GF 410589-RT (refiling of GA 410447-RT)

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

      APPEAL OF                              DOCKET NO. GF 410589 RT
                                             (refiling of GA 410447-RT)

                                          :  DISTRICT RENT OFFICE
           David Perkins, tenant,            DOCKET NO. ZFD-410036-RP
                                                        (BG 410110-RO)

                                             OWNER: 71 East Third Street 
                                                    Tenant's Corp.

                            PETITIONER    : 


      On June 26, 1992 the above-named petitioner-tenant perfected the filing 
      of a Petition for Administrative Review (PAR) against an order (Docket 
      No. FD-410036-RP) issued on January 17, 1992 by a Rent Administrator at 
      92-31 Union Hall Street, Jamaica, New York, concerning the housing 
      accommodations known as 71 East 3rd Street, New York, New York, 
      Apartment No. 15 wherein the Administrator determined that the subject 
      apartment was subject to the Rent Stabilization Law, and that the 
      $500.00 rent registered for April 1, 1984 was the Initial Legal 
      Regulated Rent since the tenant had not filed a timely objection to the 
      initial registration.

      The applicable law is Section 2520.11(l), 2522.5(h), 2526.1 and 
      2528.2(d) of the current Rent Stabilization Code and Sections 2(g)(5) 
      and 61 of the former Rent Stabilization Code.

      The issue in this proceeding is whether the Administrator's order was 

      The tenant commenced this proceeding on December 9, 1985 by filing a 
      complaint (Docket No. L-005162-R) alleging that the monthly rent of 
      $500.00 registered by the owner in the 1985 annual registration was 
      incorrect.  The tenant indicated that he was paying a monthly rent of 
      $184.61 but that the correct rent was $125.00 per month.

          GF 410589-RT (refiling of GA 410447-RT)

      By an answer dated January 24, 1986 the Administrator was advised that 
      the current owner was a tenants' association, the 71 East Third Street 
      Tenants Corp., which had been formed by a majority of the tenants in 
      residence at the subject premises to purchase the building from the 
      prior owner.

      The owner's submissions showed that the tenants had signed a pre- 
      incorporation agreement on July 7, 1983 and that the complaining tenant 
      was one of the signatories.  The Articles of Incorporation were filed 
      with the State of New York on July 14, 1983.

      The owner set forth that the 71 East Third Street Tenants Corp. was 
      formed to purchase the building from the (prior) owner with the intent 
      of filing an offering plan with the Department of Law in order to 
      convert the building into a tenant sponsored co-operative.  

      The owner indicated that the complainant participated in the formation 
      of the Tenants Corporation, and became a part owner of the building by 
      the payment of $3,000.00 which was applied toward a down payment on the 
      purchase price of the building.  The owner further stated that all the 
      shareholders in the corporation, including the complainant, accepted 
      responsibility for a share of the mortgage payment for the building and 
      all other costs incurred that went beyond the monthly rent paid to the 
      previous owner.

      The owner also contended that in a sworn affidavit dated November 2, 
      1985, submitted in connection with proceedings in the Supreme Court of 
      the State of New York, Perkins vs. 71 East Third Street Tenants Corp., 
      Index No. 25732/85, the tenant made statements inconsistent with a claim 
      of rent overcharge.  Therein, the tenant averred the following:

           22.  I urge the Court to grant the instant request that I 
           should not be subject at all to an eviction proceeding based 
           on non-primary residence since I derive my right to occupy the 
           subject premises under the Shareholder Pre-Incorporation 
           Agreement dated July 7, 1983, and not the prior leases.  
           [Emphasis added]

           23.  I am a shareholder of Defendant and not a tenant in the 
           traditional sense of a landlord-tenant relationship.  My right 
           to my apartment is not based upon the 1980 lease, but the 1983 
           Shareholder Pre-Incorporation Agreement.  That Agreement does 
           NOT require my use of my apartment as a primary residence.  
           [Emphasis in the original]

      Concerning the question of registration of the apartment, the owner 
      asserted that, as the tenants were in a transitional period, as owners 
      and residents sponsoring a co-op plan, it was felt that the rent 
      registration of the apartments should reflect the investment the tenants 
      were making beyond their role as tenants.  The owner stated that the 
      apartments, including the complainant's, were registered with the 

          GF 410589-RT (refiling of GA 410447-RT)

      knowledge and participation of each of the shareholders of the 
      corporation, and that the complainant received copies of the 1984 and 
      1985 annual apartment registrations.  The owner further stated that, 
      moreover, no monies for the occupancy of the apartment had been 
      collected from the tenant since March 1, 1985.

      The owner's answer also indicated that there had been a dispute between 
      the parties regarding the tenant's right to sublet and that the owner 
      had brought eviction proceedings in Housing Court, based on non-primary 
      residence grounds.

