GK110048RO

      `
                                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

      ------------------------------------X 
      IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
      APPEAL OF                              DOCKET NO. GK110048RO

          Ossa Properties, Inc.,          :  DISTRICT RENT OFFICE
                                             DOCKET NO. AI110448R
                                            
                                             TENANT: Frank &                  
                                             Georgina Jerome  
                            PETITIONER    : 
      ------------------------------------X                             


      ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW IN PART 


      On November 16, 1992 the above-named petitioner-owner filed a Petition 
      for Administrative Review against an order issued on October 15, 1992,  
      by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York 
      concerning the housing accommodations known as, 150-10 71st Ave., Apt. 
      5B, Flushing, N.Y, wherein the Rent Administrator determined that the 
      owner had overcharged the tenant.

      The Administrative Appeal is being determined pursuant to the provisions 
      of Section 2526.1 of the Rent Stabilization Code.

      The issue herein 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 commenced by the tenant's filing of a rent 
      overcharge complaint, on September 30, 1986.  The tenant assumed 
      occupancy on November 1, 1974 pursuant to one year lease at a rent of 
      $260.00 per month.  At the time of the filing of the complaint, the 
      tenant paid $431.56 per month.  The tenant stated on the complaint that 
      he did not receive a copy of the Initial Apartment Registration Form 
      (RR-1).         

      In reply the former owner (Imperial Properties, Inc.) stated that it did 
      not own the building until 1986; that the apartment had been properly 
      registered  from April 1, 1984 on; and that the tenant had been served 
      with a registration form each year as required.  The former owner 
      submitted the owner's copy of the RR-1 along with a 1984 Registration 
      Summary including an affidavit of service of the RR-1 on all tenants in 
      the building by the managing agent.  However, no proof of service of the 
      RR-1 on the complainant-tenant was submitted.
      In response to a Final Notice of the Imposition of Treble Damages, 
      wherein the petitioner-owner was notified that a preliminary 







      GK110048RO

      determination found an overcharge of $38,906.94, including treble 
      damages, the owner stated the former owner had properly registered the 
      subject apartment; that the apartment is in one of 8 buildings in the 
      Dara Gardens complex; and that in 1984, the owner at the time, Morfor 
      Realty Corp., registered each building with DHCR; that the petitioner- 
      owner did not purchase the building until July, 1991; and that all 
      owners have timely filed the registration statements with DHCR since 
      1984.  The owner submitted the RR-1 for the complainant-tenant and the 
      1984 Registration Summary with the agent's affidavit, which were 
      previously submitted by the former owner. The owner stated that it was 
      unable to provide any additional proof of service of the initial 
      registration on the complainant-tenant due to the passage of time and 
      many changes of ownership.  Furthermore, the owner asserted that there 
      was no actual overcharge on any particular lease;  that the finding of 
      the overcharge was entirely based on the lack of proof of registration.  
      Therefore, the owner contends that there can be no finding of willful 
      overcharges, and treble damages are unwarranted.  

      In an order issued under Docket Number AI110448R, the Rent Administrator 
      determined that the legal regulated rent was to be based upon the rent 
      paid on April 1, 1980 because the owner failed to prove service of the 
      initial apartment registration on the tenant (RR-1) and thus the initial 
      rent on April 1, 1984 was subject to challenge; that the lawful rent on 
      April 1, 1984 was $357.21; that the rent was frozen at that amount 
      through the issuance date of the order because the owner had failed to 
      prove service of the 1984 initial registration on the tenant; that as a 
      result the tenant had been overcharged $40,634.16, including treble 
      damages and excess security.

      In this petition and supplement, the owner restated the same contentions 
      made in its earlier reply to the final notice, claiming in effect that 
      it was improper for the Administrator to find that the building had not 
      been registered.  Petitioner argues that such a finding is inconsistent 
      with DHCR's own published rules, as stated in Policy Statement 92-3, 
      issued on August 14, 1992.  Specifically, that the owner's substantial 
      compliance with the rent regulations gives rise to a "strong positive 
      presumption" that the registration requirements were met as well.  
      Instead, the Administrator's determination of non-compliance is contrary 
      to the "totality of evidence" in the record.

      Petitioner also argues that proof of service on the tenant is conclusive 
      from the Affidavit of Service paragraph in the Registration Summary Form 
      (RR-2).  It is argued that if the attestation of service by the owner's 
      agent is not to be considered as evidence, why does the DHCR include it 
      at all?  Petitioner claims that we must assume the DHCR meant for it to 
      have weight or the paragraph would be meaningless.

