GF410213RO
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
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IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO.GF410213RO
: DRO DOCKET NO.ZBI410172R
1270 Lexington Ave Associates, TENANTS:Luanne (Ahonen)
Cantor & Mitchell Cantor
PETITIONER :
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW AND
MODIFYING RENT ADMINISTRATOR'S ORDER
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
tenants.
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
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 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
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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
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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.
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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
registration:
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
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adjustments.
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
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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
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for the following month. The crediting of the salary towards the
rent does not require that the DHCR reduce the amount of overcharge
found.
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.
ISSUED:
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JOSEPH A. D'AGOSTA
Deputy Commissioner
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