GD 410259-RO
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. GD 410259-RO
(refiling of GB 410192-RO)
: DISTRICT RENT OFFICE
S.E. & K. Corporation, DOCKET NO. 26076
TENANT: Tommy Yuen
PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART
On April 10, 1990 the above-named petitioner-owner filed a Petition for
Administrative Review ("PAR") against an order issued on March 6, 1990
by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning the housing accommodations known as 30 Mott Street, New York,
New York, Apartment No. 6 wherein the Rent Administrator determined that
the owner had overcharged the tenant. On March 20, 1992 the appeal
(docketed as No. GB 410192-RO) was rejected on procedural grounds, with
the owner being given 35 days to refile. The refiled appeal (Docket No.
GD 410259-RO) was received on April 22, 1992, and is herein considered
on the merits.
The issue herein is whether the Rent Administrator's order was
warranted.
The applicable sections of the Law are Section 26-516 of the Rent
Stabilization Law and Section 2526.1(a) 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 appeal.
This proceeding was originally commenced by the filing in August, 1984
of an Objection to the Rent/Services Registration by the tenant, in
which he stated that he had commenced occupancy on October 15, 1983 at
a rent of $550.00 per month.
The owner was served with a copy of the complaint and was requested to
submit rent records to prove the lawfulness of the rent being charged.
In answer to the complaint, the owner claimed that the previous tenant
was rent-controlled, and stated that a search for records at the Rent
GD 410259-RO
Control Office revealed that no decontrol certificate had ever been
filed. In response to a request for a copy of the decontrol order with
proof of service to the first rent stabilized tenant, the owner
responded that "[w]e have no proof." On May 1, 1987 the owner was
served with a Final Notice of Pending Default, which stated that the
owner's failure to submit a complete rental history from April 1, 1980
would result in certain DHCR procedures being used to set the lawful
stabilized rent, that no Guidelines adjustments would be allowed for any
leases commencing prior to the Administrator's order, and that treble
damages would be imposed on overcharges occurring on and after April 1,
1984. On April 7, 1989 the owner was served with another Final Notice,
which stated that evidence in the record established that the subject
apartment was not subject to the Rent Control Law, and requested a
rental history from April 1, 1980. In replies, the owner repeated its
contention that it had bought the subject building on July 18, 1983, and
that the rent-controlled tenant had vacated shortly thereafter.
In an order issued on March 6, 1990 the Administrator set the tenant's
initial lawful rent at the $110.00 rent of Apartment 5, froze the rent
at that amount for all leases, and imposed treble damages, resulting in
a total overcharge of $79,292.84 as of October 14, 1988.
In this petition, the owner's attorney contends in substance that the
owner did not default, since the owner submitted documentation showing
that the subject apartment was decontrolled in 1983; that the owner
submitted both a rent roll dated June 13, 1983 showing the prior tenant
paying a rent of $350.00, as well as submitting a transfer of security
deposit acknowledgement, obtained on June 13, 1983 when purchasing the
building, showing the prior tenant as having security of $350.00; that
the $550.00 initial rent charged the complainant was based upon the
prevailing market rents for comparable apartments in the neighborhood;
and that there was therefore no willful overcharge. Sherwin Choy, the
President of S.E. & K. Corporation, contends in substance that he did
not receive the alleged April 7, 1989 Final Notice, although he did
receive a notice dated December 28, 1989 which did not request any
additional information; that the owner's original answer was fully
responsive to the tenant's complaint; that the owner has not defaulted
in this proceeding, but has rather complied with all requests for
information; and that the DHCR was wrong to establish the complainant's
initial rent at the fictitious amount of $110.00 per month.
In answer, the tenant asserts in substance that the owner's original
petition (Docket No. GB 410192-RO) was untimely, and that the owner
should therefore not have been given an opportunity to refile.
