GD 410152 RT; GD 410153 RO
                             STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                             JAMAICA, NEW YORK 11433

      APPEAL OF                               DOCKET NO. GD 410152-RT
                                                         GD 410153-RO

           Jeffrey Dawson, tenant        
                     and                      DISTRICT RENT OFFICE
           Hudson Associates, owner           DOCKET NO. DL 410309-R



      On April 17, 1992, both above-named petitioners timely filed Petitions 
      for Administrative Review against an order issued on March 13, 1992, by 
      the Rent Administrator, Gertz Plaza, concerning the housing 
      accommodations known as 104 West 96th Street, New York, New York, 
      Apartment 8, where the Rent Administrator determined that the owner had 
      overcharged the tenant.

      The Commissioner has reviewed all of the evidence of the record and has 
      carefully considered that portion of the record relevant to the issues 
      raised by the administrative appeals.

      This proceeding was originally commenced in December 1989 by the filing 
      of a rent overcharge complaint by the tenant.  The tenant took occupancy 
      pursuant to a lease commencing February 1, 1989 and expiring January 31, 
      1991 at a monthly rent of $1,195.00.  The tenant also stated that he had 
      been charged a finder's fee of $1,434.00.  

      In answer, the owner submitted a rental history and bills and cancelled 
      checks in the amount of $30,898.00 for new equipment installed in 
      February and March 1986, immediately prior to the occupancy of the prior 

      By subsequent correspondence, the tenant submitted a notarized statement 
      in which he stated that he rented the subject apartment from the 
      superintendent yet was forced to pay a broker's fee to one Alex 
      DeFortuna that he paid Mr. De Fortuna at the owner's office; and that he 
      believed Mr. DeFortuna was employed by the owner and represented the 
      owner's interests, and was not an outside broker.  The tenant also 
      submitted money orders made out to Mr. De Fortuna and a notarized 

          GD 410152 RT; GD 410153 RO

      statement from another tenant in the subject building stating that he 
      had dealt with Mr. Fortuna as the owner's representative.  The tenant 
      also challenged the claimed improvements.  The tenant submitted a report 
      from an engineer hired by the tenant, Mr. Nicholas Bellizzi, who 
      estimated the allowable cost of the work at $7,900.00 ($8600.00 minus 
      $700.00 for painting).  In addition Mr. Bellizzi claimed that the floors 
      were only sanded and refinished and were not oak flooring as the owner 
      claimed; that there were no new kitchen walls and the kitchen 
      entranceway was not enlarged; that the there were no new closets or new 
      doors as the owner claimed; and that the kitchen and bathroom work and 
      electrical work were substantially less than claimed by the owner.

      In reply, the owner asserted that Mr. De Fortuna was an indepent real 
      estate broker who has on several occasions provided his professional 
      services to the owner.  The owner also questioned Mr. Bellizzi's 
      qualification to estimate the scope of the work performed int he subject 
      apartment or the value thereof, and noted that Mr. Bellizi's inspection 
      was performed more than 5 years after the work was done.

      In Order Number DL 410309-R, the Rent Administrator determined that the 
      tenant had been overcharged in the amount of $33,743.96, including 
      treble damages, and directed the owner to refund such overcharge to the 
      tenant.  The Administrator also determined that the tenant had failed to 
      prove that a relationship existed between the owner and the broker and 
      that the evidence did not indicate that the owner and the broker had 
      acted in collusion to obtain a broker's fee.

      In the tenant's petition, the tenant contends that the Administrator 
      allowed $16,808.00 as accepted costs of new equipment out of the owner's 
      submission of $30,898.00, but the Administrator never broke down an 
      itemized list of which improvements were allowed or disallowed.  The 
      tenant asserts that the report of the engineer he employed indicated 
      substantial discrepancies with the owner's claimed improvements and 
      estimated an allowable cost of only $7900.00.   The tenant also claims 
      that the Administrator erred in allowing the $15.00 per month 
      supplementary increase for the prior tenant during Guideline 17 because 
      the Administrator should have added the new equipment allowance prior to 
      the supplementary increase, thereby increasing the rent above the 
      maximum amount allowed to receive the supplementary increase.  The 
      tenant also reasserts that the owner collected an illegal broker's fee 
      and that the Administrator failed to properly investigate the allegation 
      made by the tenant that there was a business relationship between the 
      owner and broker.

