GG 510065 RO
                                  STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                              JAMAICA, NEW YORK   11433

          APPEAL OF                               DOCKET NO.: GG 510065-RO

                   VASARE CORPORATION,
                                                  DRO DOCKET NO.: DE 510196-R
                                                  TENANT:  Y. SIMAAN


           On July 2, 1992, the above-named petitioner filed a Petition for 
           Administrative Review against an order issued on May 29, 1992, by 
           a Rent Administrator concerning the housing accommodations known as 
           160 Claremont Avenue, New York, Apartment No. 1G, wherein the Rent 
           Administrator, determined that the owner had overcharge the tenant.  
           The Administrative Appeal is being determined pursuant to the 
           provisions of Section 2522.4 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 
           issues raised by the administrative appeal.

           The tenant originally commenced this proceeding by filing a 
           complaint of rent overcharge on May 15, 1989.  The tenant had 
           assumed occupancy pursuant to a two year vacancy lease for the 
           period from March 15, 1986 to March 31, 1988 at a rent of $675.00.

           The owner was served with a copy of the complaint and was directed 
           to submit a complete rental history.  The owner was advised that if 
           it claimed a rent increase for the installation of new equipment, 
           it was required to submit invoice(s) showing the cost and date of 

           The owner responded that prior to the complainant's occupancy the 
           subject apartment had been partially renovated, which is reflected 

          GG 510065 RO

           in the complainant's initial rent of $675.00.  Unfortunately, the 
           owner continued, it had no copies of cancelled checks or bills for 
           the renovations, and was unable to obtain them.

           The owner was then notified of the opportunity to refute the 
           finding that determined overcharges were willful, and thus avoid 
           treble damages.  A preliminary calculation found overcharges of 
           $65,424.00 including treble damages, and a lawful rent of $453.61 
           through the lease period ending March 31, 1992.

           Subsequently, the owner notified the Administrator that it was 
           refunding overcharges to the tenant in the amount of $19,656.99, 
           representing the Administrator's finding of actual overcharges 
           ($21,699.34, not including interest or treble damages) minus rent 
           arrears in the amount of $2,042.35.  The owner also stated that the 
           rent would be adjusted in accordance with the amount in the 
           preliminary notice, effective January 1992.

           Partial documentation of the claimed renovations included building- 
           wide repairs for which no major capital improvement application was 
           ever filed.

           In Order Number DE-510196-R, the Administrator determined that the 
           tenant had been overcharged in the amount of $55,956.75, including 
           treble damages (for the period commencing two years prior to the 
           filing of the complaint until the date of issuance of the order) 
           and interest for the period from April 1, 1984 until the 
           commencement of the treble damages penalty, which was reduced by 
           the refunded amount of $19,656,99, leaving a balance of $32,299.76.

           In its petition the owner contends that the Administrator's 
           determination to impose treble damages even after the owner 
           refunded overcharges to the tenant prior to the issuance of an 
           Order contradicts several prior rulings of the Division of Housing 
           and Community Renewal (DHCR).  Furthermore, the owner, and current 
           managing agent only learned of the tenant complaint from the 
           December 2, 1991 DHCR notice of the possibility of treble damages, 
           even though the prior agent had been served with the complaint two 
           years earlier, without responding with an answer.  The owner's 
           immediate response was to refund the amount of overcharges set 
           forth in the Final Notice, and to roll back the rent effective 
           January 1, 1992, the first month after receiving notice of the 
           complaint.  The owner's behavior thus constitutes a "good faith" 
           effort to comply with the requirements of the Rent Stabilization 
           Law and Code.  Petitioner further contends that the tenant 
           continues to withhold rental payments, and is in arrears for over 
           three thousand dollars.  Finally, the owner contends that the DHCR 
           has repeatedly held that where overcharges result from the failure 
           to substantiate the cost of improvements, no treble damages will be 
           imposed, and that the Administrator's order failed to follow these 

          GG 510065 RO

           In response, the tenant maintains that the owner has not 
           demonstrated a lack of willfulness, and that the belated refund of 
           the overcharges is no defense.  The tenant notes that the owner 
           made no attempt to reduce the rent from the time the owner was 
           first served with the complaint, in June 1989, until the DHCR 
           issued its summary notice of December 2, 1991, but offers no 
           explanation for this delay other than the fact that the current 
           managing agent "only" took control of the building one year prior 
           to the summary letter.  In fact, the answer continues, the current 
           management does not say what inquiries it made to the DHCR 
           regarding pending complaints during that one year period, as a new 
           manager should be expected to do.  The tenant contends moreover 
           that the owner has submitted no affidavit from any of its owner 
           principals attesting to a lack of knowledge of the complaint.

