GB610341RO
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 NO.GB610341RO
: DRO DOCKET NO.DI610235R
ROBERT E. HERMAN for EXPRESS MANAGE-
MENT
TENANT: Descorides Cartagena
PETITIONER :
------------------------------------X
ORDER AND OPINION GRANTING IN PART PETITION FOR ADMINISTRATIVE
REVIEW AND MODIFYING ADMINISTRATOR.S ORDER
On February 24, 1992, the above-named petitioner-owner filed a
Petition for Administrative Review against an order issued on
February 7, 1992, by the Rent Administrator, 92-31 Union Hall
Street, Jamaica, New York, concerning the housing accommodations
known as 220 Miriam St., Bronx, New York, Apartment No. 4I wherein
the Rent Administrator established the lawful stabilization rent at
$482.11 effective April 1, 1991 and directed the owner to refund
overcharges of $29,877.64 inclusive of treble damages and excess
security.
The Administrative Appeal is being determined pursuant to the
provisions of Section 2522.4(a)(1), (2) and 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 commenced on September 14, 1989 when the
tenant filed a complaint of rent overcharge. The tenant stated
that he had commenced occupancy of the subject apartment on April 1,
1989 at a monthly rent of $693.00 and that he believed that he was
being overcharged because the previous registered rent had been
$308.90.
In answer to the tenant's complaint, the owner stated that the
subject apartment had been substantially improved and rehabilitated
during the period prior to the tenancy of the previous tenant. The
owner further stated that the complainant was paying the same rent
as had been paid by the previous tenant and that such rent had
included an increase based on improvements and new equipment as well
as guidelines increases. The owner submitted bills and cancelled
checks, indicating that the owner had spent a total of $149, 642.08
in individual apartment and building wide improvements (the owner
allocated the building wide costs) to substantiate the improvements
GB610341RO
increase and a copy of the prior tenant's lease.
Subsequently, the owner was notified that an overcharge had
been determined and that treble damages would be assessed on the
overcharge.
In reply, the owner asserted that it had submitted complete
records in substantiation of the rent, including leases, bills and
cancelled checks, that there was no overcharge and that if any
overcharge were to be found, it should not be considered willful.
In the order issued under Docket No. DI610235R, the
Administrator, allowing only $3591.13 for approved individual
apartment improvements and disallowing $146051.67 for improvements
considered to be building wide major capital improvements or normal
maintenance and repair, established the lawful rent at $482.11 as of
April 1,1991 through March 31, 1993 and determined that an
overcharge of $29,877.64 inclusive of excess security and treble
damages had occurred as of February 29, 1992.
In his appeal, the owner contends that the order should be
reversed as there was no overcharge, that the Administrator erred in
omitting the prior tenant from the rent chart and in neglecting to
consider the major capital improvements installed by the owner,
whose allocation should be included in the vacancy lease of the
prior tenant. The owner asserts that the prior tenant consented to
all of the improvements increases and that no additional increases
for improvements were included in the complainant's lease. In
addition , no guidelines increase was taken in the complainant's
vacancy lease. The owner contends that the rent should be
established in accordance with Code Sections 2522.6 and 2522.7. The
owner contends that treble damages should not be imposed as there is
no evidence of willful conduct in the overcharge found.
The tenant contends that the order is correct, including the
imposition of treble damages because the overcharge was willful.
The Commissioner is of the opinion that this petition should be
granted in part.
Code Section 2522.4 governs rent increases for both individual
apartment and building wide improvements. The Code distinguishes
between individual apartment improvements and building wide
improvements quite clearly, establishing different standards as to
permissible rent increases for each. Section 2522.4(a)(1) provides
in pertinent part that an owner is entitled to a rent increase where
there has been a substantial increase, other than an increase for
which an adjustment may be claimed pursuant to paragraph(2) of this
subdivision, of dwelling space or an increase in the services, or
installation of new equipment or improvements, or new furniture or
furnishings, provided in or to the tenant's housing accommodation,
on written tenant consent to the rent increase. In the case of
vacant housing accommodations, tenant consent shall not be required.
Under this section, an owner may take a rent increase equal to
1/40th of the improvement's cost immediately without DHCR approval.
For rent increases for building wide improvements as covered by
Code 2522.4(a)(2), however, DHCR approval is always required.
