HA410044RO
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. HA410044RO
ANF Co., : DISTRICT RENT OFFICE
DOCKET NO. GF410063R
TENANT: Inez Senhouse
PETITIONER :
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ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW
IN PART
On January 20, 1993, the above-named owner filed a petition for
administrative review of an order issued on January 14, 1993, by a Rent
Administrator concerning the housing accommodations known as 3657
Broadway, New York, New York, Apartment No. 8B, wherein the
Administrator determined that the owner had overcharged the tenant.
The Commissioner has reviewed all of the evidence in the record and has
carefully considered that portion of the record relevant to the issues
raised by the administrative appeal.
This proceeding was commenced by the filing of an overcharge complaint
on June 20, 1992. The tenant stated that she took occupancy of the
subject apartment on January 1, 1991 at a rent of $1,300.00 plus $35.00
for doorman services and believed she was being overcharged.
During the pendency of the proceeding before the Administrator, the
owner submitted a "so-ordered" Stipulation of Settlement between the
parties in the Civil Court dated May 29, 1992. That court order stated
that as of January 1, 1992, "[t]he legal rent shall be $1,352.00;
however petitioner agrees to collect a lower base rent of $1,200.00 per
month." The tenant also agreed to pay $35.00 for doorman service as
ordered by DHCR. Further, the court order stated that the tenant
consented to the jurisdiction of the court, that she fully understood
the agreement and that the tenant was represented by counsel. The
order also stated that the total arrears were $5,954.50.
The owner asserted that this "so-ordered" Stipulation of Settlement
should have resulted in a termination of the overcharge proceeding by
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the Division of Housing and Community Renewal (DHCR) under Section
2520.13 of the Rent Stabilization Code.
However, the Administrator continued processing the overcharge complaint
on the merits. The owner responded to all requests for information from
the Administrator and addressed the merits of the case. The owner
claimed that no overcharges occurred. The owner alleged that the
subject apartment was vacated by a prior tenant who was paying $398.21
per month rent in November of 1988. During the ensuing vacancy the
owner allegedly made $51,809.65 worth of improvements in the subject
apartment. It is alleged that the tenants immediately prior to the
current tenant lived in the subject apartment for eights months at a
rental of $1,275.00 per month. The owner alleges that it did not charge
the full amount it could have after the improvements because the market
would not support that high a rent. In its efforts to document the
vacancy improvements, the owner stated that the renovation work included
a group of six apartments and that the subject apartment was allocated
21.42% of the total group cost. Thus, some of the documentation of
improvements would not list the individual apartment units, but the
group of apartments instead. Accordingly, the owner concluded that no
overcharges occurred and all rental charges were well within rent
stabilization guidelines. In the alternative, the owner claimed that
the record reflected a lack of willfulness and that no treble damages
should be assessed.
The tenant submitted a reply to the owner's answer. The tenant asserted
that the "so-ordered" Stipulation of Settlement was not binding because
it was made without DHCR's approval. Further, the tenant noted that a
motion was pending in the Civil Court to vacate the Stipulation of
Settlement.
In her reply the tenant also addressed the merits of the proceeding.
She alleged, among other things, that the prior tenants (Rios and
Deloach) were "illusory prime tenants" who were actually employees of
the owner set up as residents of the subject apartment for several
months to evade the rent regulation guidelines. The tenant also
disputed both the quantity and quality of any improvements made in the
subject apartment. She maintained that the documentation produced by
the owner to substantiate the alleged improvements was inadequate and
pointed out specific examples of alleged inadequate documentation.
In the order here under review, the Administrator determined that the
installation of new equipment (kitchen cabinets, stove and refrigerator,
and a bathroom vanity) at a cost of $2,692.18 was adequately documented
and disallowed the remainder of the alleged improvements because they
were either inadequately documented or were merely maintenance and
repair. Further, it was determined that the owner was entitled to the
$35.00 fee for doorman service. The Administrator also noted that the
evidence in the record indicated that the tenant did not pay rent after
December 31, 1991. Accordingly, the overcharges were calculated to be
$28,679.76 including treble damages for the period of January 1, 1991
through December 31, 1991.
