STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

          APPEAL OF                                DOCKET NO.GF410213RO

                                              :    DRO DOCKET NO.ZBI410172R

             1270 Lexington Ave Associates,        TENANTS:Luanne (Ahonen)
                                                   Cantor & Mitchell Cantor
                               PETITIONER     :


          On June 18, 1992 the above-named petitioner-owner filed a Petition 
          for Administrative Review against an order issued on June 4, 1992 
          by the Rent Administrator, 92-31 Union Hall Street, Jamaica,  New
          York concerning the housing accommodations known as 1264 Lexington 
          Avenue, New York, New York, Apartment No.  3W  wherein  the  Rent
          Administrator determined  that  the  owner  had  overcharged  the

          The Administrative Appeal is being  determined  pursuant  to  the
          provisions of Section 2526.1 of the Rent Stabilization Code.

          The issue herein is whether the Rent  Administrator's  order  was

          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 appeal.

          This proceeding was originally commenced in September, 1987 by the 
          filing of a rent overcharge complaint by the tenants, in which they 
          stated that they had commenced occupancy on June 1, 1987 at a rent 
          of $1,000.00 per month, that the rent was approximately $700.00 in 
          1984, and that the apartment had been made smaller since then.

          A copy of the complaint was sent to the managing agent, Apartments 
          East Ltd., as were a Request for Additional Information regarding 
          proof of the cost of new equipment,  and  a  Final  Notice  which
          proposed: to use an Initial Legal Regulated Rent of $560.00, to not 
          give any increase for new equipment, to freeze the rent due to non- 
          registration for 1987, and to impose treble damages.  The attorney 
          for both Apartments East Ltd. and 1270 Lexington Avenue 


          Associates stated that records regarding renovation of the subject 
          apartment had been destroyed several years previously after a flood 
          at the office of the prior owner.

          In an order issued on June 4, 1992  the  Administrator  found  an
          overcharge of $41,634.40, including  treble  damages  and  excess
          security, as of May 31, 1990.

          In this petition, the owner by its attorney contends in substance 
          that the owner purchased the building in 1986; that  the  subject
          apartment was formerly rented to a tenant at  $560.00;  that  she
          renewed that lease for two years at $599.20; that a major fire had 
          caused substantial damage to many apartments in November 1984; that 
          the former owner, Daniel Hirsch, was the general  contractor  for
          renovations; that renovation work included interior demolition of 
          fire damaged partitions and joists, the amending of the Certificate 
          of Occupancy to create new  apartments,  and  the  renovation  of
          apartments in general; that the former owner also  renovated  the
          subject apartment and installed a new kitchen, new bathroom,  new
          windows and new entrance door; that the April 1, 1985 registration, 
          listing the apartment as "Vacant- fire apt.," listed  a  rent  of
          $1,000.00 and indicated the installation of a new  bathroom,  new
          windows, new kitchen and new entrance door; that the lease of the 
          next tenant was dated November 7, 1985 at $1,000.00 per month; that 
          the complainants commenced occupancy on June 1, 1987 at a rent of 
          $1,000.00 per month; that  one  of  the  complainants  served  as
          superintendent from October, 1988 through March, 1989 at a monthly 
          salary of $375.00, deducted from his rent, so he was paying $625.00 
          per month, and any overcharge amount must subtract out $375.00 per 
          month for that time; that there was  no  overcharge  because  the
          apartment was renovated prior to November 8, 1985, at the time that 
          the entire building was undergoing substantial renovations  as  a
          result of the 1984 fire, and the $1,000.00 rent charged  on  that
          date reflected the  installation  of  a  new  bathroom,  windows,
          entrance door, kitchen and kitchen appliances;  that  the  tenant
          commencing occupancy on November 7, 1985 at a rent of $1,000.00 did 
          not challenge  the  rent  after  her  receipt  of  the  apartment
          registration, so the complainants have no standing to challenge the 
          rent; that any lack of records from a renovation made in 1985  is
          not the fault of the current owner; that  an  inspection  of  the
          apartment will disclose that the improvements were in fact  made;
          and  that  there  should  therefore  be  no  finding  of  willful
          overcharge, particularly since the owner had nothing whatsoever to 
          do with the renovations.