      This "totality of evidence" includes: the correct calculation of all 
      rent increases in accordance with the guidelines; the fact that leases 
      have always been provided to all tenants in the building; that the 
      present and all former owners have timely filed the RR-2 Building 
      Summary Form with the DHCR, and that the tenants have always been served 
      with individual rent registration forms.  Furthermore, it is unjust to 
      require an owner to prove an occurance that happened eight years earlier 
      in 1984, when the Rent Stabilization Code never requires that an owner 
      retain proof of service for so long a period.  Additionally, the owner 
      objects to the discrepancy between the total overcharge amount in the 
      Final Notice to the owner ($38,906.94) from the amount listed in the 


      GK110048RO

      order ($40,634.16), and believes that some rational explanation is 
      required.

      The owner further objects to the DHCR's delay of more than six years in 
      issuing the order, and  states that it has been unfairly penalized by 
      this delay because overcharges it could know nothing about were 
      continuing to be collected, for which treble damages would eventually be 
      imposed.  The finding of willful overcharging by the owner is contrary 
      to the evidence in the record, which shows that all rent increases were 
      calculated in accordance with the guidelines.  Finally, the owner 
      contends that it is poor public policy to impose treble damages in such 
      a case because it treats an owner who has always acted lawfully exactly 
      the same as an owner who adamantly refuses to comply with registration 
      requirements.

      The Commissioner is of the considered opinion that this petition should 
      be granted in part.

      Although the owner has been able to show that the former owner did in 
      fact file the initial registration with the DHCR in 1984, no acceptable 
      proof of service on the tenant has been submitted.  Policy Statement 92- 
      3, issued on August 14, 1992, provides that the only acceptable methods 
      of documentation of service of the initial registration on the tenant 
      prior to May 1, 1987 are: a contemporaneously signed receipt (the 
      original receipt, not a copy) from the tenant acknowledging hand 
      delivery of the initial registration form; or a Post Office receipt 
      certifying the date and number of pieces of mail to the building 
      included in the "Carrier Route Pre-Sort" service along with a list of 
      the mailing addresses furnished by the RSA or by a bonded mailing house; 
      or a signed and dated form #PO3877, "Acceptance of Registered, Insured, 
      C.O.D., and Certified Mail," which proves the date of delivery of first 
      class mail to the Post Office.  However, the owner only submits a copy 
      of the Registration Summary (RR-2) which contains an affidavit signed by 
      the Managing Agent that attests to the mailing of the initial 
      registration to each tenant of the building.  (It is noted that while 
      the affidavit indicates that 66 apartment registration forms were 
      prepared, the date of mailing is not indicated.)  Since this is not one 
      of the three acceptable means of proving service indicated in the policy 
      statement, the owner has not sustained its burden of proof.  

      The Commissioner is also of the opinion that treble damages are 
      warranted in this case.  The record documents two instances where 
      overcharging occurred independent of the failure to serve the tenant 
      with the initial registration, namely in the lease terms commencing on 
      November 1, 1980 and November 1, 1981.  However, total overcharges must 
      still be reduced because the Administrator incorrectly allowed only a 5% 
      guidelines increase on the November 1, 1980 lease, which amount is for 
      residences where the tenant provides heat, instead of 11%, when the 
      owner provides it, as in the instant case.  A recalculation of rent 
      history results in a reduction of total overcharges to $33,604.30, from 
      $40,634.16, as documented in the rent calculation chart affixed hereto 
      and made a part hereof.
      The owner is directed to reflect the findings and determinations 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.  The owner is further directed to adjust subsequent rents to 







      GK110048RO

      an amount no greater than that determined by this order plus any lawful 
      increases.

      The Commissioner has determined in this Order and Opinion that the owner 
      collected overcharges of $33,604.30.  This Order may, upon 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 or not in excess of twenty percent per month of 
      the overcharge may be offset against any rent thereafter due the owner.  
      Where the tenant credits the overcharge, the tenant may add to the 
      overcharge, or where the tenant files this Order as a judgment, 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.

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

      ORDERED, that this petition for administrative review be, and the same 
      hereby is, granted in part, and that the order of the Rent Administrator 
      be, and the same hereby is, modified in accordance with this Order and 
      Opinion.              



      ISSUED:
                                     

                                                                    
                                         JOSEPH A. D'AGOSTA
                                         Deputy Commissioner
    

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