HC410065RO
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. HC410065RO
: DISTRICT RENT OFFICE
OLGA MORA, DOCKET NO.FK410065R
TENANT: Carmine and
Christina Cassino
PETITIONER :
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On March 12, 1993 the above-named petitioner-owner filed a Petition for
Administrative Review against an order issued on February 5, 1993 by the
Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning the housing accommodations known as 15 West 74th Street,
Apartment G, New York, New York, wherein the Administrator determined
that the tenant had been overcharged.
The Administrative Appeal is being determined pursuant to the provisions
of 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 November 26, 1991. The tenants had assumed
occupancy on September 1, 1991 pursuant to a one year lease at a rent of
$1300.00 per month.
In answer to the tenant's complaint, the owner submitted the complete
lease history from the base date. The rent history showed an initial
registered rent of $714.13 on the base date of April 1 , 1984. Annual
registrations were filed every year though 1987. The 1987 registration
stated that the premises were occupied by a professional business, and
the apartment was thus exempt from regulation. Annual registrations
were not filed again until 1992, where the complainant was listed for
the first time. The owner explained that the apartment was occupied by
commercial tenants until the tenancy of David Korb, immediately prior to
the complainant's occupancy. Mr. Korb occupied the premises from May-
August, 1991.
HC410065RO
In Order number FK410065R, issued on February 5, 1993, the Administrator
determined that the tenant had been overcharged in the amount of
$10,144.97, including treble damages for overcharges collected since
April 1, 1984. The Administrator calculated the lawful rent by
"deeming" one two year commercial lease commencing on September 1, 1986,
a two year deemed lease and a one year deemed lease for a period of
owner occupancy, from September 1, 1988 until April 30, 1991, and a one
year vacancy lease for David Korb, commencing on May 1, 1991.
Overcharges were first determined in Mr. Korb's lease, in part from the
rejection of the owner's claim of $5,000.00 in apartment improvements,
because they were found to be only maintenance and repair, and thus
ineligible for a rent increase. Overcharges were also determined for
the complainant's vacancy lease, because of compounding of guidelines
and vacancy allowance increases for the second lease in the same
guidelines period.
In its petition, the owner contends in substance that the
Administrator's order was in error in that it failed to consider the
actual lease history of the premises in calculating rent increases that
have been granted for periods of commercial occupancy, owner's occupancy
and other exemptions. The owner proffers its own calculations - as
detailed in an enclosed chart- wherein it calculated one year guideline
increases for each year of commercial and owner occupancy, and vacancy
allowances at the commencement of the commercial occupancy and again
with the commencement of the owner's occupancy. As based on these
calculations, the owner acknowledges an inadvertant overcharge of $17.55
per month, coming to a total amount of $193.05, which it refunded to the
tenants prior to the issuance of the order. The owner also contends
that the disallowance of the claim for new equipment as ordinary
maintenance and repair is unsupported by facts or reasoning and is thus
"arbitrary and capricious." Instead, the owner claims that the
improvements were mostly structural in nature and thus qualify for a
rent increase. Even if unqualified, however, the owner contends that it
believed they were legitimate improvements, and therefore it was
improper to impose treble damages, a position supported by DHCR
opinions, case law and Policy Statement 89-2. The owner contends that
willfulness was not present in any overcharge, as evidenced by the
owner's voluntary rollback of the rent and refund of overcharges.
In their answer, the tenants state that the owner's PAR fails to provide
a single credible reason to revoke the Administrator's order. They
contend that the alleged rental history of the apartment clearly shows
that their initial rent of $1,300.00 was an overcharge. The owner's
rent calculation of the commercial lease period was self-serving in that
the owner gave itself one year leases and all vacancy allowances,
whereas the Administrator properly calculated two year deemed leases and
a one year deemed lease prior to the complainant's occupancy.
Furthermore, they contend, the owner was not even entitled to increases
in 1987 and 1988 because he failed to file annual registrations in those
years.