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The owner filed both a request for reconsideration and a petition for
administrative review. With the request for reconsideration the owner
submitted twenty-six exhibits and raised a variety of issues. Among the
issues raised by the owner was that a tenant's submission dated December
28, 1992 was never served on the owner and that the owner had no
opportunity to rebut this submission. The owner asserted that this
unrebutted tenant's submission served as the basis for the
Administrator's order and concluded that the failure to serve the owner
with this submission constituted an irregularity in a vital matter. On
April 24, 1993, the Administrator denied the request for reconsideration
and specifically stated that the tenant's submission of December 28,
1992 did not form the basis of the overcharge finding and, as such, did
not have to be served on the owner. The owner was further advised that
this issue and all other issues would be resolved by the Commissioner in
the determination of the petition for administrative review.
The Commissioner notes that during the early processing of the petition
for administrative review, on April 9, 1993, the owner was served with
a copy of the tenant's submission of December 28, 1992. This service
was made "to protect the due process rights" of the owner, and the owner
was afforded an opportunity to respond to this submission. The owner
concluded that the findings contained in the denial of owner's request
for reconsideration and the service of the tenant's submission on the
owner constituted an inconsistency which must result in a reversal of
the Administrator's order.
In the petition for administrative review, the owner raises many issues
which it alleges would require revocation or modification of the
Administrator's order. The petition for administrative review raises
both procedural and substantive issues and fully incorporates the
request for reconsideration.
Procedurally, the owner asserts, among other things, that the
Administrator favored and gave prejudicial treatment to the tenant's
complaint resulting in rushed and incomplete processing. It is alleged
that this prejudicial treatment was evidenced by ex parte communications
with the tenant or her attorney. Further, the owner vigorously
reasserts the claim that the "so-ordered" Stipulation of Settlement
between the parties should have resulted in the termination of the
overcharge proceeding.
Substantively, the owner alleges various errors by the Administrator.
Among these errors, the owner asserts that the Administrator failed to
consider the registered rent of the prior tenant, misstated the rents
actually charged to the tenant, failed to include MCI rent increases
previously granted by DHCR and mistakenly excluded almost $50,000.00 in
vacancy improvements. Further, the owner alleges that the
Administrator's order was insufficiently specific. The owner asserts
that the Administrator's order failed to discuss the "so-ordered"
Stipulation of Settlement at all, insufficiently detailed why the
vacancy improvements were rejected and insufficiently explained what
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specific acts by the owner displayed willfulness. In the alternative,
the owner again asserts that the record clearly displayed a lack of
willfulness and that no treble damages should have been assessed.
On June 14, 1993, the owner submitted a supplemental pleading to bolster
the petition for administrative review. This twenty page pleading
included seven additional exhibits and an affidavit. In this submission
the owner maintains that giving the owner the opportunity to respond to
a submission at the administrative review level does not and cannot cure
the denial of due process in the underlying proceeding. The remainder
of this supplemental pleading consisted of a point-by-point rebuttal to
the tenant's submission of December 28, 1992. The affidavit and
additional exhibits which were attached to the supplemental pleading
were further efforts made by the owner to document its claimed
entitlement to vacancy allowances. Among the other issues raised by the
owner in this supplemental pleading is the alternative argument that its
vacancy improvements were extensive enough to entitle the owner to
charge a new first rent to a tenant after renovations.
In her reply to the petition for administrative review, the tenant urges
that the Administrator's order be affirmed. The tenant maintains that
no preferential treatment was afforded to her. Further, the tenant
maintains that the "so-ordered" Stipulation of Settlement was not
binding on the DHCR and that she never intended to withdraw the
overcharge complaint. Finally, the tenant's reply reasserts that the
improvements, if any, were poorly done and several reports of service
violations were made to the New York City Department of Housing
Preservation and Development.
Subsequently, a series of submissions were filed by attorneys for both
sides which reasserted earlier arguments and attacked the credibility of
the other party. Little new substantive evidence of probative value was
submitted in these subsequent submissions.
The Commissioner is of the opinion that this petition should be granted
in part.
The Commissioner is of the opinion that the owner's allegations of
prejudice in this case are without merit. Any errors made were
inadvertent. The record discloses no evidence of bias in this case.