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

           Section 2526.1(a)(1) of the Rent Stabilization Code provides for 
           the penalty of treble damages on overcharges unless the owner 
           establishes by a preponderance of the evidence that the overcharge 
           was not willful.  The Division's position on the application of 
           treble damages upon the finding of a rent overcharge was clarified 
           in Policy Statement 89-2 which describes, inter alia, certain 
           circumstances in which the burden of proof in establishing lack of 
           willfulness will be deemed to have been met.  One such situation is 
           were 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 the instant case a copy of the tenant's complaint was mailed to 
           the owner's prior managing agent on May 30, 1989.  The owner does 
           not submit an affidavit from the prior managing agent attesting to 
           non-receipt of the complaint, and indeed the owner does not make 
           that claim.  At any rate, the owner's first acknowledgment of the 
           complaint is in a letter to the DHCR from the current managing 
           agent, dated October 23, 1991, requesting a further extension of 
           time to prepare an answer.  In another brief letter, dated November 
           18, 1991, the new managing agent informed the Administrator that 
           the complainant's initial rent of $675.00 was determined after the 
           apartment was "partially renovated", but that, because it had only 
           been managing agent since January, 1991, it had no copies of 
           cancelled checks or bill for the renovations, and furthermore had 
           no access to them.  The owner apparently redoubled its efforts 
           after receiving the Administrator's Final Notice of Treble Damages 
           of December 2, 1991, which estimated an overcharge of over 
           $65,000.00, including treble damages because, in its submission of 
           December 20, 1991, as prepared by an attorney, the owner submitted 
           documentation of the claim, which included 15 separate bills, 
           receipts and cancelled checks.  An examination of them revealed, 
           however, that all of the work was in the nature of maintenance and 

          GG 510065 RO

           repair, and thus would not qualify for a rent increase.  
           Nevertheless, as the Administrator's rent calculation chart makes 
           clear, the initial and all subsequent overcharges are directly 
           attributable to this unsupported claim for the cost of renovations, 
           amounting to nearly three hundred dollars per month in the 
           complainant's vacancy lease.

           On the issue of applying treble damages to overcharges directly 
           attributable to this claim, the owner contends that its situation 
           is the same as those cases where the penalty was revoked or 
           omitted.  It cites as examples three cases in which the 
           Commissioner made that ruling:  In The Matter of Clinton Hill 
           Equities Group, Inc. (ARO No. ARL 02037-K), In The Matter of Saxony 
           Realty Associates (ARO NO. ARL 06156-Q) and In The Matter of Shore 
           Lane Arms, Inc. (ARO NO. ARL 13023-K).  However, a review of those 
           cases as well as others with a similar ruling reveals a significant 
           difference from the instant case, namely that all of the 
           aforementioned claims concerned installations and renovations that 
           would have qualified for a rent increase had the costs been 
           substantiated, while the present claim is for innumerable items of 
           repair that could not merit a rent increase even if actual costs 
           were established.  On the basis of this distinction, the 
           Commissioner believes that the presumption of willfulness has not 
           been refuted.

           The owner has also failed to rebut the presumption of willfulness 
           by its attempts to refund the determined overcharge.  It is quite 
           evident that the owner's belated efforts failed to comply with DHCR 
           Policy Statement 89-2.  The Policy Statement requires a full refund 
           "within the time afforded to interpose an answer."  Although the 
           owner was first served with the complaint in June, 1989, the record 
           discloses no response until after the summary notice of 
           December 2, 1991, when the owner tendered the amount of the 
           overcharge - minus current rent due - to the tenant.  The owner's 
           attempt at an explanation -  that the prior managing agent never 
           mentioned the complaint - is unsupported by affidavits, but is at 
           any rate unacceptable because of the DHCR's long standing policy, 
           which has been repeatedly upheld by the courts, that the service of 
           the complaint on a managing agent is adequate service on the owner 
           as well (Accord:  CE 410026-RO; ARL 02813-L).

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

           ORDERED, that the owner's petition be, and the same hereby is, 
           denied, and that the Administrator's order be, and the same hereby 
           is, affirmed.

          GG 510065 RO


                                                   JOSEPH A. D'AGOSTA
                                                   Deputy Commissioner


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