106.08, representing the 
      entire overcharge plus interest, less the aforementioned credit.

      The above-referenced Administrator's order, here appealed, followed.  It 
      states in pertinent part that because the evidence showed the overcharge 
      to have been willful, the damages due to the tenant would be trebled, 
      adding:


           The owner's representative submitted a sworn affidavit along 
           with a $12,106.08 check that was offered to the tenant.  The 
           record failed to show that the check was cashed. * * * 
           Therefore, treble damage is assessed.

      The instant petition asks that the Rent Administrator's order be 
      modified to eliminate treble damages.  The argument is that because the 
      rent was reduced to its correct level before the tenant filed his 
      complaint, and the overcharge repaid (with 9% interest thereon) before 
      the owner's answer was due, DHCR policy precludes imposing treble 
      damages (regardless of whether the refund check was cashed).


      The tenant's representative responds to the petition by arguing (a) that 
      the owner's acts, in the course of this tenancy and these proceedings, 







          GD 420073 RO

      offer abundant evidence of willfulness, (b) that no $694.82 credit 
      should be deducted from the overcharge repayment herein, (c) that 
      Division policy does not invariably preclude treble damages where an 
      owner has timely adjusted the rent and tendered a refund in good faith, 
      and (d) that at any rate those criteria were not met in the instant 
      case.  (The tenant does not address the issue of whether cashing of the 
      refund check is one of those criteria.)

      Having carefully reviewed the pertinent portions of the record herein, 
      the Commissioner is of the opinion that this petition should be granted.

      In Policy Statement 89-2 the Commissioner promulgated the rule that 

           the treble damage penalty is not applicable . . . where . . . 
           an overcharge occurred under certain specified circumstances.  
           Examples of such circumstances are as follows:

                                      * * *

           2. 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 to the DHCR that he or she has tendered, in good 
           faith, to the tenant a full refund of all excess rent 
           collected, plus interest.

      In this case, the owner adjusted the rent before the tenant filed his 
      complaint, and delivered a refund check (dated August 29, 1991) to the 
      tenant after the 20-day period for filing its answer had expired, but 
      before the expiration of requests to extend that period duly filed by 
      the owner and not explicitly granted or denied by the Administrator.  
      The disputed issues are whether the owner made the rent adjustment "on 
      [its] own," whether the refund was (a) "tendered," (b) "during the time 
      afforded to interpose an answer," (c) "in good faith," and (d)"a full 
      refund," and whether, assuming all those conditions were met, the 
      Commissioner should nevertheless impose treble damages in the instant 
      circumstances.

      The tenant asserts that the rental adjustment was only made under 
      pressure that his agent was then exerting upon the owner.  The rent was 
      nevertheless lowered before the complaint was filed; since the Policy 
      Statement allows an owner to avoid treble damages by a rental adjustment 
      made after such filing, and since a complaint exerts more pressure than 
      the mere remonstrances of a tenant, the rollback herein must be deemed 
      to have been done "on [the owner's] own" within the meaning of the 
      Statement.  And although the ensuing refund was sent after the complaint 
      had been filed, liability therefor was tacitly admitted, and the 
      imminence thereof implied, by the aforementioned rental adjustment.  The 
      Commissioner therefore concludes that the owner's ameliorative steps 
      were taken "on [its] own" within the meaning of the Statement.

      The Administrator concluded that there was no refund under the Statement 
      because the tenant had not cashed the owner's check.  The Statement only 
      requires, however, that the refund be "tendered," i.e., presented or 
      proffered, which it certainly was.
      Did that tender come too late?  The answer turns on the application of 
      the phrase "time afforded to interpose an answer."  The time was 
      "afforded" to the owner, in that the Administrator accepted the 
      subsequent answer of the owner during the period in which the owner had 


          GD 420073 RO

      requested an extension and had not been informed by the DHCR that the 
      extension had been denied or granted.  In the absence, therefore, of any 
      indication that "time afforded" can only mean the time granted the owner 
      in the notice accompanying service of the complaint upon him, the 
      Commissioner determines that the rollback and refund were made during 
      the time "afforded" to answer the tenant's complaint, and were therefore 
      timely under Policy Statement 89-2.

      The next issue is whether the refund was tendered "in good faith."  The 
      relevant question is whether the refund was intended to compensate the 
      tenant for the overcharges herein, or was instead made for the purpose 
      of defrauding, or in a manner calculated to defraud, the tenant or this 
      Division.  As the record will not justify a conclusion that the refund 
      tendered was in any way fraudulent, the "good faith" requirement of the 
      Policy Statement was met thereby.

      The tenant would argue that notwithstanding all of the above, the 
      Statement does not apply because the owner did not make a "full" refund 
      of "all" the excess rent collected, plus interest.  The tenant 
      specifically points to the owner's deduction from the refund, of the 
      aforementioned $694.82 "credit" it had announced when the rent was 
      reduced, as unwarranted; it would follow that the refund was $694.82 too 
      small and thus not "full" as required by the Policy Statement.  This 
      might indeed be true if the owner had properly calculated the refund; as 
      of the end of August, 1991, however, the overcharge -- as found by the 
      Administrator (who correctly declined to go back more than four years 
      before the date of the complaint) -- plus interest thereon, came to only 
      $8,457.74.  Since this is less than the $12,106.08 tendered to the 
      tenant, the refund clearly was a full one within the meaning of the 
      Policy Statement.

      The tenant argues, finally, that even if the instant circumstances match 
      those quoted above from the Statement, the Commissioner should find 
      willfulness -- and hence treble the overcharge refund herein -- based on 
      the owner's entire course of conduct vis-a-vis this tenant.  However, 
      the language of Policy Statement 89-2 is mandatory: "[T]he burden of 
      proof shall be deemed to have been met" under certain circumstances, 
      "examples" of which are then given.  Thus while there may be discretion 
      to entertain other circumstances as showing nonwillfulness, there is no 
      discretion to find willfulness where, as here, one of the given examples 
      applies.  The Administrator, in sum, erred in assessing treble damages.

      The Commissioner has recalculated the refund herein, based on the 
      Administrator's findings of monthly overcharges of $99.30 from 4/1/87 
      through 9/30/87, $143.39 from 10/1/87 through 9/30/89 and $208.40 from 
      10/1/89 through 11/30/90.  With interest to the date of the 
      Administrator's order, a total refund of $8,822.87 should have been 
      ordered.




      This order may, upon the expiration of the period within 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 
      for $8,822.87, or not more than 20 percent per month thereof may be 
      offset against any rent thereafter due the owner.








          GD 420073 RO

      If on the other hand 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 is permitted to pay off the 
      arrears in 24 equal monthly installments.  Should the tenant vacate 
      after the issuance of this order or have already vacated, said arrears 
      shall be payable immediately.

      THEREFORE, in accordance the Rent Stabilization Law and Code, it is

      ORDERED, that this petition be, and the same hereby is, granted as set 
      forth above, and that the Rent Administrator's order be, and the same 
      hereby is, modified in accordance with this order and opinion. 


      ISSUED:



                                                                  
                                      JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner
    

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