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
          IN THE MATTER OF THE ADMINISTRATIVE :    ADMINISTRATIVE REVIEW
          APPEAL OF                                DOCKET NOS.:GE410206RO
                                              :                GF410364RT
          175  West  79th  Realty,  owner,  and          DRO  DOCKET   NO.:
          Sam & Helene Schoenfeld, tenants,        ZAJ410588R      
                                                   PRIOR OWNER: Rubin &
                               PETITIONERS    :                 Paleg
          ------------------------------------X

            ORDER AND OPINION GRANTING PETITIONS FOR ADMINISTRATIVE REVIEW
                                       IN PART

          On May 26 and June 23, 1992  the  above-named  petitioners  filed
          Petitions for Administrative Review against an order issued on May 
          20, 1992 by the Rent  Administrator,  92-31  Union  Hall  Street,
          Jamaica, New York  concerning  housing  accommodations  known  as
          Apartment 4C at 175 West 79th Street, New York, New York  wherein
          the Rent Administrator determined that the  owner  had  collected
          excess rent from the tenants.

          The issue in this appeal is whether the Rent Administrator's order 
          was warranted.

          This applicable sections of the Law are Sections 2522.3, 2526.1(g) 
          and 2529.10 of the Rent Stabilization Code.

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

          This proceeding was originally commenced by the filing in October 
          1986 of a rent overcharge complaint by the tenants, in which they 
          stated that they had commenced occupancy on May 1, 1985 at a rent 
          of $893.64 per month.  In response  the  owner  stated  that  the
          tenants herein were the first  rent  stabilized  tenants  of  the
          subject apartment and that their complaint  should  be  dismissed
          because it was not filed within 90 days of service of the notice of 
          Initial Legal Regulated Rent (hereafter DC-2 Notice).  The  owner
          was then afforded an opportunity to submit proof of service of the 
          DC-2 Notice or Apartment Registration Form (hereafter  RR-1)  and
          comparability data to be used in determining the fair market rent. 


          GE410206RO













          GE410206RO
          In the course of the proceeding the owner submitted  among  other
          things a DC-2 Notice naming one of the tenants, but did not submit 
          proof of service.  The tenants denied receiving this notice.  The 
          owner also submitted data for Apartment 9C  to  be  used  in  the
          comparability study.  The tenants contended that the tenant of that 
          apartment was Arnold J. Davis,  an  owner  of  the  building  and
          managing agent at the time of the apartment rental.  (In 1984 Seena 
          R. Davis was registered as the first stabilized tenant in Apartment 
          9C beginning November 1, 1983.  On March 1,  1985  she  moved  to
          Apartment 8C, where she has been ever since.  Gail Davis took her 
          place in Apartment 9C, and has been there ever since.   In  their
          petition the tenants contend that Seena R. Davis is the  wife  of
          Arnold J. Davis, and that Gail Davis is his daughter.)

          On April 14, 1992 the owner was requested to  submit  "copies  of
          certified rent ledgers showing rent paid for Apt. 9C for the period 
          of time between December 1, 1983 and April 30, 1984."  In reply the 
          owner, stating that "[n]o certified copies of  rent  ledgers  are
          available as the  ownership  and  management  were  different  in
          1983/84," submitted a lease for Apartment 9C given  by  "Rubin  &
          Paleg" to Seena R. Davis commencing November 1, 1983.  (Arnold J. 
          Davis signed all but the last four letters of his name on the Rent 
          Guidelines Rider before crossing it out and having  someone  else
          sign on the owner's behalf.)
               
          In an order issued on May 20, 1992  the  Administrator,  applying
          Sepcial Guidelines Order No. 16 to a calculated 1984 Maximum Base 
          Rent ("MBR") of $496.23 plus the 1984  fuel  cost  adjustment  of
          $14.60, determined a fair market rent of $587.45.  After allowing 
          an increase of $49.16 for improvements  and  new  equipment,  the
          Administrator arrived at a final Fair Market Rent of $636.61, and 
          found that the tenants had paid excess rent of $24,594.84 from May 
          1, 1985 to April 30, 1992.  The order directed the  prior  owner,
          Rubin & Paleg, to refund any excess rent collected from May 1, 1985 
          to the date of title transfer, and directed the current owner, 175 
          West 79th Realty, to refund any excess rent  collected  after  it
          acquired title to the property.