HC410065RO
The tenants also argue that the owner's objections to the denial of the
claim for new equipment are all without merit, and the Administrator's
decision was correct. In the first place, the invoice fails to identify
which of the two apartments on the first floor was actually repaired
and, in all likelihood, the work was done in both of them; if so, the
cost of the work in only the subject apartment is never specified.
Similarly, the invoice fails to break down the cost for each item
listed. The tenants also object to the authenticity of the invoice,
noting that the amount was hand-written while the rest of the invoice
was typed. However even if the invoice only represented work for the
subject apartment, the tenants believe the claim was unqualified as
wholly in the nature of repairs and maintenance, as was found by the
Administrator. The tenants also support the finding of willfulness and
the imposition of treble damages. They contend, in the first place,
that the DHCR does not, as a rule, remove treble damages just because an
owner claims that it thought work done in the subject apartment
qualified for a rent increase. In cases where the DHCR has removed
treble damages, the tenants point out that there was usually a major
portion of the claim that did qualify as improvements, or the owner "in
good faith" believed that the work was a "substantial rehabilitation" of
the apartment such as would qualify for a "first rent," neither of which
is evident in this case. The tenants also contend that since the prior
tenant actually used the apartment as a residence, it was not properly
a commercial tenancy. Therefore, the owner's failure to register it
during that tenancy was improper, and further evidence of willful
overcharging. Furthermore, the use of $1,200.00 - itself an unlawful
rent - as the base for calculating the tenant's vacancy rent of
$1,300.00, an increase that is a blatant avoidance of the guidelines, is
proof of willful overcharging. Finally, the tenants contend that the
owner's petition was untimely filed with the DHCR and should have been
rejected.
The Commissioner is of the considered opinion that this petition should
be denied.
At the outset, an examination of the record including the U.S. postal
mail on the envelope in which the owner's petition was filed, discloses
that said petition was timely filed within the 35 day filing period,
contrary to the tenant's answer to said petition.
Turning to the merits, an examination of the record is sufficient to
validate the Administrator's calculation of deemed increases for the
period when the subject apartment was exempt from regulation because of
a commercial tenancy and owner occupancy. In essence, the tenants are
correct when they say the owner's calculations are self-serving because
the maximum possible yearly increases are taken. Rather DHCR policy
provides that calculating the increases during an exemption period would
require the increase of a deemed two year vacancy lease and such other
one and/or two year deemed renewal lease increases as may be required to
"bridge the gap" between the last stabilized tenant's
lease and the September 30th guidelines base date applicable to the new
tenant's vacancy lease. Since this is exactly the formula relied on by
the Administrator, the order's calculation of guidelines increases is
HC410065RO
affirmed.
The petitioner's contention that most of its $5,000.00 claim for work
done in the apartment qualified as "new" or "major" improvements,
because they were "structural" in nature is belied by the invoice itself
which is clearly and unambiguously a list of repairs; i.e., remove old
rotted damaged walls, remove overhead ceiling, remove protruding pipes,
remove part of flooring, frame out wall, sheetrack wall, install
clampshell around doorframe, tape and compound wall and paint apartment.
However, even if the other items listed did suggest improvements(build
new ceiling, run pipes in wall and run new electric line), no increase
would be allowed because the invoice failed to break down the cost of
each item or to designate the apartment.
The petitioner's objection to treble damages is similarly without merit.
There is no credible evidence that the claim for "improvements"-
accounting for $125.00 per month - was not a willful overcharge. Of the
twelve items, only the three listed above can even remotely be
considered "improvements". The awarding of treble damages is consistent
with DHCR cases where rent increases were denied for work constituting
normal decorating or maintenance (Accord: ARL-03105L). Part of the
remaining overcharge - $73.35 - is unexplained and therefore must be
considered willful. In addition part of the overcharge was attributed
to the owner's taking of two vacancy allowances during the Guideline 22
period - prohibited by Guideline 22 and therefore willful. Since the
majority of the overcharge was due to willfulness which the owner has
failed to refute, the imposition of treble damages was warranted.
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
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 $10,144.97. 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
HC410065RO
ORDERED, that this petition for administrative review be, and the same
hereby is, denied, and that the order of the Rent Administrator be, and
the same hereby is, affirmed.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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