GC410135RO
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 SJR No. 6815
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.: GC410135RO
DISTRICT RENT ADMINISTRATOR'S
Max O. Doss, DOCKET NO.: L003081R
TENANT: Caroline Ashe
William Wescott
PETITIONER
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART
On March 6, 1992, the above-named owner filed a petition for
administrative review of an order issued on February 6, 1992 by a Rent
Administrator concerning the housing accommodations known as 309 East
93rd Street, New York, New York, Apartment No. 5W, wherein the Rent
Administrator determined that the owner had overcharged the tenant.
Subsequently, and after more than ninety days had elapsed from the time
he had filed his petition for administrative review, the owner deemed
his petition as having been denied, and sought judicial review in the
Supreme Court of the State of New York pursuant to Article 78 of the
Civil Practice Law and Rules.
By stipulation, the court proceeding was withdrawn and the petition for
administrative review was remitted to the Division of Housing and
Community Renewal (DHCR) for a determination on the merits.
On August 9, 1985, this proceeding was commenced by the filing of an
overcharge complaint. In the complaint the tenant questioned whether or
not the owner was charging a legal rent and alleged that she had not
been served with the Initial Apartment Registration.
On April 29, 1988, DHCR requested that the owner supply proof of service
of the Initial Apartment Registration (RR-1). The owner was advised
that if he failed to do so he would be required to submit a complete
lease history from April 1, 1980 and the agency would establish the
legal rent as of April 1, 1984. Further, the owner was advised that his
failure to prove service of the RR-1 on the tenant would result in the
rent being frozen at the April 1, 1984 level as established by the
Administrator.
In response to this notice, the owner submitted the requisite complete
lease history. Further, the owner submitted copies of the RR-1 forms
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for the subject apartment and alleged that the tenant was served.
However, the owner acknowledged that he was unable to produce any
documentary evidence to prove service of the Initial Apartment
Registration on the tenant.
Because of the owner's acknowledged failure to produce proof of service
of the Initial Apartment Registration on the tenant, the owner was
subsequently advised that the case would be processed as a timely
challenge to the Initial Apartment Registration.
In the order here under review the Administrator determined that the
subject apartment was not lawfully registered because of the owner's
failure to prove service on the tenant. The Administrator computed the
overcharges beginning April 1, 1984 and determined the April 1, 1984
rental by using the default method and froze the rent at the April 1,
1984 level. Finally, the Administrator found that the owner failed to
prove that the overcharges were not willful and assessed treble damages
on those overcharges occurring between April 1, 1984 and March 31, 1986.
Interest only was imposed on those overcharges occurring after April 1,
1986.
In the petition for administrative review, the owner alleged, among
other things, that the determination of whether or not the tenant was
served with the initial registration was a question of fact which
mandated an evidentiary hearing. Also, the owner alleges that he relied
on the assurances of a prior managing agent that all DHCR registration
requirements were met and that all the rent increases associated with
the subject apartment were consistent with appropriate rent guidelines.
Accordingly, the owner asserted that these facts constituted a display
of a lack of willfulness and no treble damages should have been
assessed. Further, the owner alleges, in the alternative, that even if
it is determined that registration requirements were not met in 1984,
the subsequent filing of the registration form in 1985 would
prospectively unfreeze the rent. Also, the owner alleges errors in the
Administrator's computations.
In support of his factual allegation that the tenant was served with the
Initial Apartment Registration, the owner submits an affidavit from the
prior managing agent (Henry Bunch) in which Mr. Bunch stated that it was
his general practice to serve the tenant with the RR-1 but that he could
not provide documentation to support this claim. In support of his
various legal allegations, the owner cites several cases as precedents.
After careful consideration, the Commissioner is of the opinion that
this petition should be granted in part and that the Administrator's
order should be modified.
