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

          APPEAL OF                               DOCKET NO.: GI410041RO

                    THOMAS & BRENDA ROHLMAN,  :   DRO DOCKET NOS. ZEF410195RV

                              PETITIONERS     :   SUBTENANT: JILL SKALER

          ------------------------------------X   OWNER: PARK CREST APTS., 
                                                  C/o PINE MANAGEMENT, INC.

                           MODIFYING ADMINISTRATOR'S ORDER

          On September 15, 1992 the above named petitioners-prime tenants 
          filed a Petition for Administrative Review against an order issued 
          on August 11, 1992 by the Rent Administrator, 92-31 Union Hall 
          Street, Jamaica, New York concerning housing accommodations known 
          as Apartment 2A at 4 West 90th Street, New York, New York wherein 
          the Rent Administrator determined that the subtenant was entitled 
          to a lease to the subject apartment because of an illusory prime 
          tenancy by members of the owner's family.

          The issue in this appeal 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 originally commenced by the filing in June, 
          1990 of a complaint by the subtenant, in which she stated that she 
          had commenced occupancy on July 15, 1987 at a rent of $1,900.00 per 
          month, [$1,850.00 during the first 12 months], and that an 
          illusory prime tenancy by the daughter and son-in-law had resulted 
          in her apartment being registered as exempt from rent stabilization 
          and her rent being approximately $1,600 per month more than the 
          lawful rent.


          The prime tenants advised that the matter was pending under 
          overcharge complaint docket no. DL410177R.  In a June 1, 1992 
          answer to questions from the DHCR, they stated that they had an 
          oral lease with the owner Harold Pine from March 5, 1983 to March 
          31, 1993; that Brenda Rohlman was the daughter of Harold Pine; that 
          Thomas Rohlman was Vice President of Pine Management, Inc., the 
          agent for the owner; that the owner had not made a renewal offer to 
          the prime tenants; that the subtenant had apparently opted to 
          effectuate the sublease option for a one-year extension of her 
          sublease; and that the subtenant had commenced a declaratory 
          judgment action.  The prime tenants' answer stated in a footnote 
          that "[t]his addendum also pertains to Docket No. DL-410177-R; the 
          two Dockets should be consolidated for review."  In their answer 
          the prime tenants also referred to their November 5, 1991 response.  
          That is actually a response, several hundred pages in length, 
          submitted in Docket No. DL-410177-R, the overcharge proceeding.

          In an order issued on August 11, 1992 the Administrator, stating 
          that the complainant had stated that the prime tenants had never 
          lived in the subject apartment, found that prime tenancy was 
          illusory, and directed the owner to offer a lease to the subtenant.  
          The order stated that it was without prejudice to the overcharge 

          In a September 30, 1992 denial of the prime tenants' request for 
          reconsideration, the Acting Bureau Chief of the Overcharge Bureau 
          stated that all relevant information submitted in the overcharge 
          case was considered during the processing of the lease violation 

          In this petition, the prime tenants contend in substance that the 
          Administrator did not consider the materials submitted in the 
          overcharge proceeding, which showed that the subject apartment was 
          the prime tenants' primary residence from 1983 to 1987, including 
          a period in the Spring of 1984 when the apartment was rehabilitated 
          at a cost of more than $60,000 by among other things adding 
          formerly non-residential space to double it in size; and that the 
          incorrect claim of non-residence by the prime tenants was the sole 
          factual predicate for the Administrator's finding of an illusory 
          prime tenancy.  As part of their petition the prime tenants have 
          incorporated their November 5, 1991 answer in Docket No. DL410177R.  
          Among the contentions and statements contained in it are that the 
          subject apartment is "owner-occupied" under both a familial and 
          agency relationship to the owner; that the apartment has been 
          registered as exempt each year, although no registration was ever

          required to be served on the exempt apartment; that the prime 
          tenants paid a rent of $250.00 per month from March, 1983 through 