GB610341RO
Pursuant to
Section 2522.4 (a)(2) an owner may file an application to increase
the legal regulated rents of the building on DHCR-prescribed forms,
which the DHCR shall serve upon all affected tenants, on one or more
of four possible grounds. An application for a rent increase based
upon a major capital improvement, the type of increase allocated to
the instant tenant, must meet specific criteria established in the
Code, including itemization, certification of cost, useful life
schedule requirements, proof of payment, necessary governmental
approvals, and an affidavit that the installation has been completed
in compliance with all applicable governmental codes and
regulations. The approved rent increase based on major capital
improvements is limited to 1/60th of the total cost.
The facts in this proceeding show that the owner chose to
collect a rent increase without legal justification, unjustifiably
ignoring the regulations established under the law. Since the owner
herein chose not to conform with the Code's requirements for
building wide increases, it is not entitled to allocate a portion of
the total cost to the complainant. The Commissioner finds that the
Administrator correctly disallowed the following improvements
considered to be major capital improvements: roofing,burner,
mailboxes and other building wide improvements. A rent increase is
not permitted under the Code for work considered ordinary repair and
maintenance. The Administrator did not err in disallowing the cost
of repairing the entrance door and sanding the floor which are
considered ordinary repair and maintenance.
The Commissioner finds that the Administrator erred in not
considering the prior tenancy. Review of the evidence indicates
that the prior tenant took occupancy after April 1988. Since the
prior tenant executed a one year vacancy lease, August 1, 1988 to
July 31, l989, the owner was entitled to a one year vacancy
guideline increase of 13% pursuant to guidelines number 19. The
increased rent then becomes $402.09 ($308.90 times 13% plus $53.03,
the permitted improvements increase). The owner was then entitled
to an 18% increase pursuant to Guidelines # 20 when the complainant
executed a one year vacancy lease, making the complainant's initial
rent $474.87. Accordingly, the Commissioner has recomputed the
legal rent and the overcharge to be refunded as follows:
LEASE TERM RENT LEGAL OVERCHARGE
CHARGED RENT CALCULATION
8/1/88-7/31/89 $693.00 $402.09 NA
4/1/89-3/31/90 $693.00 $474.47 $218.53 x 12 mos =$2622.36
4/1/90-3/31/91 $731.10 $500.57 $230.53 x 12 mos = $2766.36
4/1/91-3/31/93 $787.27 $535.61 $246.66 x 11 mos = $2713.26
Total Overcharge --------------------$ 8101.98
Treble Damages 16203.96
Excess Security 246.66
Total Refund Due 4/1/89-2/29/92 = $24552.60
GB610341RO
With respect to the owner's contention that Sections 2522.6 and
2522.7 be considered in establishing the rent for the subject
accommodations, the Commissioner notes that Section 2522.6 of the
Code does not pertain to the instant situation where there was an
established legal rent and the owner attempted to take an increase
in an unauthorized manner. As to consideration of the equities, the
Code provides the method by which the owner could have recouped its
cost of making major capital improvements. That it chose not to do
it in the prescribed manner does not entitle it to special
consideration even though it improved the subject building.
There is no provision in the Code that permits an owner unilaterally
to allocate expenses for building wide improvements to individual
apartments.
With regard to the imposition of treble damages, Section 2526.1
of the Code provides for treble damages in all cases of willful
overcharge. Under the Code, there is a presumption of willfulness
which can be overcome by the owner's proving that the overcharge was
not willful. DHCR policy lists those conditions which will overcome
the presumption. When an owner, as here, takes a rent increase that
is not sanctioned by the Rent Stabilization Code, which results in
a rent overcharge , the resultant overcharge will be considered
willful and subject to the treble damages penalty. Accordingly,
the Commissioner finds that the Administrator did not err in
assessing treble damages.
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.
The Commissioner has determined in this Order and Opinion that
the owner collected overcharges of $24552.60 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 provisions of the Rent
Stabilization Law and Code, it is
ORDERED, that this petition for administrative review be, and
the same hereby is, granted in part, and, that the order of the Rent
Administrator be, and the same hereby is, modified in accordance
with this order and opinion.
GB610341RO
ISSUED
JOSEPH A. D'AGOSTA
Deputy Commissioner
|