          In its petition (Docket No.GE410260RO),  the  owner  contends  in
          substance that the Administrator should have used the 1985 MBR of 
          $528.58, including labor passalong of December 29, 1982 per Docket 
          No.2AOM34722, rather than the 1984 MBR, which was $511.50 in  any
          event rather than $496.23; that Apartment 9C should have been used 
          for comparability; and that the tenants did  not  timely  file  a
          complaint after service of the DC-2 notice.  With its petition the 
          owner has enclosed a "Notice of Increase in 1984-85 MBR  and  MCR
          Calculation", computing a 1984 MBR of $511.50; a "Notice of Maximum 
          Collectible Rent: effective January 1, 1985" form  computing  the
          adjusted 1985 MBR, on which Arnold Davis has entered the adjusted 



          1984 MBR of $528.58 "corrected to include December 29, 1982 labor 
          cost adjustment Docket No.2AOM34722"; and a sheet listing  leases






          GE410206RO

          and rents of various tenants.  The latter  is  not  a  record  of
          monthly payments, but rather a summary.  It shows Seena R. Davis in 
          Apartment 8C at a rent of $874.35, and Gail Davis in Apartment 9C 
          at a rent of $920.78.  Both have leases running from March 1, 1987 
          to February 28, 1989.

          In answer, the tenants assert in substance that it was correct to 
          exclude Apartment 9C as a comparable rental; that 9C and  8C  are
          rented to members of the immediate family of the owner Paleg, and 
          cannot be regarded as arms-length transactions indicative of fair 
          market value; that the owner never served the complainants with an 
          RR-1 form, nor does it claim to have done so; that the unsupported 
          document submitted by the owner for the first time on appeal should 
          be disregarded; and that the Paleg family interests are represented 
          in both the former and current owners.

          In their petition, the tenants assert in substance that they should 
          be allowed to recover the full  amount  of  overcharge  from  the
          current owner, since:

               Rubin and Paleg were  brother  and  sister.   Following
               Rubin's death, ownership of the building was conveyed to 
               175 West 79th Realty, an entity controlled by the Paleg 
               family.  Arnold J. Davis, Mrs. Paleg's son-in-law,  was
               active in the management of the subject building for both 
               the prior and current owner.  He is  married  to  Seena
               Paleg Davis (Apt. 8C) and is the father of  Gail  Davis
               (Apt. 9C).

          The tenants later  submitted  a  supplement  calling  for  treble
          damages.

          In response, the owner contends in  substance  that  "tenant  who
          signed is not tenant of  record";  that  the  building  is  under
          different ownership, since ownership was transferred; and that any 
          overcharge of a first stabilized tenant is not willful.

          On September 2, 1993 the owner was requested to submit a copy  of
          the partnership agreement, articles of incorporation or  whatever
          other documents might be necessary to establish the principals of 
          175 West 79th Realty; and to point out any factual inaccuracies in 
          the tenants' contentions that were quoted three paragraphs earlier 
          in this order.  The owner's September 21, 1993 response consisted 
          of a deed and of the following statements:

               



               1) Copy of deed enclosed
               2) Relationships of tenants are not pertinent.  Leases 
                  were and are in effect & were and are registered with 












          GE410206RO

                  the D.H.C.R.
               3) Marcia Rubin and Jeanette Paleg were not blood relations. 
                  Mr. Davis is not currently active in building management.

          The deed concerned the September 29, 1987 sale of the building by 
          Marcia Rubin, individually and as the administratrix of the estate 
          of Philip Rubin, to Jeanette Paleg.

          The Commisioner is of the opinion that these petitions should  be
          granted in part.

          The DHCR's rent registration cards show an adjusted 1982/83 MBR of 
          $454.23, plus a December 29, 1982 labor cost adjustment of $15.88 
          per Docket No. 2AOM34722.   This total of $470.11 is increased by 
          7 1/2% to get a 1984 MBR of  $505.37,  rather  than  the  $496.23
          calculated by the Administrator or the $511.50 calculated by  the
          owner on its report.  Further the 1984-85 MBR is the same, contrary 
          to the owner's contention that the 1985 MBR was higher.  Adding the 
          1984 fuel cost adjustment of $14.60, and adjusting that total  of
          $519.97 by an additional 15% results in a  fair  market  rent  of
          $597.97.  After adding $49.16 for new equipment, the  final  Fair
          Market Rent is $647.13.  Taking this into account, the Commissioner 
          has calculated the lawful stabilization rents and the  amount  of
          excess rent collected.  They are set forth  on  an  amended  rent
          calculation chart attached hereto and made a part hereof.

