GG 510065 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
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IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: GG 510065-RO
VASARE CORPORATION,
DRO DOCKET NO.: DE 510196-R
TENANT: Y. SIMAAN
PETITIONER
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
warranted.
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
installation.
The owner responded that prior to the complainant's occupancy the
subject apartment had been partially renovated, which is reflected
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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
precedents.
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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
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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.
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ISSUED:
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JOSEPH A. D'AGOSTA
Deputy Commissioner
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