GF410045RO, GF410058RT

                                  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
          APPEALS OF                             DOCKET NO.GF410045RO
                                              :            GF410058RT
                                                 DRO DOCKET NO.ZDG410042RP
          343-7 HALBOR, INC. & DAVID RUFO

                                PETITIONERS   : 
          ------------------------------------X                             
            ORDER AND OPINION DENYING PETITIONS FOR ADMINISTRATIVE REVIEW


               On June 4, 1992, the above-named petitioner-owner and tenant 
          filed Petitions for Administrative Review against an order issued on 
          May 8, 1992, by the Rent Administrator, 92-31 Union Hall Street, 
          Jamaica, New York, concerning the housing accommodations known as 
          347 West 48th Street, New York, New York, Apartment No. 2B, wherein 
          the Rent Administrator determined the fair market rent pursuant to 
          an apartment comparability study and the special fair market rent 
          guideline promulgated by the New York City Rent Guidelines Board for 
          use in calculating fair market rent appeals.
               
               The Commissioner notes that this proceeding was filed prior to 
          April 1, 1984.  Sections 2526.1 (a) (4)  and 2521.1 (d) of the Rent 
          Stabilization Code (effective May 1, 1987) governing rent overcharge 
          and fair market rent proceedings provide that determination of these 
          matters be based upon the law or code provisions in effect on March 
          31, 1984.  Therefore, unless otherwise indicated, reference to 
          Sections of the Rent Stabilization Code (Code) contained herein are 
          to the Code in effect on April 30, 1987.

               The Administrative Appeals are being determined pursuant to the 
          provisions of Sections 25 and 26 of the Rent Stabilization Code and 
          Section 2526.1 of the current 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 issue raised by the administrative appeals.  

               This proceeding was originally commenced on January 25, 1984, 
          by the filing of an application by the tenant challenging the 
          initial legal regulated rent.  In such application, the tenant 
          indicated that he had not received a notice of initial legal 
          regulated rent (hereafter DC-2 notice).

               In answer to the application, the owner submitted a copy of a 
          DC-2 notice dated May 26, 1981, addressed to the tenant and an 









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          affidavit from a real estate broker attesting to personal delivery 
          of the DC-2 notice to the tenant with his lease on or about May 28, 
          1981.

               In Order Number TA 12052, CDR 23,574, the Rent Administrator 
          rejected the tenant's application as untimely filed.  The tenant 
          filed a Petition for Administrative Review against such 
          determination and on May 26, 1989, under docket AK410212RT, the 
          Commissioner issued an order granting the tenant's petition on the 
          basis that the tenant had disputed the owner's allegation of 
          personal service of the DC-2 notice and that the owner had not 
          served the DC-2 notice by certified mail as required by Section 26 
          of the Code.  The Commissioner remanded the proceeding to the Rent 
          Administrator for processing of the tenant's fair market rent 
          appeal.  Subsequently, the owner filed an Article 78 petition 
          seeking to annul the Commissioner's Remand Order.  Such petition was 
          denied by the Court without prejudice on the basis that the 
          Commissioner's order of remand was not a final determination subject 
          to judicial review.

               Upon remand, in Order Number ZDG410042RP, (the order under 
          appeal herein), the Rent Administrator adjusted the initial legal 
          regulated rent by establishing a fair market rent of $276.41 
          effective June 1, 1981.  In addition, the Rent Administrator found 
          that the tenant had paid excess rent totalling $12,914.49 through 
          December 31, 1990, and directed the owner to refund such excess rent 
          to the tenant.

               In the owner's petition, the owner alleges in substance that 
          the tenant's fair market rent adjustment application should have 
          been rejected as untimely because it was not submitted within ninety 
          days of the personal service of the DC-2 notice on the tenant by a 
          licensed real estate broker; that personal delivery of the DC-2 
          notice when supported by an affidavit of service as is the case 
          herein should be accepted by the DHCR in lieu of service by 
          certified mail and that this position has been upheld in certain 
          court cases.  In support of its contentions, the owner submitted an 
          affidavit from the real estate broker to the effect that he served 
          the tenant with the DC-2 notice on or about May 28, 1981 and a copy 
          of said DC-2 notice.

               In the tenant's petition, the tenant alleges in substance that 
          the imposition of treble damages or at least interest on the 
          overcharge is warranted and that the tenant was never served with 
          the DC-2 notice as alleged by the owner.

               The Commissioner is of the opinion that these petitions should 
          be denied.

               Section 26 of the Rent Stabilization Code provides in pertinent 
          part that all tenants who are entitled to file a fair market rent 
          appeal shall be entitled to receive notice of such rent together 






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          with a statement as to the right of appeal (DC-2 notice).  Such 
          notice shall be served by the owner upon every such tenant by 
          certified mail.  Section 25B of the Rent Stabilization Code provides 
          in pertinent part that a fair market rent appeal must be filed 
          within ninety (90) days after the tenant receives the DC-2 notice.  
          Further the Court of Appeals in Alcoma Corp. v. New York State 
          Division of Housing and Community Renewal, (79 N.Y. 2d 834, 1992) 
          found that the DHCR interpretation of Sections 25B and 26 requiring 
          service of the DC-2 notice by certified mail before the 90 day 
          limitation period for filing a fair market rent appeal commences to 
          run to be reasonable and rational.

               In the instant case the evidence of record discloses that the 
          owner did not serve the DC-2 notice by certified mail as the Rent 
          Stabilization Code mandates and as upheld by the Court of Appeals.  
          Moreover, the tenant has denied having been served with the DC-2 
          notice in the manner the owner alleges.  Accordingly, it was proper 
          to process the tenant's fair market rent appeal on the merits and 
          not to dismiss it as untimely.

               With regard to the tenant's contention that the imposition of 
          treble damages or at least interest was warranted, Section 2526.1 of 
          the current Rent Stabilization Code provides that any owner found to 
          have collected an overcharge above the authorized rent shall be 
          liable for a penalty equal to three times the amount of such 
          overcharge but that if the owner establishes by a preponderance of 
          the evidence that the overcharge was not willful, the DHCR shall 
          establish the penalty as the amount of the overcharge plus interest.  
          Further treble damages may not be based upon an overcharge having 
          occurred more than two years before the complaint is filed or upon 
          an overcharge which occurred prior to April 1, 1984.  This section 
          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 
          and/ or interest 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 Rent 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, 







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          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] shall not apply to a 
          proceeding pursuant to Section 2522.3 of this Title (Fair Market 
          Rent Appeal)."

               Pursuant to the above, the imposition of treble damages and / 
          or interest is not warranted. 

               The owner is directed to reflect the findings and 
          determinations 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.

               If the owner does not take appropriate action to comply with 
          this order within sixty days from the date of issuance of this 
          order, the tenant herein may seek to enforce this order by filing an 
          appropriate action in a court of competent jurisdiction.  A copy of 
          this order is being sent to the tenant currently in occupancy at the 
          subject apartment.

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

               ORDERED, that these petitions for administrative review be, and 
          the same hereby are, denied, and, that the order of the Rent 
          Administrator be, and the same hereby is,  affirmed.

          ISSUED



                                                                        
                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner





                     














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