GD 410259-RO
                             STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                             JAMAICA, NEW YORK 11433

      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    : 

                                     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 

      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 

          GD 410259-RO

      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 

           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 

          GD 410259-RO


      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 

           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.

                                              JOSEPH A. D'AGOSTA
                                              Acting Deputy Commissioner

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