Because the owner's original petition in No. GB 410192-RO, dated April
10, 1990, was lost by the DHCR, the Commissioner's March 20, 1992 order
rejecting the appeal was based on a photocopy received on February 24,
1992. The copy of the Certificate of Mailing used to prove mailing of
GD 410259-RO
the original petition on April 10, 1990 was of marginal legibility. On
July 13, 1992 the owner submitted a legible copy, showing a date of
April 10, 1990. In reply, the tenant contends in substance that the
Certificate of Mailing does not establish exactly what was mailed to the
DHCR on April 10, 1990; that some other document may have been mailed by
regular mail on that date; that the DHCR has no record of receiving the
phantom PAR; and that the owner's failure to inquire as to the status of
a PAR for which it had never received an acknowledgement from the DHCR
suggests that a PAR was in fact not mailed on April 10, 1990.
The Commissioner is of the opinion that this petition should be granted
in part.
Regarding the timeliness of the filing of a PAR in Docket No. GB 410192-
RO, on the basis of which the owner was allowed to refile in Docket No.
GD 410259-RO, the Commissioner finds the April 10, 1990 Certificate of
Mailing to be conclusive proof that a PAR was timely filed. The DHCR's
computerized case tracking system shows only four cases in this six-unit
building, all of which involve the subject apartment. One is a June,
1987 Report of Statutory Decontrol, one is the tenant's registration
objection, and the others are the rejected and the refiled PAR's. It is
highly unlikely that on April 10, 1990, the last day on which to file a
PAR against the order concerning the registration objection, the owner
was filing some other document and not a PAR. In addition, the owner's
attorney signed a letter dated April 10, 1990 transmitting the PAR to
the DHCR.
Turning to the merits, it is noted that the owner has not submitted any
evidence to show that the apartment was previously rent-controlled, and
DHCR rent control records contain no mention of the apartment. In
addition, the $350.00 rent charged the prior tenant in 1983 would have
been surprisingly high for a controlled rent, since controlled rents are
typically substantially lower than stabilized rents, yet the stabilized
rent of the other 5-room apartment in the building was only $220.00 as
of 1984. The Commissioner also notes that on April 29, 1987 (four weeks
after being sent the first Final Notice of Pending Default) Sherwin Choy
submitted an Owner's Report of Vacancy Decontrol (Docket No. BF 420411-
SD), which stated that the rent controlled tenant, Jimmy Wu, had had a
maximum rent of $220.00 [which is the same as the stabilized rent of the
other 5-room apartment in the building] and had vacated on August 31,
1983 [after the owner bought the building]. However, S.E. & K. Realty
Corp. on June 16, 1983 acknowledged receiving a transfer of $350.00
security for Lauren Yee in the subject apartment, and on August 27, 1983
it refunded $350.00 to Lauren Yee, as shown by a cancelled check in the
file for Docket No. GB 410192-RO.
Section 2526.1(a)(3)(ii) of the Rent Stabilization Code provides in
substance that for complaints filed within 90 days of the initial
registration, the legal regulated rent for the purpose of determining an
overcharge shall be deemed to be the rent charged and paid on April 1,
1980. The tenant filed his complaint within 90 days of the initial
registration, so the base date is April 1, 1980, and the owner was
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directed, but failed, to submit a rental history from that date and
failed to establish that the tenant herein was the first rent stabilized
tenant as noted previously.
In 1982, the DHCR predecessor N.Y.C. Conciliation and Appeals Board
adopted procedures to be used to determine an apartment rent where the
owner did not provide a complete rent history of the apartment. In such
cases the rent is calculated to be the lowest of the following amounts:
1) The lowest rent for a similar apartment in the same
building, without any Guidelines adjustment for the
complainant's vacancy lease or for any subsequent
lease commencing prior to the date of the agency's
order.
2) the current tenant's initial rent minus any
allowance` for the tenant's initial lease, without
any Guidelines adjustment for any subsequent lease
commencing prior to the date of the agency's order.
3) the prior tenant's last rent, without any Guidelines
adjustment for any subsequent lease commencing prior
to the date of the agency's order.