The Commissioner finds that this administrative review procedure has, in
fact, protected the due process rights of both parties. The
Commissioner rejects the owner's argument that a due process error by
the Administrator permanently taints a proceeding and cannot be cured at
the administrative review level. The document which is of greatest
concern to the owner appears to be the tenant's submission of December
28, 1992. The owner concluded that this document must have formed the
basis for the Administrator's order. In denying the owner's request for
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reconsideration, the Administrator specifically stated that this
document did not form the basis for the Administrator's order and
therefore did not have to be forwarded to the owner. The Commissioner
agrees that this document did not form the basis of the Administrator's
order. The document contained predominantly unsubstantiated allegations
which carry little or no weight. However, to cure any possible denial
of due process, this document has now been forwarded to the owner.
Section 2529.7(c) of the Rent Stabilization Code permits the
Commissioner to forward evidence to a party and afford that party the
opportunity for rebuttal. Affording the owner this opportunity for
rebuttal at the administrative review level affords the owner due
process. The Commissioner has carefully considered and given
appropriate weight to all the submissions of both parties made at all
stages of this proceeding.
The Commissioner also finds that the Administrator made no error by
continuing to process this case despite the submission by the owner of
a "so-ordered" Stipulation of Settlement entered into by the parties in
Civil Court on May 29, 1992. The issue is whether the stipulation
constituted the court exercising its concurrent jurisdiction to
establish the lawful rent.
The Commissioner is of the opinion that the owner is correct on this
issue. The establishment of the legal rent in the "so-ordered"
Stipulation of Settlement clearly constitutes an exercise of the court's
concurrent jurisdiction. As noted above, the stipulation specifically
states that the tenant consents to the jurisdiction of the court, that
she fully understands the agreement and that the tenant was duly
represented by counsel.
However, the Housing Court established the lawful rent only as of
January 1, 1992. It is also uncontested that the tenant ceased paying
rent as of January 1, 1992 and the amount of arrearages set by the court
($5,954.50) clearly was limited to the five month period from January 1,
1992 through May 31, 1992.
Accordingly, the Administrator made no error by continuing to process
this case and correctly concluded its findings and calculations as of
December 31, 1991. As of January 1, 1992 the order of the Housing Court
as reflected in the "so-ordered" stipulation of May 29, 1992 is in full
force and effect and the rent stipulated to in the stipulation becomes
the lawful rent.
This proceeding was initiated by an overcharge complaint filed on June
20, 1992. Accordingly, the Administrator's investigation of the
overcharges and lawful stabilization rent correctly began as of April 1,
1988. It is uncontested that the rent registered and the rent collected
on that date was $398.21. In its petition for administrative review,
the owner claimed that the Administrator failed to consider the
registration of the prior tenant. The Commissioner is of the opinion
that this claim is correct and the Administrator erred by failing to
include in the calculations the tenants in residence prior to the
complainant-tenant. There is no documentation of the complainant-
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tenant's allegation that the prior tenant was "illusory." Accordingly,
the Commissioner has included the prior-tenant in the revised
computations which are reflect in the attached calculation chart.
The owner claims that the Administrator was incorrect in disallowing
most of the vacancy improvements and that the Administrator was
insufficiently specific in her order to allow the opportunity to present
a point-by-point rebuttal in the petition for administrative review.
The Commissioner finds that, while the Administrator failed to specify
why each item was rejected this vagueness did not affect the owner's
ability to argue its position. The owner submitted over one hundred
pages of documentation to the Administrator in an effort to prove the
validity of the vacancy improvements and has submitted many more pages
of new documentation with its petition for administrative review. All
of the documentation has been considered by the Commissioner in order to
make a detailed determination as to the validity of the individual
claimed improvements.
The Commissioner finds that Administrator correctly excluded most of the
owner's alleged vacancy improvements. The rejected vacancy improvements
included alleged: 1) plumbing improvements 2) electrical improvements 3)
bathrooms tile 4) carpentry work 5) demolition, masonry and stucco work
6) work associated with the above, such as plans, licenses and debris
removal 7) painting and plastering 8) floor finishing 9) kitchen
linoleum.