          April 1984 for a two room, one bath apartment; that in the Spring 
          of 1984 more than $60,000 was spent to convert it, together with 
          unfinished storage space and a raw basement with a dirt floor, to 
          a loft-typed luxury duplex of approximately 1,000 square feet, with 
          three rooms, two baths, and a deck [In a January 18, 1990 answer 
          enclosed as part of exhibit A of the petition, the owner Harold 
          Pine states that the renovation and expansion took place "[i]n 
          approximately February of 1983, subsequent to vacation of the 
          apartment by the last rent stabilized tenant of record"]; that this 
          renovation entitled the owner to charge a "first rent"; that the 
          prime tenants paid no rent for the new apartment through the time 
          that they sublet it to the complainant; that they continue to pay 
          no rent; that the complainant's rent payments to them are declared 
          on their income tax returns; that they sublet the apartment in 
          July, 1987 because they were intending to have another child, and 
          because it would be difficult for Brenda Rohlman to negotiate the 
          spiral staircase while pregnant and attend to the needs of their 
          existing toddler at the same time; that they moved to Tenafly, New 
          Jersey; that [as stated by Harold Pine in his January 18, 1990 
          answer] "Thomas and Brenda Rohlman will, at the termination of the 
          sublease, be returning to the subject apartment, using it as their 
          primary residence within the City of New York", and "no co-op or 
          condo plans exist for this property"; that [as stated in an August 
          2, 1989 Affidavit In Support of Cross-Motion and In Opposition to 
          Motion to Strike in Index No. 7479/89] "[a]t all times, it has been 
          our intent to utilize the apartment as our primary residence in the 
          State and City of New York and to begin living there again once Ms. 
          Skaler vacates," and "[f]requently, my duties as Vice President of 
          Pine Management, Inc. require my presence in the City of New York 
          during the evening hours and as a result, require me to stay in the 
          City overnight.  Thus, it was my intention to return to the subject 
          apartment after the expiration of our sublease"; that the Courts 
          have ruled that where an owner has permanently resided in an 
          apartment for a period of time, thereafter subletting it without 
          "irrevocably" severing his ties to the apartment, said owner cannot 
          be considered an illusory tenant; that the prime tenants occupied 
          the subject apartment for four and one-half years prior to 
          subletting it; that the owner himself has never profited as a 
          result of the sublease; and that there would be no overcharge even 
          if the apartment were stabilized.  In a response to the denial of 
          their request for reconsideration the prime tenants contend among 
          other things that in the recent decision in Bozzi v. Golblatt, 587 
          N.Y.S.2d 658 (A.D. 1st Dept. 1992), the Supreme Court's direction 
          of a renewal lease to a subtenant (based upon an "illusory 
          tenancy") was unanimously reversed by the Appellate Division in a 
          case with facts very similar to the present one.

          In answer, the subtenant asserts among other things that the prime 
          tenants claim that they lived in the apartment during substantial 
          renovations, but in fact there were no substantial renovation but 
          rather just some cosmetic changes which were legalized by a simple 


          filing with the appropriate City agency; that the owner of the 
          building acknowledges that he has never charged or collected any 
          rent from his daughter and son-in-law, the alleged tenants, from 
          the time of the construction in 1984 through the present; that the 
          Rohlmans live in a large house that they own in New Jersey; that 
          they have a son and daughter who are being raised in New Jersey, 
          and who attend schools in New Jersey from their residence in New 
          Jersey; that case law makes it clear that the tenancy of the 
          Rohlmans is illusory; that the so-called 10- year oral prime lease 
          is contrary to the Statute of Frauds, and is contradicted by the 
          fact that under the so-called lease they had not been required to 
          pay rent since 1984; that the retention and subletting of a rent- 
          stabilized apartment by the Rohlmans for personal advantage 
          directly evades the intent of the rent stabilization system; that 
          the DHCR has consistently taken the position that where there is an 
          illusory tenancy, the owner will be required to recognize the 
          actual occupant as the real tenant, disregarding the illusory 
          tenancy; that the Administrator's order incorrectly stated that the 
          complainant had stated that the Rohlmans had never resided in the 
          apartment; that, while they did live in the apartment, they have 
          conceded that they have no intention of ever returning to it; and 
          that it is very clear that the Administrator considered all of the 
          relevant evidence.