      The tenant, in a reply dated May 14, 1987, reiterated that the legal 
      monthly rent should be $125.00 and that the $500.00 per month rent 
      reflected in the annual apartment registration was incorrect; asserted 
      that rent was tendered each and every month, but that the owner refused 
      to accept it; and alleged that the Housing Court had dismissed a non- 
      primary resident eviction proceeding brought by the owner.

      On June 18, 1987 the Administrator issued an order terminating the 
      proceeding on the grounds that the "[t]enant purchased the housing 
      accommodation as part of a co-op conversion."

      In a petition (Docket No. BG 410110-RO) dated July 17, 1987, the owner 
      questioned the Administrator's decision to terminate the overcharge 
      complaint on the grounds that the tenant had purchased the housing 
      accommodation as part of a co-op conversion.  The owner pointed out that 
      a co-op offering plan was submitted to the Attorney General but that the 
      plan had not yet been declared effective on the date the Administrator 
      issued the determination.  The owner also indicated that the parties 
      were then still engaged in litigation in Housing Court in relation to a 
      further non-primary residence holdover proceeding.

      In a supplement dated July 27, 1988 the petitioner advised that in a 
      decision dated June 20, 1988 rendered in Housing Court, Judge Gould 
      dismissed a non-primary residence proceeding based on a finding that the 
      Administrator's determination below that the premises were not subject 
      to rent stabilization was binding on the Court, 71 East Third Street 
      Tenants' Corp. vs. Perkins, L&T Index No. 55842/85 (1988) [even though 
      administrative proceedings had not yet been concluded], so that the 
      governing instruments of the "de facto cooperation corporation" would 
      govern.  He found that the pre-incorporation agreement, which did not 
      require that shareholders maintain their apartments as their primary 
      residence, had not been superseded by an ambiguous by-law provision 
      which the other tenants attempted to strengthen in a February, 1987 
      subscription agreement from which the complainant was excluded.  

      The owner also argued that the Administrator improperly rendered the 
      determination based on documents submitted below by the complainant 
      which the owner did not have the opportunity to review and to comment 

      In an order issued on April 19, 1991 the Commissioner remanded the 

          GF 410589-RT (refiling of GA 410447-RT)

      proceeding for further processing, stating as follows:

           The Commissioner rejects the petitioner's unfounded 
           speculations that the Administrator based the determination on 
           the tenant's submissions.  In fact, the Examiner's notes in 
           the record below reflect that the decision was based on the 
           information the owner provided.

           However, the petitioner is correct that there was no basis in 
           the record for the Administrator's conclusion that the 
           apartment was not subject to rent stabilization and that the 
           tenant had purchased the shares to his apartment as part of 
           co-op conversion.

           While it does appear that the premises were operating as a de 
           facto co-operative, conversion to co-operative status, 
           pursuant to Section 352 of the General Business Law, had not 
           been declared effective on the date of the order.  Nor is 
           there evidence in the record that the co-operative plan has 
           since been declared effective.  Accordingly, the 
           Administrator's determination was clearly in error and must be 

           The tenant has taken contradictory positions before the Courts 
           and the Division as to his legal status as a rent stabilized 
           tenant.  The owner also requests relief under the Rent 
           Stabilization Code while disputing the tenant's status as a 
           rent stabilized tenant.  While the evidence submitted to date 
           is of probative value as to the parties' ownership of the 
           subject building, to the ownership of the apartments, and to 
           the complainant's status under the Code, the record is not 

           Additionally, the parties' various agreements, or possible 
           breaches thereof, as well as the parties' several stops in the 
           Civil Court and in the Supreme Court, may have fixed the 
           parties' respective claims and status. 

           The matter is therefore remanded to the Administrator to 
           ascertain if the Division retains jurisdiction of the 
           overcharge complaint, in whole or in part, and to render a 
           determination accordingly.

      In an order regarding the remanded proceeding (No. ZFD-410036-RP) issued 
      on January 17, 1992 the Administrator determined that the subject 
      apartment was subject at all times after decontrol to the Rent 
      Stabilization Law; that it was subject to the registration requirements 
      of the Omnibus Housing Act of 1983; that the owner registered the April 
      1, 1984 rent and served the tenant with a copy of the 1984 registration; 
      that the tenant did not file a timely objection to the rent; that the 
      April 1, 1984 registered rent of $500.00 per month was therefore the 

          GF 410589-RT (refiling of GA 410447-RT)

      Initial Legal Regulated Rent; and that subsequent rent increases should 
      be calculated above that amount since the tenant had failed to provide 
      a rental history of rents charged and paid since April 1, 1984.