          According to Master Building Rent Schedules submitted in  various
          years, "Rubin & Paleg" were the building  owners  from  at  least
          January 1, 1972 through January 1, 1987.  The 1972 schedule  gave
          the owners as P. Rubin and J. Paleg.  It might be thought that the 
          initials refer to Philip Rubin  and  Jeanette  Paleg,  since  the
          address on most of the schedules was in care of Philip Rubin, and 
          since the 1987 sale was of the interests of Philip and Marcia Rubin 
          to Jeanette Paleg.  This bargain  and  sale  deed  was  the  only
          document submitted by the owner in an attempt to show that  there
          had been a transfer of ownership that should result  in  its  not
          being liable for the refund of excess rent collected.  It does not 
          succeed in doing so.   The  owner  does  not  deny  the  tenants'
          contention that it is an entity controlled by the Paleg family, and 
          the deed, in combination with the Master Building Rent Schedules, 
          and the leases and registrations showing the building as owned by 
          "Rubin and Paleg" through 1987, shows that Jeanette Paleg has had 
          a partial interest in the building since at least 1972 and that she 
          now has a larger, and perhaps total, interest.  While Policy 


          Statement 93-1 would make the current owner, who participated  in
          the proceeding before the Administrator,  jointly  and  severally
          liable for the refund of excess rent collected since April 1, 1984, 
          the current owner, as an entity of Jeanette Paleg, would also  be
          responsible for the refund of the excess rent since Jeanette Paleg 
          has had an ownership interest in the premise since at  least  the






          GE410206RO

          inception of the complainants' tenancy in 1985.

          While the owner may be  correct  that  Arnold  J.  Davis  is  not
          currently active in building management, he was an agent from  at
          least 1979 through 1987.  In particular, he was the managing agent 
          on October 6, 1983, when  Seena  R.  Davis  signed  a  lease  for
          Apartment 9C, which the owner wishes  to  use  for  comparability
          purposes.  The owner has not denied the tenants' contention  that
          Arnold Davis is married to Seena Davis, or that she is Jeanette 
          Paleg's daughter.  It is interesting to note that Arnold Davis had 
          almost completed his signature on Seena Davis' lease rider when he 
          crossed it out and had another person sign the rider.  Such a lease 
          does not, however, indicate either that the lease rent was set in 
          an arms-length transaction or that the decision of Seena Davis not 
          to file a fair market rent appeal was arrived at independently of 
          considerations of family relations.  It has also not  been  shown
          that she actually paid the lease rent.  In an April 14, 1992 answer 
          the owner stated that "[n]o certified copies of rent ledgers  are
          available as the  ownership  and  management  were  different  in
          1983/84."  This is misleading since the 1983/84  managing  agent,
          Arnold Davis, an in-law of the owner, was presumably living in the 
          building when the answer was prepared (since Seena Davis continued 
          to be registered in Apartment 8C), whether  or  not  he  was  the
          managing agent in 1992.   In  terms  of  ownership,  the  owner's
          September 21, 1993 submission, in response to a request  to  show
          exactly who actually now owns the building, indicates  only  that
          Jeanette Paleg, who was a part-owner in 1972, is still an  owner.
          While the document purporting to show Seena Davis'  rent  is  not
          accepted, since submitted for the first time on appeal, it  would
          not in any event be useable to establish that Apartment 9C should 
          be used as a comparable.  It consists solely of a sheet on  which
          lease dates, lease amounts, number of rooms, and tenant names have 
          been listed for each apartment.  With respect to Seena Davis,  it
          lists the rent for a 1987-89 lease for Apartment  8C,  which  she
          moved into in 1985 after having been in Apartment 9C for two years. 
          The sheet proves nothing about Apartment 9C.  (The sheet also lists 
          Gail Davis in Apartment 9C.  It is interesting to note  that  the
          apartments occupied by Seena and Gail  Davis,  whom  the  tenants
          allege are the wife and daughter of Arnold Davis, and relatives of 
          the owner, have by far the highest rents of any of the  nine  "C"
          line apartments listed on the sheet, with the exception of the 



          complainants' apartment.  While the sheet does not list it, the "C" 
          line apartment of Marcia Rubin, who was still a part owner  until
          September 29, 1987, is registered as having the next highest rent 
          in 1987.)