          In response, the prime tenants' attorney contends in substance that 
          the sub-tenant is incorrect in asserting that an apartment that was 
          substantially rehabilitated and more than doubled in size just had 
          "some cosmetic changes"; that the unit newly created in 1984 was 
          effectively owner-occupied and was therefore exempt from the Rent 
          Stabilization Law and Code; that the Rohlmans have never conceded  
          that they do not intend to return to the apartment; that "[t]he 
          Rohlmans have every intention of utilizing the apartment in the 
          future.  Whether they maintain the apartment as their sole primary 
          residence or as their primary residence in the City of New York, 
          their entitlement to recover the apartment is clear"; that it is 
          neither illegal, inappropriate or illusory for an owner to rent an 
          apartment to persons related to him; that the prime tenants' 
          several year residency in the subject apartment distinguishes it 
          from the normal illusory tenancy set forth in Hutchin vs. C.A.B., 
          480 N.Y.S.2d 684 (Sup. 1984); and that the prime tenants have 
          neither severed their ties to the subject apartment nor engaged in 
          a conspiracy to evade or avoid the Rent Stabilization Law or Code.

          In reply, the subtenant asserts in substance that when the Rohlmans 
          permanently vacated the apartment and moved to their new home in 
          New Jersey, the owner of the building would have entered into a 
          direct stabilized lease with the complainant except for a 
          conspiracy with his daughter and son-in-law whereby they pretended 
          to be the prime tenant pursuant to some kind of oral lease 


          arrangement, which did not even require the payment of rent, and 
          then "subleased" the premises to the complainant; that it is clear 
          that this arrangement was entered into on behalf of the owner and 
          for the sole purpose of evading the rent stabilization laws and 
          possibly the co-op/condominium conversion laws; that if the 
          apartment was registered as exempt because of owner occupancy, then 
          the Rohlmans were owners when it became time to lease the 
          apartment, and the agreement with the complainant is therefore a 
          lease, not a sublease; that the rent for the subject apartment 
          should be based on the full rental history of the apartment; that 
          such rent should not include any increase for claimed improvements, 
          since no evidence of their cost has been submitted, and since the 
          owner would not be entitled to any increase for major capital 
          improvements because the apartment was never vacant and because 
          there was no written agreement between the prime tenant for the 
          increase of the rent, and where in fact the prime tenants were not 
          required to pay any rent; and that the owner appears to be in the 
          business of subletting apartments, as there are numerous other 
          apartments in the subject building occupied by members of the 
          immediate family of the owner, some apartments of which have been 
          sublet at excessively high rent with or without occupancy ever 
          having been commenced by the relatives.

          In answer, the prime tenants' attorney contends in substance that 
          under rent regulation owners have always been granted a right of 
          "owner occupancy", a special exception to the norms under rent 
          regulation so that owners could provide housing for themselves 
          and/or persons related to them; that the Rohlmans, primary 
          residents of the apartment before the subletting, have never stated 
          that they have permanently vacated or abandoned the apartment; that 
          their ability to make use of the apartment has been stymied by the 
          complainant's holding over subsequent to the expiration of her 
          sublease; and that neither the owner nor the managing agent have 
          reaped an economic benefit from the sublet, since the rent paid by 
          the complainant has never been shared with the owner or managing 
          agent, but has in fact been reported by the Rohlmans as income.  
          With the answer is enclosed an affidavit by the Rohlmans asserting 
          some of the same points made by their attorney, and additionally 
          contending that it would have been useless to seek to evict the 
          complainant to get the apartment back, since the court would have 
          waited for a DHCR determination; that there are no other apartments

          in the building occupied by members of the owner's immediate 
          family, although the owner and his son each had an apartment until
          1991; that neither of those apartments were sublet; and that upon 
          vacancy they were duly rented to stabilized tenants.  The Rohlmans 
          also enclosed various utility bills and tax returns listing them at 
          the subject apartment from February, 1983 through August, 1987.