The alleged plumbing improvements ($8,149.24) were appropriately
excluded. The documentation presented by the owner fails to specify
what type of work was performed in the subject building or in the
subject apartment. The only submissions made to support the request for
rent increases based on plumbing improvements were limited to checks
made to a plumber, an affidavit of the plumbing contractor explaining
the lack of a contract and why the checks were not contemporaneous with
the work, and owner-supplied accounting sheets. No description of
plumbing work done was submitted, nor was the cost attributed to the
subject apartment adequately documented.
The alleged electrical improvements ($3,748.50) also were properly
excluded. In order for an owner to collect rent increases for vacancy
improvements, DHCR requires strict compliance with its rules for
documentation. The request for rent increase based on electrical
improvements included an invoice from an electrical contractor, and this
invoice did specifically state what work was done in the subject
apartment. This invoice is for $36,556.25 and the quantities of work
done in each apartment is different. For no clear reason, the owner
allotted $17,500.00 of this amount to the group of apartments which
included the subject apartment. Again, for no clear reason, the owner
allotted $3,748.50 to the subject apartment. Also, the invoice is dated
May 9, 1990 and the checks for the $17,500.00 all are written in 1989.
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Accordingly, the electrical improvements were properly excluded because
of the owner's failure to adequately document its costs.
Further, the owner's request for a rent increase based on the
installation of new bathroom tiles ($3,125.00) was correctly disallowed.
Within the large amount of documentation filed by the owner, the only
reference to bathroom tiles was an invoice from a marble company which
failed to list the subject apartment or the subject building. In fact,
the invoice stated that the work was done at a different address and was
for $9,500.00. Accordingly, the bathroom tiles were correctly rejected
as inadequately documented.
The owner's request for a rent increase based on carpentry work
($9,420.00) was also properly excluded by the Administrator. Again, the
documentation presented by the owner does not state what type of work
was performed in the subject building or subject apartment.
Similarly, the owner's request for a rent increase based on demolition,
masonry and stucco work ($12,207.85) was correctly disallowed. The
documentation presented for this claim is also devoid of any description
of the specific work done or of adequate documentation of the cost
attributed to the subject apartment.
Because the underlying claims have been disallowed, the Commissioner is
of the opinion that peripheral claims associated with those rejected
underlying claims must also be disallowed. Accordingly, the costs
associated with the alleged work such as certificate fees, licensing
fees, and rubbish removal ($2,119.23) and the costs associated with
painting and plastering and floor finishing and covering ($10,347.65)
were correctly rejected.
The Commissioner also finds that the owner's alternative assertion that
he was entitled to a free market rent for this allegedly renovated
apartment is without merit. Clearly, if the owner cannot substantiate
its entitlement to rent increases based on vacancy improvements, it is
not entitled to a free market rent with its higher standard of proof.
Finally, the Commissioner must consider the question of treble damages.
Section 2526.1(a)(1) of the Rent Stabilization Code provides that any
owner found "... to have collected any rent or other consideration in
excess of the legal regulated rent shall be ordered to pay to the tenant
a penalty equal to three times the amount of such excess...." The owner
is assessed only with interest if it can establish that the overcharge
was not willful. The owner asserts that once an owner has denied
willfulness the entire record must be examined to determine the issue of
willfulness. The owner asserts that by its voluminous efforts to
document the vacancy improvements it has displayed by a preponderance of
the evidence a lack of willfulness. The Commissioner disagrees with
these assertions by the owner and is of the opinion that treble damages
should be assessed. The voluminous documentation submitted by the owner
to support its claim for rent increases based on vacancy improvements is
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significantly lacking in the very elementary requirements for rent
increases. Namely, the owner has virtually failed to describe the work
done in the subject apartment or the subject building. In as much as
this failure is not simply a deficiency in documentation of costs,
treble damages should be assessed.
As noted above the Administrator's order concluded as of December 31,
1991. All of the adjustments requested by the owner such as the
inclusion of MCI grants occurred in 1992 after the lawful stabilization
rent was established by the housing court. The only portion of the
Administrator's order in question in this petition for administrative
review is the arrearages accruing through December 31, 1991.
Thereafter, the portion of the Administrator's order which set the
lawful stabilized rent was superseded by the Civil Court's "so-ordered"
Stipulation of Settlement.
THEREFORE, in accordance with 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 the Administrator's order be, and the
same hereby is, modified in accordance with this order and opinion. The
amount of the rent overcharge through December 31, 1991 was $25,624.08.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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