Adm. Rev. Docket No. GH820142RO

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

          APPEAL OF                            DOCKET NO.: GH820142RO
                                               DRO DOCKET NO.: GC810165R
                                               TENANTS: MICHAEL & ADRIA WARD


          The above-named petitioner-landlord timely filed a Petition for 
          Administrative Review against an order issued on August 7, 1992, by 
          the Rent Administrator at 55 Church Street, White Plains, New York, 
          concerning housing accommodations known as 24E Monsey Boulevard, 
          Monsey, New York, wherein the Administrator established the 
          stabilized rent and directed the owner to refund $ 5,728.35, 
          including interest from April 1, 1984.  

          The Commissioner has reviewed all of the evidence in the record and 
          has carefully considered that portion of the evidence relevant to 
          the issues raised in the administrative appeal.

          There are two issues raised in this appeal. The first issue is 
          whether the petitioner may be deemed to have complied with Section 
          2503.8 (formerly Section 48) of the Tenant Protection Regulations 
          (the TPR) and whether Section 2503.8 should have been applied at 

          This proceeding was originally commenced on March 20, 1992, by the 
          filing of a Tenant's Complaint of Rent Overcharge and/or Excess 
          Security. In the Complaint, the tenants asserted, in substance, 
          that they did not know if they were being charged a legal rent; 
          that they had had a fortuitous conversation with the prior tenant 
          wherein the prior tenant had told them what rent she had paid; and 
          that they had been advised by their tenant's association that they 
          were paying an excessive rent. 

          In response to the Complaint and the District Rent Administrator's 
          requests for additional documentation, the landlord submitted 
          proofs that showed that the tenants' vacancy lease (June 1, 1990 to 
          May 31, 1991) rent was $610.00 per month; that the prior tenant's 

          Adm. Rev. Docket No. GH820142RO

          last lease had provided for a monthly rental of $414.00; that the 
          landlord could not find a copy of a written notice in compliance 
          with Section 2503.8 and stated that "it was most likely a verbal 
          notice"; that the landlord claims to have calculated the tenant's 
          vacancy lease rent based on the monthly rental of $ 590.00 charged 
          for an allegedly comparable one bedroom apartment on October 1, 
          1989; that the tenants' vacancy lease was followed by two renewal 
          leases (June 1,1991 to May 31, 1992 and June 1, 1992 to May 31, 
          1993) which each provided for a monthly rent of $ 625.00.

          The tenants replied to the landlord's submissions noting that they 
          had never been advised as to how their vacancy lease rent had been 

          In the appealed order, the Administrator determined that the 
          maximum legal rent under the tenants' vacancy lease was $ 457.47; 
          and $ 468.91 and $492.98, respectively, under each of the renewal 
          leases. The Administrator also found that the landlord had not 
          complied with TPR Section 2503.8 and, therefore, found that the 
          maximum rent the landlord could have collected from the 
          commencement of the vacancy lease through to the end of the period 
          covered by the appealed order (August 31, 1992) was the rent under 
          the prior tenant's lease, $ 414.00. Whereupon, the Administrator 
          found that the tenants had been overcharged $ 5,517.00 and directed 
          the landlord to refund or credit that sum, together with $ 211.35 
          in interest, to the tenants.

          In the Petition, the landlord, in substance, makes the following 
          arguments. The landlord claims that the notice given to the tenants 
          at the commencement of the term was sufficient as the lease itself 
          is in writing and the subsequent explanation of the prior rent and 
          increase was sufficient to meet the applicable requirements. The 
          landlord further claims that Section 2503.8 was adopted in 
          contravention of the ETPA in that it is not appropriate to the 
          implementation of the ETPA; it is arbitrary and capricious, serving 
          no purpose; it is penal in nature (failing to provide or recognize 
          any legitimate mistake) and designed to reduce the housing stock 
          available to the community. The landlord further argues that "there 
          is no rational basis to reduce the current rent because of failure 
          to provide to a prospective tenant written notice comprising the 
          old rent, new rent and calculations on how it was arrived at". The 
          landlord also directs the Commissioner's attention to the other 
          provisions in the TPR which provide for "damages" in the event of 
          an overcharge (such as treble damages) under 9NYCRR2506.1.

          The tenants filed an answer opposing the Petition. In opposing the 
          Petition, the tenants, in substance, re-assert that they were never 
          given any notice relating to the manner in which their rent had 
          been calculated and point out that the Administrator found that 

          Adm. Rev. Docket No. GH820142RO

          they had been overcharged even without the application of Section 

          The Commissioner is of the opinion that this Petition should be 

          The Commissioner notes that the landlord does not dispute the 
          Administrator's calculation of the basic overcharge herein, but 
          limits the bases of this appeal to the issues raised concerning 
          Section 2503.8.

          Section 2503.8 reads as follows.