The Commissioner is of the opinion that the owner has incorrectly
asserted that an evidentiary hearing is mandated in this case. Sections
2527.5(h) and 2529.7(f) of the Rent Stabilization Code state that the
granting or ordering of a hearing to determine a question of fact is
discretionary both for the Administrator and the Commissioner. The
owner cites a DHCR precedent (Docket No. ART13438K) to support his
assertion that a hearing is mandatory. However, in that case the owner
submitted a copy of a DC-2 notice signed by the tenant. In this case,
no documentation has been produced by the owner. Even if the instant
case and the precedent cited by the owner were not distinguishable on
the facts, the Commissioner is of the opinion that ordering a fact-
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finding hearing in an overcharge proceeding is always discretionary and
never mandatory.
Further, the Commissioner finds that the Administrator correctly
determined that the owner had not sustained his burden of proof in that
the owner failed to prove that he had served the tenant with the Initial
Apartment Registration. As stated earlier, the owner has acknowledged
several times that he cannot produce any proof of service of the RR-1 on
the tenant. The owner submits an affidavit from a prior managing agent
stating that it was his practice to insure service of the apartment
registration by certified mail or by hand. The Commissioner notes that
this affidavit is submitted for the first time with the administrative
appeal and is, therefore, outside the scope of review. However,even if
the affidavit were to be fully considered, it would be insufficient to
warrant reversing the Administrator's finding. The affidavit does not
meet the requirements for proof of service of the initial registration
form in effect at the time as stated in DHCR registration instructions.
Also, the Commissioner finds that the Administrator correctly froze the
rent at the April 1, 1984 figure and correctly kept the rent frozen for
the entire period of the calculation. Section 2528.4 is the section of
the Rent Stabilization Code which is determinative. The section bars an
owner from collecting any rent increase "... until such time as such
registration is completed... ." Section 2528.4(c) goes on to state that
"the late filing of a registration shall result in the elimination,
prospectively of such penalty."
Clearly, the statute mandates that the registration in question must be
filed retroactively to eliminate the penalty. Registration of an
apartment for a subsequent year does not cure the failure to file in a
specific year. The DHCR precedent cited by the owner, Matter of D'Urso
(Docket No. DK110319RO), is simply an error by DHCR which will not be
followed.
Further, the Commissioner is of the opinion that treble damages should
not be assessed. The Commissioner finds that the record contains
sufficient proof of a lack of willfulness on the part of the owner.
First, all of the building and apartment registrations for the subject
unit have been duly filed with DHCR. Second, the rents charged by the
owner were all within guidelines. In fact, for the lease period of
August 15, 1983 through August 14, 1985 the owner elected to take no
increase. The owner could have but did not charge the tenants more
money. The owner did not benefit from his failure to prove service on
the tenant of the Initial Registration Form. Had the tenant been duly
served with the RR-1 and challenged the rent, no overcharge would have
been found. Finally, the owner displayed further good faith by
complying with the Administrator's order when issued. This fact is
reflected in the 1992 registration filed with DHCR.
Finally, the owner asserted that the Administrator's computations
contained errors. A reexamination of the calculations does, in fact,
disclose several errors made by the Administrator. The Administrator
incorrectly used the default method for determining the April 1, 1984
rent. The default method should not have been used because the record
contained a complete lease history. Also, the Administrator began the
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examination of the overcharges as of April 1, 1984. The calculations
should have begun with the rent of April 1, 1980 because the case was a
timely challenge to the initial registration. These corrections are
reflected in the attached Rent Calculation Chart which is made part of
this order.
Accordingly, as reflected on the attached Rent Calculation Chart, the
lawful stabilization rent is $335.77 and total overcharges are $5,701.61
through August 31, 1991. The Commissioner notes that the owner may not
prospectively eliminate the penalties until he has served the tenant
with a copy of the 1984 Initial Apartment Registration Form.
This order may upon the expiration of the period in 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 or not
in excess of twenty percent per month thereof may be offset against any
rent thereafter due the owner.
If 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 12
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 with the provisions of the Rent Stabilization
Law and Code, it is
ORDERED, that this petition for administrative review be, and the same
hereby is, granted in part, and that the order of the Rent Administrator
be, and the same hereby is, modified in accordance with this order and
opinion.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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