GF 410589-RT (refiling of GA 410447-RT)
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
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IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO. GF 410589 RT
(refiling of GA 410447-RT)
: DISTRICT RENT OFFICE
David Perkins, tenant, DOCKET NO. ZFD-410036-RP
(ZL-005162-R)
(BG 410110-RO)
OWNER: 71 East Third Street
Tenant's Corp.
PETITIONER :
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
correct.
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
upon.
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
revoked.
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
conclusive.
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
that:
[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
jurisdiction.
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.
ISSUED:
JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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