                         (a) A landlord of a vacant housing accommodation for 
               lease shall make available to prospective tenants a 
               notice in writing of the monthly rent under the offered 
               lease, and of the prior legal regulated rent, if any, 
               which was in effect immediately prior to the vacancy, and 
               that any increase in the prior legal regulated rent under 
               the offered lease does not exceed the applicable rate of 
               rent adjustment in effect pursuant to the guidelines 
               filed with the division by the Rent Guidelines Board for 
               the county wherein the housing accommodation is located, 
               or as otherwise authorized by the act.
                    (b) At the time of renting the vacant housing 
               accommodation, the landlord shall attach this notice in 
               writing to the executed written lease, and deliver a copy 
               of the notice to the tenant with a copy of the lease, or 
               include a written provision in the lease setting forth 
               the prior legal regulated rent, the amount of any rent 
               increase under the lease and showing that such increase 
               does not exceed the applicable rate of rent adjustment in 
               effect pursuant to the guidelines filed by the Rent 
               Guidelines Board or as otherwise authorized by the act. 
               In the event the landlord does not comply with this 
               requirement, the lease shall not be effective to increase 
               the prior legal regulated rent; however, at such time 
               thereafter that the landlord does provide the notice to 
               the tenant with the required information in writing, the 
               otherwise authorized monthly rent increase shall be 
               collectible commencing with the first rent payment date 
               thereafter. [emphasis supplied]

          The Commissioner finds that the landlord has the burden of proving 
          compliance with Section 2503.8 and that the landlord has not met 
          that burden. The Commissioner points out that Section 2503.8 
          requires that the subject notice be in writing. The Commissioner 
          finds that the lease itself, with nothing more, does not constitute 

          Adm. Rev. Docket No. GH820142RO

          the required notice. The Commissioner further finds that even if 
          one could construe Section 2503.8 as permitting the required notice 
          to be given in a manner other than in writing, the landlord would 
          not be found to have met its burden of proof as to having given 
          such notice. The Commissioner finds that there is nothing in the 
          record herein, either below or on appeal, which indicates that the 
          tenants were ever given anything like what the landlord refers to 
          in the Petition as "the subsequent explanation of the prior rent 
          and increase".

          The Commissioner points out that the Administrator must determine 
          the matters before him in accordance with the applicable 
          regulations. The Commissioner finds that Section 2503.8 was 
          applicable herein and that it was properly applied by the 
          Administrator. As to the landlord's objections to Section 2503.8, 
          the Commissioner notes that the landlord has raised no challenge to 
          the regularity of the procedures under which 2503.8 was adopted. 

          The regulation is valid on its face and as such has the effect of 
          law unless and until it is amended or revoked in accordance with 
          the procedures outlined in the law for the adoption of regulations; 
          or it is declared void by a court of competent jurisdiction. 

          The Commissioner notes that Section 2 of the ETPA contains a 
          statement of the legislative findings which prompted the enactment 
          of the ETPA, as amended by the Omnibus Housing Act of 1983. Section 
          2 (Section 8622 in McKinneys Consolidated Laws of New York, Vol. 
          65) reads, in pertinent part, as follows:

               The legislature hereby finds....that a substantial number 
               of persons residing in housing not presently subject to 
               the provisions of the emergency housing rent control law 
               or the local emergency housing rent control act are being 
               charged excessive and unwarranted rents and rent 
               increases; that preventive action by the legislature 
               continues to be imperative in order to prevent exaction 
               of unjust, unreasonable and oppressive rents and rental 
               agreements and to forestall profiteering, speculation and 
               other disruptive practices tending to produce threats to 
               the public health, safety and general welfare....  

          The Commissioner further notes that, to deal with the housing 
          emergency found by the legislature and described in Section 2 of 
          the ETPA, the legislature gave the DHCR the following powers, in 
          Section 10 a. (cited as Section 8630 a. in McKinneys):

               For cities having a population of less than one million 
               and towns and villages, the state division of housing and 
               community renewal shall be empowered to implement this 
               act by appropriate regulations. Such regulations may 

          Adm. Rev. Docket No. GH820142RO

               encompass such speculative or manipulative practices or 
               renting or leasing practices as the state division of 
               housing and community renewal determines constitute or 
               are likely to cause circumvention of this act.

          The Commissioner believes that it is at the heart of the 
          legislative intent which caused the passage of the ETPA that 
          landlords not be permitted to charge rent increases in excess of 
          those provided for by the local rent guidelines boards (Section 4 
          of the ETPA [Section 8624 in McKinneys]). The primary mechanism for 
          preventing this under the TPR is by means of tenant complaints. 
          The Commissioner believes that the facts herein provide a good 
          example of how compliance with Section 2503.8 furthers the 
          legislative intent of the ETPA.