          With the petition the owner's attorney has enclosed, as previously, 
          a copy of the Fire Department operational report, describing a fire 


          on November 3, 1984 in apartment 5S, affecting 6S, 7S and adjacent 
          areas;  a lease commencing March 1, 1984 at a rent of $599.20 per 
          month;  a May 25, 1984 letter to that tenant stating that she has 
          not yet returned signed copies of the lease, such letter having a 
          notation by the tenant that she  is  enclosing  checks  for  rent
          through May plus the additional security; a March 10, 1989 letter 
          from  one  of  the  the  complainants  regarding   his   assuming
          superintendent duties in return for  a  $375.00  per  month  rent
          reduction, with the pay for each month's work being deducted from 
          the following month's rent; a copy of the 1985 registration stating 
          "Vacant- fire apt.," giving a  rent  of  $1,000.00,  and  listing
          improvements of new kitchen,  new  bathroom,  new  door  and  new
          windows; a March 23, 1983 Altered Building Application proposing to 
          convert 4, 3 and 3 apartments on the third, fifth and sixth floors 
          to 5, 4 and 4 apartments respectively; and an amendment  approved
          January 7, 1985 which resulted in a limited permit to remove  all
          fire-damaged partitions and joists only.

          In answer, the tenants  assert  in  substance  that  the  owner's
          petition contains no allegations of factual or legal errors in the 
          Administrator's order, but just attempts to introduce new evidence; 
          that the tenants have never received a copy of any of the materials 
          submitted by the owner prior to the initial order of November 15, 
          1990, have not been able to obtain them from the owner, and  have
          just made a Freedom of Information Law request to  the  DHCR  for
          them; that this should not be treated as a  de  novo  proceeding,
          although in any event the  new  evidence  does  not  support  the
          increase of 78% paid by the prior tenant; that the submission  is
          signed by the owner's attorney, with no affidavits from the owner 
          or the prior owner about crucial records  being  lost;  that  the
          owner, while claiming that a  fire  forced  it  to  renovate  the
          apartment, does not mention what the damage was; that in fact they 
          were told by occupants of another third floor apartment,  on  the
          side of the building where the fire occurred, that such occupants 
          moved into the subject apartment while their apartment was  being
          renovated; that other residents of the building have informed them 
          that "renovations" were simple  capital  improvements  undertaken
          voluntarily; that during the course of the renovations apartment 3W 
          was divided in 3W and 3N; that the owner has not  shown  or  even
          stated, other than by a cursory apartment registration filled out 
          by the prior owner, the specifics of the extent or cost of claimed 
          capital improvements; that the owner,  prior  to  purchasing  the
          building, had the opportunity to require the prior owner to provide 
          documentation to support the rents charged, or to reflect the lack 

          of such documentation in the purchase price; and that the tenants 
          did pay the full overcharge, since the owner's acceptance of  one
          tenant's services in return for rent simply reflects a method  of
          payment, not a rent reduction.


          With their answer the tenants have enclosed  the  text  of  their
          Petition for Administrative Review (Docket No. DH410078RT) against 
          an order (No. ZBB410036RP) concerning Major Capital  Improvements
          (M.C.I.'s).  In that petition the tenants contended  among  other
          things that the owner's M.C.I. application lists an April 1, 1984 
          rent of $560.00; that the application states that the apartment has 
          five rooms; whereas it currently contains two full rooms  plus  a
          bathroom and walk-in-kitchen,  and  that  architectural  drawings
          approved December 10, 1980 clearly show that apartments 3W and 3N 
          were formerly part of a single apartment.  Although they did  not
          submit them in this proceeding,  the  tenants'  petition  in  No.
          DH410078RT had included a portion of two architectural  drawings,
          one labelled by hand as "Arch. drawing from Alt.  1398-74.  Arch.
          dated 6/24/77.  Approved 12/10/80," which showed an apartment  of
          about five or six rooms being divided into two apartments, with the 
          one on the west having a living room, bedroom, bathroom and  full
          kitchen, with new windows also being  installed;  and  the  other
          drawing, labelled by hand as  "From  Alt.  #184-84.  Arch.  dated
          2/14/84.  App'd.  4/2/84,"  and  labelled  by  the  architect  as
          "Demolition plan," showing the 1980 proposed changes to the western 
          apartment as already having been accomplished, but not showing any 
          additional changes to it. (Dashed lines in the  upper  left  hand
          portion of the page suggest that demolition work was to occur not 
          in the subject apartment but in an apartment overlooking Lexington 
          Avenue, perhaps to create two apartments in place of one.)

