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    
      ------------------------------------X                             


          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      By stipulation, the court proceeding was withdrawn and the petition for 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 







          GC410135RO

      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- 


          GC410135RO

      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 







          GC410135RO

      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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