          In reply, the complainant's attorney asserts in substance that the 


          claim of illusory tenancy is based not just on the Rohlman's 
          business and familial relationship to the principal of Pine 
          Management, Inc., but also on the fact that at the time of the 
          sublease the Rohlmans concealed their relationship to the owner of 
          the property; that only owners are entitled to collect a "first 
          rent"; that the Rohlmans cannot claim on the one hand that they are 
          prime tenants who are simply subletting the apartment, while on the 
          other hand assert that they are the owners of the apartment 
          entitled to collect a "first rent"; that this is especially the 
          case where their supposed prime lease is oral and does not call for 
          the payment of rent; that their failure to commence a holdover 
          proceeding is a clear indication that they had abandoned the 
          apartment and did not want to be questioned in court regarding 
          their true motivations and status; that while the Rohlmans assert 
          that they have never shared any of the complainant's rental 
          payments with the owner, it may be that such rental income is part 
          of the consideration being paid to Thomas Rohlman in light of his 
          position as Vice President of the company that manages the 
          building; that the utility bills submitted by the Rohlmans are not 
          inconsistent with their using the apartment as a pied--tere, or 
          for some other purpose which remains unknown to the complainant; 
          and that, but for the collusion between the Rohlmans and the owner, 
          the complainant would have been entitled to have her own lease, and 
          to file a fair market rent appeal since the apartment has never 
          been registered.

          In answer, the prime tenants contend among other things that the 
          complainant was fully aware of a familial relationship, since she 
          was informed of the available sublet by an acquaintance of hers who 
          shared a house with the owner's son; that upon her vacating the 
          Rohlmans will recover possession of the unit; that they intend to 
          maintain the unit as their primary residence in the City of New 
          York; that their failure to pursue eviction proceedings is only a 
          recognition of the reality that a Court would have deferred to 
          pending DHCR proceedings; and that the complainant's failure to 
          pursue a proceeding which she commenced in Supreme Court is 
          evidence that she recognizes the paucity of proof supporting her 

          The Commissioner is of the opinion that this petition should be 
          denied, and that the Administrator's order should be modified.

          An apartment otherwise subject to stabilization is exempt during 
          the time that it is occupied by its owner as her or his primary 
          residence.  If the owner occupies the apartment from the base date, 
          then the rent charged the first tenant becomes the initial legal 
          stabilized rent, and the lawful rent for subsequent tenants is 
          based on lawful increases above the initial legal stabilized rent.


          A tenant who occupies a rent stabilized apartment as his or her 
          primary residence may generally, with approval of the owner, sublet 
          the apartment, at a lawful rent no greater than his or her rent 
          plus an increase for any additional services such as furniture that 
          the subtenant receives which are not already included in the prime 
          tenant's rent.  For the sublease to be a legitimate sublease, 
          rather than an assignment, the prime tenant must intend to resume 
          occupancy at the conclusion of the sublet.

          As noted in Hutchins v. C.A.B., two types of illusory tenancy have 
          generally been recognized.  One is that of a "strawman", acting as 
          the landlord's agent or in cooperation with him or her, subleasing 
          an apartment to enable a landlord to circumvent obligations, 
          including those relating to cooperative conversion, under the rent 
          laws.  The other is that of a prime tenant subletting for a profit 
          one or more apartments that are not his or her primary residence.

          The facts of the present case evidence an attempt by the owner and 
          the Rohlmans to create a third type of illusory prime tenancy, or 
          rather a new class of landlord having aspects of both tenant and 
          owner.  They cannot have it both ways, and the appeal fails whether 
          the Rohlmans are hypothecated as tenants or as owners.

          As (prime) tenants, the Rohlmans are claimed to have a lease and to 
          be subleasing to the complainant.  However, their rent would have 
          to be shown to be a lawful stabilized rent, whether by virtue of 
          being the first stabilized rent or by virtue of their having been 
          only lawful increases since the base date, and the complainant 
          could be charged no more than such lawful rent since there has been 
          no contention that the apartment is furnished or receiving 
          increased services.  However, the Rohlmans claim to have paid 
          $250.00 per month through April, 1984, and to have paid no rent 
          since what they contend is a new base date based on an increase in

          the size of the apartment.  There is also some doubt about their 
          desire and intention to move back into the subject apartment as 
          their primary residence, based on their statements that they intend 
          to make the apartment their "primary residence in the City of New 
          York," rather than their only primary residence.  Further their 
          failure to dispute allegations that they own their own home suggest 
          that their actual primary residence would remain in New Jersey, 
          with the subject apartment being just their (only or primary) pied- 
          -tere in New York City and/or a place for Thomas Rohlman to stay 
          in Manhattan when he has to work late, whether or not they also 
          desire to retain it for financial gain, such as cooperative 
          conversion rights.  Another problem with the concept of the 