          The Commissioner is of the opinion that this petition  should  be
          denied, and that the Administrator's order should be modified.

          It is well settled that an Administrative Appeal is not a de novo 
          proceeding, but is limited to the issues and evidence which  were
          before the Administrator.  The owner was given an opportunity  to
          submit leases to the Administrator,  so  the  lease  for  $599.20
          commencing March 1, 1984 is not accepted for the  first  time  on
          appeal.  (It is also inconsistent with the initial registration and 
          with the owner's M.C.I application in Docket No. OM5862, both  of
          which list a rent of $560.00 on April 1, 1984.)

          The owner is incorrect in  claiming  that  the  tenants  have  no
          standing to challenge the rent since the  prior  tenant  did  not
          challenge her $1,000.00 rent after  receiving  the  registration.
          Section 2526.1(a)(3)(i) of the Rent Stabilization  Code  ("Code")
          provides that,  except  for  timely  challenges  to  the  initial

               the legal regulated rent for purposes of determining an 
               overcharge shall be deemed to be the rent shown in  the
               annual registration statement filed four year prior  to
               the most recent registration statement,  (or,  if  more
               recently filed, the initial registration statement) plus 
               in  each  case  any  subsequent  lawful  increases  and



          The tenants filed their complaint in September, 1987, so the base 
          date rent is the $560.00 rent registered for April 1, 1984.

          Aside from that portion resulting from the freezing of the rent due 
          to non-registration, the  overcharge  occurred  because  a  large
          increase, to $1,000.00, was taken in a lease commencing November 8, 
          1985 and because the owner has not been able to document the cost 
          of claimed improvements.  In the present case  the  date  of  any
          claimed improvements is also relevant,  since  such  expenditures
          would not affect the lawful rent if they occurred prior to the base 
          date of April 1,  1984.   In addition,   if improvements were made 
          after the fire, and if the owner received insurance proceeds  for
          any damage to the apartment occurring as a result of the fire, such 
          amount received would generally not  be  the  basis  for  a  rent
          increase.  The owner has not  submitted  any  evidence  regarding
          these, aside from a claim by the owner's attorney that the  owner
          was told by the former owner that he, acting as his  own  general
          contractor, renovated the building and the subject apartment after 
          the fire.  This is certainly not sufficient  to  warrant  a  rent
          increase.  It is also not sufficient to justify  the  removal  of
          treble damages.  While any work on the subject apartment may have 
          been done at some (unknown) time prior to purchase by the current 
          owner, the current owner was obligated to charge only lawful rents. 
          If it did not receive documentation from the prior owner to justify 
          the rent being charged, it could have reduced the rent to an amount 
          no more than what could be  supported  by  the  available  rental
          history.  The owner did not lower the rent, but charged a rent it 
          could not justify.

          While the owner's failure to submit  documentation  warrants  not
          allowing any rent increase for claimed improvements, there is some 
          indication that in any event any improvements were made prior  to
          the base date and that they therefore would not have resulted  in
          any rent increase even if their cost had been proven.  In  Docket
          No. DH410029RT,  concerning an M.C.I. increase,  tenants  in  the 
          building claim that from 1978 to 1984 large apartments were being 
          subdivided, and that  the  fire  destroyed  or  severely  damaged
          apartments 3S and 3SE among others while leaving 3N,  3NE and 3W 

          relatively undamaged.  (In Docket No. BB410036RP,  the proceeding 
          whose order was appealed in No. DH410029RT, the Secretary/Treasurer 
          of the tenants' association had contended  that  there  was  much
          construction from 1978 to 1982 to subdivide apartments on the 3rd, 
          5th and 6th floors, and that improvements were made only  to  the
          subdivided units.)   In  Docket  No.  OM5862,  the  original  MCI
          proceeding, the contractor certified that that the new plumbing and 
          rewiring were completed in 1979.  The  order  in  No.  BB410036RP