          Like many other regulations designed to protect consumers, Section 
          2503.8 sets forth a common sense disclosure requirement. Section 
          2503.8 requires landlords to be open and honest with new tenants; 
          telling them at the outset what it is that the landlord believes it 
          is entitled to in rent. If a landlord does this and the tenant has 
          any problem with the landlord's calculations or interpretation of 
          the applicable Guideline, the whole thing can be worked out between 
          them either before the tenant moves in or shortly thereafter. If 
          the differences cannot be resolved, the parties can part company or 
          seek a resolution of their dispute long before the dispute has 
          escalated. The freezing of the rent that is triggered by a 
          landlord's failure to comply with this Section is a reasonable 
          inducement to compliance as soon as possible, so that a 
          disagreement over a modest sum of money does not grow into a 
          disagreement over a substantial sum of money long before the tenant 
          even knows that there may be something unusual about the way the 
          rent was calculated; and, as soon as there is compliance, the 
          freeze is lifted. 

          The Commissioner notes that the Guideline applicable to the 
          tenants' vacancy lease herein provided that the vacancy lease rent 
          not exceed the lesser of the highest comparable rent (the landlord 
          used $590.00) plus a one year guideline increase (3%) or the prior 
          rent ($414.00) plus an increase of 7.5%, plus the one year 
          guideline increase. The Commissioner therefore finds that if the 
          landlord had complied with Section 2503.8 at the commencement of 
          its dealings with the tenants, all concerned might have readily 
          seen that the rent in this vacancy lease exceeded the legal rent by  
          $152.53 per month. Whereupon an appropriate adjustment in the rent 
          could have been made; before almost twenty months went by; and 
          before the landlord had collected over $4,000.00 in overcharges 
          which the tenants might never have been aware of but for a chance 
          conversation with the prior tenant.

          The Commissioner notes that the landlord has referred the 

          Adm. Rev. Docket No. GH820142RO

          Division's attention to other penalties provided in the regulations 
          for determining the amount of a refund when a finding of overcharge 
          has been made; but the landlord did not clearly indicate what 
          relief it seeks or what argument it seeks to found based on said 
          citation. Nevertheless, to the extent that the landlord may have 
          intended to set up a comparison between the penalty provided for 
          under Section 2503.8 and the penalty of treble damages under 
          Section 2506.1, the Commissioner points out that even without the 
          implementation of Section 2503.8, the landlord has been found to 
          have overcharged the tenant a total of $ 4,072.50 (before 
          interest): $152.53 per month for twelve months, under the vacancy 
          lease, $156.09 per month for twelve months under the first renewal 
          lease and $132.02 per month for the first three months of the 
          second renewal lease. Thus, as applied in the appealed order, the 
          provisions of Section 2503.8 account for an additional overcharge 
          of only $ 1,444.50, plus interest. Although the two penalties may 
          not be mutually exclusive, the Commissioner notes that had the 
          penalty of treble damages alone been imposed herein, the refund due 
          would have amounted to $12,217.50. 

          In summary, then, on this second point, the Commissioner finds that 
          Section 2503.8 is consistent with the legislative intent behind the 
          enactment of the ETPA and is an appropriate regulation for the 
          implementation of that intent; that its adoption was within the 
          authority granted under the ETPA to the DHCR; that neither 
          intrinsically nor as applied herein is it arbitrary or capricious; 
          that it is valid on its face; that it serves a most important 
          function in encouraging full and prompt compliance with the ETPA 
          and the avoidance of practices designed to circumvent the ETPA; 
          that the penalty imposed is reasonable as it is directly 
          proportionate to the length of time the landlord fails to comply; 
          that there has been no showing that Section 2503.8 tends to reduce 
          the housing stock; and that the assertion that that is the case is 

          The Commissioner notes that the record indicates that the tenants 
          have vacated the subject apartment; therefore, the Commissioner is 
          causing a copy of this Order and Opinion, along with a copy of the 
          appealed order to be mailed to the current tenant. The landlord is 
          advised to update the registration statement for the subject 
          apartment (if the landlord has not already done so) to reflect the 
          change in occupancy and the legal regulated rent determined in the 
          appealed order and affirmed herein. 

          In hereby affirming the order below, the Commissioner has 
          determined in this Order and Opinion that the landlord collected 
          overcharges of $ 5,728.35, including interest from April 1, 1984, 
          and that as of the issuance date of the Administrator's order, 
          August 7, 1992, the landlord became liable to the tenants for the 
          repayment of said sum.  

               Adm. Rev. Docket No. GH820142RO

               This Order and Opinion may, upon the 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 and 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 and Opinion.

               THEREFORE, pursuant to all of the applicable statutes and 
               regulations, it is

               ORDERED, that this Petition be, and the same hereby is denied; and 
               that the Administrator's order be and the same hereby is affirmed.


                                               JOSEPH A. D'AGOSTA
                                               Deputy Commissioner



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