      In answer to the tenant's petition, the owner again challenged Mr. 
      Bellizzi's report, asserting that all claimed work had been performed 
      and documented.  The owner also asserted that it was allowed a $15.00 
      supplemental increase under Guideline 17 and that the Administrator 
      correctly determined the rent by adding the new equipment allowance 
      after the rent was calculated.

      In the owner's petition, the owner contends in substance that the 

          GD 410152 RT; GD 410153 RO

      Administrator erred by not granted a sufficient new equipment allowance 
      based on the work performed and the bills and cancelled checks 
      submitted.  In addition, the owner contended that the Administrator 
      should not have granted treble damages because even if the Administrator 
      disallowed some of the new improvements, the owner did not wilfully 
      overcharge the tenant as it believed it was justified or due to a 
      hypertechnical computation error.

      In answer to the owner's petition, the tenant asserts, in substance, 
      that the owner has failed to demonstrate that the overcharge was not 
      willful and that treble damages were warranted.

      The Commissioner is of the opinion that this petition should be remanded 
      to the Rent Administrator for additional processing.

      The record in the instant case reveals that the owner submitted 
      cancelled checks and invoices for considerable work that was allegedly 
      performed in the subject apartment.  Both the owner and tenant have 
      challenged the amount of increase for improvements allowed by the 
      Administrator.  The tenant raised several issues in a report by Mr. 
      Bellizzi concerning the claimed improvements which were not addressed by 
      the Administrator.  The Administrator allowed a partial allowance for 
      some of the work performed, but did not state specifically which bills 
      were accepted and which bills were rejected (and the reasons therefor). 
      In addition, the Commissioner finds that, based on the documentation in 
      the record, additional investigation into the tenant's allegation of an 
      illegal broker's fee is warranted.

      Accordingly, the Commissioner is of the opinion that this proceeding 
      must be remanded to the Rent Administrator for additional fact finding, 
      including a physical inspection and/or hearing, if warranted to 
      determine which new equipment was installed and work was performed in 
      the subject apartment and the owner's entitlement to a rent increase 
      based thereon; to determine whether treble damages should be assessed if 
      there was an overcharge; and to determine whether or not the owner 
      collected an illegal broker's fee.

      The Commissioner further finds that the tenant's argument that the 
      Administrator erred by granting a $15.00 supplemental increase during 
      Guideline 17 is incorrect.  Guideline 17 permits the $15.00 per month 
      for base rents of less than $330, not to exceed $342.50 for a two year 
      vacancy lease.  In this case, the Administrator added a guideline and 
      vacancy increase to the prior rent of $258.00 per month.  Since that 
      resulted in a rent of $294.12, the Administrator was correct in adding 
      the additional $15.00 per month supplemental increase.  The Code 
      provides that the legal regulated rent may only be increased upon the 
      execution of leases with tenants.  There is no provision in the Rent 
      Stabilization Law or Code to increase the legal regulated rent of a 
      vacant apartment.  The Guideline do not provide for a rent increase 
      until a tenant executes a vacancy lease.  Since the Guidelines orders 
      provide that the vacancy rent shall be computed above the rent charged 
      and paid on the preceding base date and since the Section 2522.4 

          GD 410152 RT; GD 410153 RO

      allowance was not charged on the base date, the owner is not permitted 
      to add the allowance to the rent before the guidelines computation.  
      (Accord: ARL10,876-L).
      THEREFORE, in accordance with the Rent Stabilization Law and Code, it is

      ORDERED, that this proceeding be remanded to the Rent Administrator for 
      further processing in accordance with this Order and Opinion.  The order 
      and determination of the Rent Administrator remains in full force and 
      effect until a new order is issued upon remand.  However, if the Rent 
      Administrator's order retroactively adjusted the rent and directed a 
      refund of monies between the parties, so much of the Rent 
      Administrator's order as directed such refund is hereby stayed until a 
      new order is issued upon remand.


                                         Joseph A. D'Agosta
                                         Acting Deputy Commissioner

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