      In this petition, the tenant contends in substance that the tenants' 
      corporation fully intended to be a cooperative under the laws of New 
      York State; that provisions were made in the by-laws for the 
      establishment of proprietary leases; that the corporation operates the 
      building as a cooperative; that the maintenance charges to the 
      individual shareholders are dependent upon the size of the units and the 
      number of shares owned; that there is no relationship between the rents 
      registered with the DHCR and the amount paid by each individual 
      shareholder; that the $500.00 rent registered for the subject apartment 
      in 1984 was totally disproportionate to the maintenance of $118.00 that 
      he was paying [plus his share of the purchase money mortgage]; that a 
      certificate of occupancy report (from Abstracter's Information Service, 
      Inc.) indicates that the tax classification of the building is that of 
      a cooperative; and that Justice Gould had determined, based on the 
      admissions both of the tenant and the corporation, that the subject 
      apartment was part of a de-facto cooperative, and that the building is 
      therefore not subject to rent stabilization.  The tenant also contends 
      in substance that he is a learning-disabled individual and did not fully 
      understand the import of the 1984 registration, which was not sent to 
      him by certified mail; that he understood from the corporation that the 
      document establishing a rent of $500.00 per month was merely a technical 
      necessity for a short time before the cooperative was fully established; 
      that the president of the corporation admitted that the $500.00 was 
      pulled from thin air; that the sole motivation of the corporation in 
      pursuing the registration of his apartment at a $500.00 monthly rent 
      over a period of years is to force him from his apartment; that no other 
      shareholder is paying this artificially set amount or being pursued by 
      the corporation; that the corporation is discriminating against him in 
      order to acquire his apartment for profit; that the DHCR's affirmance of 
      the $500.00 rent registered for 1984 and subsequent years would be 
      tantamount to its participation in the fraud perpetrated upon him by the 
      corporation; and that affirmance of the Administrator's determination 
      would certainly result in his eviction.

      In answer, the owner states in substance that the tenant has asserted in 
      court proceedings for eviction for non-payment that the DHCR is the 
      determinative agency, but that he has asserted before the DHCR, where 
      the DHCR has reached a determination that does not support his position, 
      that the DHCR has no authority to be the determinative agency; that the 
      tenant does not use the subject apartment as his primary residence; and 
      that the DHCR has no basis to return to the initial, revoked order of 
      June 18, 1987.

      In response, the tenant contends in substance that there was no proper 
      service of the 1984 registration by either personal delivery or by 
      certified or registered mail; and that Section 2528.2(d) of the Rent 
      Stabilization Code as well as the DHCR's own instructions for initial 
      registration provide for certified mail.

          GF 410589-RT (refiling of GA 410447-RT)

      In reply, the owner has submitted an affidavit by the Rent Stabilization 
      Association of service of the registration on the tenant by mailing on 
      July 9, 1984; as well as a receipt for a certified mailing to the DHCR 
      on July 26, 1984.  The owner previously submitted this to the DHCR on 
      November 27, 1991.

      In answer, the tenant asserts in substance that the $9,123.60 postage 
      for the mailing of 45,616 letters by the Rent Stabilization Association, 
      a postage of 20 cents each, proves that the mailing was by regular 
      first-class mail.

      The owner later submitted documents dated September 12, 1991 tending to 
      show that the tenant had bought into a cooperative apartment in a 
      limited profit housing company project elsewhere in Manhattan, wherein 
      the tenant agreed that he would occupy the dwelling for himself and his 
      immediate family, and for no other purpose.

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

      The tenant is in error in asserting that the DHCR does not have 
      jurisdiction over the subject apartment.  Without addressing the 
      question of whether the Attorney General alone can determine what is or 
      is not a cooperative apartment, the Commissioner believes that the 
      initial issue herein is not whether the subject apartment was a 
      cooperative apartment, but whether, if it was a cooperative apartment in 
      any conceivable sense, the apartment was exempt from regulation under 
      the Rent Stabilization Law by virtue of its being a co-op.

      Neither under the Code in effect on April 30, 1987 [Sections 2(g)(5) and 
      61], which was the Code in effect on the date of the pre-incorporation 
      agreement and the date of incorporation of the tenants corporation, nor 
      under the Code effective May 1, 1987 [Sections 2520.11(l) and 2522.5(h)] 
      was an accommodation exempt as a cooperative unless the offering plan 
      for it had been accepted for filing by the Attorney General's Office.  
      The parties are in agreement that this has never occurred.  Therefore, 
      the subject apartment was never exempt from regulation as a rent 
      stabilized apartment by virtue of its being part of a co-op.  

      The Commissioner declines to follow Justice Gould's determination that 
      the building was exempt from rent stabilization since such determination 
      was based on a Rent Administrator's determination which was not yet 
      final because it had been appealed.  As a result of the appeal, the 
      subject apartment was found by the DHCR (after remand) to be rent 
      stabilized, and that determination is being upheld in this appeal.