          Rohlmans being legitimate prime tenants with a right to sublease 
          and to return is that their purported 10-year oral lease would 
          generally be considered void under the Statute of Frauds (General 
          Obligations Law  5-703), and would in any event probably not have 
          envisioned them as stabilized tenants.  In addition, Clause 6 of 
          the sublease agreement provides that "[u]undertenant recognizes 
          that subject apartment is Fair Market, exempt from Rent Control or 
          Rent Stabilization."  This would be a rather unusual clause to 
          include in a subletting by genuine prime tenants, since the fact 
          that someone has a lease does not somehow exempt an otherwise 
          stabilized apartment.

          However, the owner and the Rohlmans have contended that the 
          Rohlmans are owners under both familial and agency theories.  While 
          they are "owners" for some purposes, such as refunding overcharges, 
          there are problems in considering them as owners for the purposes 
          of retaining rights to the apartment and exempting it from rent 
          stabilization.  If they are "owners" it would seem unusual for them 
          to have a (purported) long-term lease for an apartment used for 
          residential purposes and to have paid rent for part of the period.  
          If the Rohlmans are regarded as exempt from rent stabilization 
          during the time that they occupied the apartment without paying 
          rent, then the first tenant after they vacated should have been 
          offered a stabilized lease with a right to renew, and a right to 
          purchase upon a conversion, rather than a non-stabilized sublease 
          specifically excluding those rights in clauses 6 and 8 of the 
          rider, since an apartment is not "occupied" by an owner once such 
          owner vacates and leases the apartment to a rent-paying tenant.  
          The present situation is dissimilar from that in Bozzi v. 
          Goldblatt.  In that case the owner's daughter, who allegedly had an

          oral lifetime leasehold at a rent of $244.37, paid that rent for at 
          least 34 years.  At the time that she and her husband sublet the 
          apartment and moved to Putman County allegedly due to economic 
          necessity, the building was owned by three co-equal testamentary 
          trusts of herself and her two siblings, who resided in the 
          building.  The Appellate Division felt that triable issues of fact 
          were present on the issue of illusory tenancy and of whether 
          Goldblatt and the corporate defendant conspired to evade the rent 
          laws.  It is not apparent from the opinion whether Goldblatt 
          rented, rather than owned, a residence in Putman County.  In the 
          present case the Rohlmans are not alleged to have a legal ownership 
          interest, such as by deed.  Thomas Rohlman is corporate Vice 
          President of Pine Management, and Brenda Rohlman is (according to 
          an answer to an interrogatory in the court proceeding submitted to 


          the DHCR) corporate Secretary as well as Harold Pine's daughter.  
          While it might be understandable, and considered not out of the 
          ordinary, for Harold Pine to let his daughter and son-in-law use 
          the apartment rent-free if they were not employees, and while the 
          Rohlmans would probably be considered legitimate tenants (whether 
          or not stabilized) during the time that they were actually living 
          there pursuant to such a "sweetheart" arrangement, in the present 
          case the Rohlmans have received in excess of $100,000.00 in rents 
          from the complainant since she commenced occupancy, allegedly 
          reporting the rent as their own income and not being obligated to 
          turn any of it over to Harold Pine.  This is not a typical 
          arrangement between an owner and prime tenants.  [While it would be 
          a typical arrangement for an owner to receive rent and to not have 
          to turn it over to someone else, it bears repeating that the 
          Rohlmans have not claimed to have an actual ownership interest, 
          that owners typically do not attain rights to an apartment through 
          an (alleged) prime lease, and that an owner not in occupancy should 
          not be subleasing, but rather leasing to a stabilized tenant.]  The 
          fact that the apartment is allegedly "occupied" by two employees, 
          rather than by someone whose trust is a co-owner of the building, 
          makes the present situation less like Bozzi v. Goldblatt, and more 
          like a situation where a superintendent performing services worth 
          $1,900.00 a month is allowed to live without paying rent in an 
          apartment worth that much.  In such a case, if the superintendent 
          were to vacate and sublease the apartment for $1,900.00 a month 
          without being required to pay any rent to the owner of the 
          building, it would be found that the apartment was no longer 
          temporarily exempt by reason of employee occupancy, and that the

          owner's attempt to pay the superintendent by granting the usufruct 
          of the apartment had simply resulted in the apartment becoming 
          vacant when the superintendent left (whether or not the 
          superintendent "intended to return" someday), and in the under - 
          tenant having a right to a prime stabilized lease in her or his own 
          name, including the right to renew and rights related to 
          cooperative or condominium conversion.

