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



      ------------------------------------X 
      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    : 
      ------------------------------------X                             


          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 












          HA410044RO

      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.






          HA410044RO


      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 












          HA410044RO

      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 






          HA410044RO

      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- 












          HA410044RO

      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.  






          HA410044RO

      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 












          HA410044RO

      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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