These procedures have been adopted by the DHCR and upheld by the Courts
(61 Jane Street Associates v. CAB, NYLJ, May 8, 1984, p. 11, col. 4
(Sup. Ct. N.Y.Co., Greenfield, J.) 108 A.D. 2d 636, 486 NYS 2d 694,
affirmed 65 NY2d 898, 493 NYS2d 455 (C.A., 1985). It was therefore
proper for the Administrator to use the default procedure to set the
lawful rent in the tenant's initial lease.
However, the Administrator did not apply the formula correctly, since
the $110.00 rent used was that of a 2-room apartment, while the subject
apartment is registered as having five rooms. The only other 5-room
unit in the building had an April 1, 1984 registered rent of $220.00.
This should have been used in the default formula. Taking this into
account, the Commissioner has recalculated the lawful stabilization
rents and the amount of overcharge. They are set forth on an amended
rent calculation chart attached hereto and made a part hereof.
Section 2526.1(a)(1) of the Rent Stabilization Code provides in
substance that treble damages shall be imposed on overcharges occurring
on and after April 1, 1984 unless an owner establishes by a
preponderance of the evidence that the owner charge was not willful. An
owner has a duty to charge only lawful rents, based upon an apartment's
rental history. The owner has not furnished a rental history to
establish that all rent increases since the base date have been lawful,
and in any event the complainant's initial rent of $550.00 would have
represented an unlawful increase even if the owner had proven that the
prior tenant's (apparent) rent of $350.00 was lawful. The Commissioner
does not consider that the presumption of willful overcharge has been
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rebutted.
Regarding Sherwin Choy's contention that he did not receive the April 7,
1989 Final Notice, DHCR records show the following mailings, among
others, to the owner:
1) An Owner's Answer to Tenant Complaint form sent to
the owner on April 3, 1986, on which form Sherwin
Choy submitted an answer dated May 9, 1986. This
form requested a rental history from the base date,
and stated that treble damages would be imposed on
willful overcharges. At the bottom of the first
page was stated "THIS IS A FINAL NOTICE. YOU WILL
NOT RECEIVE A SECOND REQUEST FOR THIS DATA."
2) On May 1, 1987 a Final Notice of Pending Default was
sent to "Sherwin Choy, c/o S.F. & K Corp., 30 Mott
Street, New York, New York 10013." This stated the
3-prong default formula that would be used to
establish the lawful rent since the owner had not
submitted a rental history from April 1, 1980, and
stated that treble damages would be imposed on
willful overcharges.
3) On April 7, 1989 another copy of the Final Notice of
Pending Default, with a copy of the tenant's
complaint attached, was sent to " SE & K Corp., c/o
Sherwin Choy, 30 Mott Street, New York, New York,
10013." With this was enclosed a notice stating
that the apartment was not subject to rent control,
and requesting a rental history from April 1, 1980.
S.E. & K. Corporation has been registered at the 30 Mott Street address
for all registrations since 1984. The Commissioner rejects the
contention that it did not receive proper notice.
Because this order concerns lawful rents only through October 14, 1988,
the owner is cautioned to adjust the rent, in leases after those
considered in this order, to amounts no greater than that determined by
this order plus any lawful increases, and to register any adjusted rent,
with this order being given as the reason for the adjustment.
This order may, upon the expiration of the period in which the owner may
institute a proceeding pursuant to Article seventy-eight of the Civil
Practice Law and Rules, be filed and enforced by the tenant in the same
manner as a judgment or not in excess of twenty percent thereof per
month may be offset against any rent thereafter due the owner.
THEREFORE, in accordance with the Rent Stabilization Law and Code, it is
ORDERED, that this petition be, and the same hereby is, granted in part
and that the Rent Administrator's order be, and the same hereby is,
GD 410259-RO
modified in accordance with this Order and Opinion. The lawful
stabilization rents and the amount of overcharge are established on the
attached chart, which is fully made a part of this order. The total
overcharge is $60,627.84 as of October 14, 1988, including excess
security of $383.32. The lawful stabilization rent is $220.00 per month
in the lease from October 15, 1987 to October 14, 1988.
ISSUED:
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JOSEPH A. D'AGOSTA
Acting Deputy Commissioner
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