          Section 2524.4 of the Rent Stabilization Code provides grounds, 
          including primary residence by a member of an owner's immediate 
          family, for refusing to offer a renewal lease.  However, the right 
          to commence a court proceeding to recover possession for owner 
          occupancy is limited to owners, who would, to recover possession 
          for personal or family use, have to give notice during a "window" 
          period of 120 to 150 days prior to the expiration of a lease.  The 
          Rohlmans are attempting to retain the rights of owners vis--vis 
          the tenant, without any of the obligations and restrictions on 


          them, and without the rights of the complainant, that would apply 
          if they were actually owners.  They are also attempting to use the 
          defenses available to prime tenants but not owners (i.e., ability 
          to not give a stabilized lease, to refuse to renew, and to retain 
          conversion rights), but to also avoid the requirements (i.e., 
          themselves having a written stabilized lease of one or two years 
          with the rents being registered and lawful, and having the 
          apartment as their primary residence).  If Harold Pine, the actual 
          owner, were to commence a court proceeding to recover possession, 
          it would most plausibly be against the Rohlmans, in their attempted 
          role as prime tenants who can sublease and refuse to renew.  For a 
          likely outcome of such an action, see Lindstrom v. Conte, N.Y. City 
          Civ. Ct., 448 N.Y.S.2d 636 (1982), where a prime tenant who merely 
          wanted the added convenience of a pied--tere was not allowed to 
          regain possession from a subtenant.  See also Sommer v. Ann Turkel, 
          Inc., 522 N.Y.S.2d 765 (Sup. 1987), where the Appellate Term, First 
          Department found that an apartment was not the primary residence of 
          a tenant who spent 60-75 days there annually, who paid New York 
          City and State income taxes, who did not sublease it, and who 
          claimed that she regarded New York as her true home and intended to 
          return when her work permitted her to do so.  The reality of the 
          present situation is that two employees of Pine Management vacated 
          the subject apartment, regardless of their reason and regardless of 
          whether they ever intended to make it their primary residence 
          again, and the complainant has been living in the apartment for 
          more than six years while the Rohlmans have lived elsewhere.  The 
          Rohlmans have not shown adequate legal or equitable grounds why the 
          complainant should be denied her own lease from the owner and why 
          the owner or the Rohlmans should (ultimately) be able to require 
          her to vacate her residence.  (The registrations show the owner as

          Park Crest Apartments. C/o Pine Management, Inc., and the manager 
          as Harold Pine c/o Pine Management, Inc.  If Thomas Rohlman were to 
          sign such a lease with the complainant it would be as an agent of 
          Pine Management, and not as either a prime tenant or as an "owner" 
          by virtue of his familial relationship.  Also, if the building is 
          actually owned by a corporation, it is not even clear if it would 
          be possible to have "owner" occupancy [by Harold Pine, the 
          shareholder], as opposed to employee occupancy by two people who no 
          longer reside there.)

          While the Administrator was correct to order the offer of a lease 
          to the complainant, the order should be modified to remove the 
          statement that the complainant stated that the Rohlmans never 
          resided in the subject apartment.

          The owner is directed to reflect the findings and determination 
          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.  Any rent registered should 
          indicate that it is subject to a pending DHCR overcharge 

          THEREFORE, in accordance with the Rent Stabilization Law and Code, 
          it is

          ORDERED, that this petition be, and the same hereby is, denied and 
          that the Rent Administrator's order be, and the same hereby is, 
          modified in accordance with this Order and Opinion.


                                             Joseph A. D'Agosta
                                             Deputy Commissioner



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