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
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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 :
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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
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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
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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
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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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