Adm. Rev. Docket No. GH820142RO
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.: GH820142RO
REGENCY VILLAGE MANAGEMENT,
DRO DOCKET NO.: GC810165R
TENANTS: MICHAEL & ADRIA WARD
PETITIONER
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
all.
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
calculated.
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
2503.8.
The Commissioner is of the opinion that this Petition should be
denied.
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
spurious.
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.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
1A2D3D4GH820142.RO
STORECODEC.010402290394
FORMERLY
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STORECODEC.010402270394
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