          Regarding the timeliness of the tenants' complaint: The owner did 
          not submit proof of service of a DC-2 notice on the tenants,  and
          they deny receiving the notice, so their 90-day period in which to 












          GE410206RO

          file a fair market rent appeal never began to run.

          Section 2526.1 of the Rent Stabilization Code provides  that  any
          owner found to have willfully collected an overcharge  above  the
          authorized rent shall be liable for a penalty equal to three times 
          the amount of such overcharge and may be assessed the reasonable 
          costs and attorney's fees of the proceeding on any overcharge which 
          occurs after April 1, 1984.  If the overcharge is found not to be 
          willful, interest is imposed rather than  treble  damages.   This
          section applies to violations of the Rent Stabilization  Law  and
          Rent Guidelines Board orders and does not apply to fair market rent 
          appeals.   Pursuant  to  Section  26-512(b)  (2)  of   the   Rent
          Stabilization Law, for apartments which  are  removed  from  rent
          control and become subject to the Rent Stabilization Law, by virtue 
          of a vacancy occurring after June 30, 1974, the owner is permitted 
          to charge an initial fair market rent as "agreed to by the landlord 
          and the tenant," subject to the tenant's right to  challenge  the
          initial rent as exceeding the fair market rent.  If the tenant does 
          not challenge the initial rent, it becomes the legal base rent.  If 
          the tenant challenges the initial rent, a determination may be made 
          that the tenant's initial rent exceeds the proper fair market rent 
          for the apartment.  In such case, the owner is required to give the 
          tenant a refund or credit for the amount collected in excess of the 
          fair market rent.  However, such determination that  the  initial
          rent exceeds the fair market rent is considered in the nature of a 
          rent adjustment rather  than  a  rent  overcharge  and  thus  the
          imposition of treble damages or interest and attorney's fees is not 
          warranted.  It is noted that rent  overcharge  proceedings  where
          treble damages may be imposed generally involve  cases  where  an
          initial legal  regulated  rent  (fair  market  rent)  is  already
          established and an owner  willfully  charges  rents  higher  than
          permitted by the Guidelines Board upon subsequent renewal leases or 
          refuses to submit a complete rental history thus leading  to  the
          conclusion that rent overcharges occurred.  In addition,  Section
          2526.1(g) of the Rent Stabilization  Code  provides  that  "[t]he
          provisions of this section [Section 2526.1, concerning overcharge 
          penalties and assessment of costs and attorney's fees] shall  not
          apply to a proceeding pursuant to Section 2522.3  of  this  Title
          (Fair Market Rent Appeal)."  Therefore neither interest nor treble 
          damages have been applied to the excess rent collected.


          Regarding the owner's contention that "[t]enant who signed is not 
          tenant  of  record":  Helene  Schoenfeld   was   named   in   the
          Administrator's order, so she had a right to file a petition  for
          Administrative Review against it.  The owner's contention will not 
          be treated as an objection to the Administrator's inclusion of her 
          in the order, since the owner did not raise  that  issue  in  its
          appeal, and since the owner is clearly referring to her signature 
          on her petition rather than referring to the Administrator's order.

          The owner is directed to reflect the findings and  determinations






          GE410206RO

          made in this order on all future registration statements, including 
          those for the current year if not already filed, citing this Order 
          as the basis for the change.  Registration statements already on 
          file, however, should not be amended to reflect the findings  and
          determinations made in this order.  The owner is further directed 
          to adjust subsequent rents to an  amount  no  greater  than  that
          determined by this order plus any lawful increases.

          The owner is directed  to  roll  back  the  rent  to  the  lawful
          stabilized rent consistent with this decision and  to  refund  or
          fully credit against future rents over a period not exceeding six 
          months from the date of receipt of this order,  the  excess  rent
          collected                         by                          the
          owner.

          In the event the owner does not take appropriate action to comply 
          within sixty (60) days from the date of this order, the tenants may 
          credit the excess rent collected by the owner  against  the  next
          months rent until fully offset.

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

          ORDERED, that these petitions be, and the same hereby are, granted 
          in part and that the Rent Administrator's order be, and the  same
          hereby is, modified in accordance with this Order and Opinion.  The 
          lawful stabilization rents and the amounts  of  excess  rent  are
          established on the attached chart, which is fully made a part  of
          this order.  The total refund due, including excess  security  of
          $304.76, is $23,588.48 as of April 30, 1992.

          ISSUED:
                                                 


                                                                          
                                                    JOSEPH A. D'AGOSTA
                                                    Deputy Commissioner
             






    

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