      While taxing authorities may consider the building to be a cooperative 
      for their purposes, the Commissioner does not consider that fact to 
      require a conclusion that the Rent Stabilization Law, with its own 
      criteria for exemption, does not apply to the building.

          GF 410589-RT (refiling of GA 410447-RT)

      The tenant has contended that the service of the 1984 registration on 
      him was invalid because it was not made by certified mail.  The tenant 
      is basing that contention on the current Rent Stabilization Code, which 
      became effective May 1, 1987, and the March, 1988 Instructions for 
      Initial Rent Registration, which reflect the May 1, 1987 Code 
      provisions.  However as part of the requirements for the initial 
      apartment registration, Section 9 NYCRR 2528.2(d) of the Code provides 

           [o]ne copy of the initial Apartment Registration form which 
           pertains to the tenant's housing accommodation shall be sent 
           by the owner to the tenant by certified mail.  Service of such 
           form pursuant to this subdivision (d) together with the Notice 
           of Initial Legal Registered Rent shall constitute proper 
           service of such Notice of Initial Registered Rent under 
           section 2523.1 of this Title.  Provided however, that for 
           registrations served prior to the effective date of this 
           subdivision (d), any method of service permitted by the DHCR 
           at the time of service shall be deemed to have the same effect 
           as service by certified mailing.

      The instructions (Form RR-5 [1-'84]) for rent registration under the 
      Omnibus Housing Act of 1983, applicable to the initial registration of 
      the subject apartment in 1984, contained certain provisions for 
      delivering the apartment registration (Form RR-1 [10-'83]) to a tenant 
      in an envelope.  An owner could:

           "obtain an acceptable proof of delivery in one of the 
           following ways: 

                @Hand-deliver the envelope to the tenant named, and 
                get an appropriate signed receipt . . .

                @Use the U.S. Post Office "Carrier Route Pre-Sort" 
                service, through a bonded mailing house.  The Post 
                Office will date-certify the number of pieces 
                received from the mailing house for each building, 
                and the bonded mail house will furnish a list of 
                addresses  . . .

                @Obtain a signed and dated copy of Post Office form 
                #PO 3877 "Acceptance of Registered, Insured, C.O.D. 
                and Certified Mail", which is available through your 
                post office and can be used to prove date of 
                delivery of regular first-class mail to the post 
                office . . . 

           The proof(s) of receipt, properly signed and dated (by the 
           tenant, the post office, and the mailing house, as 
           appropriate), will be considered adequate by DHCR to establish 
           the tenant's 90-day challenge period, which will begin on the 
           date of the receipt . . ."

          GF 410589-RT (refiling of GA 410447-RT)

      This is providing that delivery of the 1984 registration be by proven 
      personal delivery or by proven mailing by regular first class mail.  
      (While Post Office form #PO 3877, mentioned in the instructions, can be 
      used for certified or registered mail, the Commissioner notes that the 
      form is often used as a certificate of mailing of a number of pieces of 
      mail.  At the upper right hand corner of the form is the statement 
      "[a]ffix stamp here if issued as certificate of mailing or for 
      additional copies of this bill."  The mention of the form in the RR-5 
      instructions therefore cannot be taken as authorizing certified mail, 
      particularly since the instructions say the form "can be used to prove 
      date of delivery of regular first-class mail to the post office . . ."  
      [Emphasis added])  In addition, Policy Statement 92-3 has reiterated 
      that for initial registrations filed prior to May 1, 1987 the only 
      acceptable proof of service on the tenant is by one of the three methods 
      mentioned earlier in this order.  Therefore the proven mailing of the 
      registration to the tenant by regular first-class mail was proper 
      service and since the tenant did not file a timely tenant's objection, 
      the initial rent pursuant to the Rent Stabilization Law and Code is 
      established at $500.00 per month.

      However, it is important to note that this order does not diminish
      the rights and obligations (not conflicting with the Rent Stabilization 
      Law) of the parties, which may already have been fixed by their written 
      agreements and/or by Justice Gould's opinion.  That is, it may be that 
      the owner cannot charge the tenant more than the maintenance charge 
      applicable to all other 350 square foot apartments plus principal and 
      interest on the balance of his purchase money mortgage; or that he has 
      a right not be evicted, or at least not to be deprived of his ownership 
      share in the corporation, as a result of non-primary residence and/or 
      subleasing; or that he has the right to sell his share in the 
      corporation and/or his quasi-"proprietary lease"; or that he has a right 
      to tax benefits as a partial owner regardless of whether or not he lives 
      in the apartment.  These matters, separate from the Rent Stabilization 
      Law and Code, may have to be determined in a court of competent 

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

      ORDERED, that this Petition be, and the same hereby is, denied and that 
      the Rent Administrator's order be, and the same hereby is, affirmed. 


                                      JOSEPH A. D'AGOSTA
                                      Acting Deputy Commissioner


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