          removed the increases granted in  No.  OM5862  for  plumbing  and
          rewiring since such work appeared to have  been  done  mainly  to
          create additional housing units.    With their petition in Docket 
          No. DH4100078RT  (against  BB410036RP)  the  complainants  herein
          enclosed the  architectural  plans  previously  mentioned,  which
          someone had labelled as having  been  dated  June  24,  1977  and
          approved December 10, 1980, showing the subdividing of an apartment 
          in the NW corner of the building, as well as the demolition plan, 
          showing the  (presumed)  subject  unit  as  already  having  been
          subdivided (and as already having new locations for the kitchen and 
          the bathroom), such plan having been labelled by someone as having 
          been dated February 14, 1984 by the architect and as having  been
          approved April 2, 1984.  The April 1, 1984 registration lists the 
          subject apartment as having two rooms (although the application in 
          No. OM5862, received May 24, 1984,  lists  five  rooms  for  some
          unknown reason, perhaps because the person preparing the building- 
          wide application was relying on old documents).  The May 8,  1981
          certificate of occupancy submitted in No. BB410036RP  shows  four
          apartments as being on the 3rd floor.  The March 23, 1984 altered 
          Building Application in No. BI410172R lists four units existing on 
          the 3rd floor, proposed to be changed to five units.  The January, 
          1986 rent roll submitted by the owner in  Docket  No.  BB410036RP
          lists apartments 3W, 3N, 3NE, 3S  and 3SE.  The Fire Department's 
          operations report, together with the contentions  in  Docket  No.
          DH410029RT and the present appeal, tend to indicate that there was 
          little or no damage to the subject apartment  by  the  fire.   In
          combination, the preceeding factors suggest that new plumbing and 
          new electrical wiring were installed in 1978 for the  purpose  of
          subdividing apartments, that much subdividing was  in  fact  done
          prior to the November, 1984 fire, that the subject apartment  was
          subdivided to two rooms  (plus  new  kitchen  and  bathroom,  new
          windows, and new entrance door) sometime between December 10, 1980 
          and February 14, 1984 (certainly  before  the  1984  registration
          listed it as having two rooms, and possibly before the May 8, 1981 
          C.of O.), and that the apartment in the north half of the east side 
          of the building was subdivided between April 2, 1984 and January 1, 
          1986 to make a total of five apartments on the 3rd floor.  In any 
          event, it is still the case that the owner has not shown that the 
          work in the subject apartment was done after the base date.

          Regarding the contention that the overcharge should be reduced by 
          $375.00 per month for six months:  This is not  a  case  where  a
          superintendent lived rent-free in an an apartment, and where  the
          legal rent might therefore be of little importance.  In the present 
          case the tenants had a lease for $1,000.00 per month.  For several 
          months during their first lease term one of the tenants served as 
          superintendent at a salary of $375.00 per  month,  applied  as  a
          credit to the next  month's  rent.   This  is  not  significantly
          different than if the owner had paid the tenant $375.00 in cash at 
          the end of each month and the tenants had used it towards the rent 


          for the following month.  The crediting of the salary towards the 
          rent does not require that the DHCR reduce the amount of overcharge 

          Since the tenants have vacated, the owner is  no  longer  holding
          excess security, so $421.60 should be removed from the total refund 
          calculated by the Administrator.

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

          The Commissioner has determined in this Order and Opinion that the 
          owner collected overcharges of $41,212.80.  This Order may,  upon
          expiration of the period for seeking review  of  this  Order  and
          Opinion pursuant to Article Seventy-Eight of the Civil Practice Law 
          and Rules, be filed and enforced as a judgment or not in excess of 
          twenty percent per month of the overcharge may be offset  against
          any rent thereafter due the owner.  Where the tenant credits  the
          overcharge, the tenant may add to the overcharge,  or  where  the
          tenant files this Order as a judgment, the County Clerk may add to 
          the overcharge, interest at the rate payable on a judgment pursuant 
          to section 5004 of the Civil Practice  Law  and  Rules  from  the
          issuance date of the Rent Administrator's Order to  the  issuance
          date of the Commissioner's Order.

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

          ORDERED, that this petition be, and the same hereby is, denied and 
          that the Rent Administrator's order be, and the same  hereby  is,
          affirmed except as modified to remove excess security.  The total 
          overcharge is $41,212.80.



                                                       JOSEPH A. D'AGOSTA
                                                       Deputy Commissioner


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