STATE OF NEW YORK
                            OFFICE OF RENT ADMINISTRATION
                                     GERTZ PLAZA
                               92-31 UNION HALL STREET
                               JAMAICA, NEW YORK 11433

      APPEAL OF                              DOCKET NO.: HD410272RO

                                             DRO DOCKET NO.: ZL002960R

           Dr. T.K. Mong,                    CURRENT OWNER:Barbara Cohen
                                             PRIME TENANT: Richard Fung

                                             SUBTENANT: Debra S. Rubenstein

      On April 16, 1993 the above-named petitioner-former owner filed a Petition 
      for Administrative Review against an order issued on March 19, 1993 by the 
      Rent Administrator, 92-31 Union Hall Street, Jamaica, New York concerning 
      the housing accommodations known as 5R at 29 East 11th Street, New York, 
      New York wherein the Rent Administrator determined that the owner had 
      overcharged the subtenant.

      The issue in this appeal is whether the Rent Administrator's order was 

      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 originally commenced by the filing in July, 1985 of a 
      rent overcharge complaint by the subtenant, Debra Rubenstein, in which she 
      stated that she had commenced occupancy on July 25, 1984 at a rent of 
      $650.00 per month pursuant to a sublease with an illusory prime tenant, and 
      that she had never dealt with the prime tenant concerning her rental 
      payments.  (The tenant's checks for the period of the sublease were made 
      out to "Twenty Nine East 11th Street" rather than to the prime tenant.)

      In answer, the (former) owner contended in substance that, while the prior 
      agent may have registered the apartment, that was an error since at the 
      time the apartment became vacant the building already consisted of five 
      units; and that the subject apartment was no longer subject to rent 
      regulation, as made clear by decisions in Museum of Modern Art v. Kirk, 448 
      N.Y.S.2d 93 (App. Term 1st Dept. 1981) and Mt. Sinai Hospital v. Loutsch, 
      462 N.Y.S.2d 1004 (N.Y. City Civ. Ct. 1983), as well as in 123 E. 18th 
      Street Corp. v. Gisler, 448 N.Y.S.2d 926 (N.Y. City Civ. Ct. 1982), where 
      the Court specifically held that where the premises on the base date 
      consisted of six units but was thereafter reduced to five units, then each 
      unit as it became vacant became deregulated; that as of May 1, 1983 the 
      subject apartment was being rented as a furnished apartment, and 
      accordingly at a very minimum the rent was $650.00, which was the same rent 
      later charged the complainant; that the prime tenant lived in the apartment 


      from May 1, 1983 to August 12, 1983; that the apartment was sublet from 
      August 12, 1983 to July 19, 1984; that it was then sublet to the 
      complainant; that the complainant paid the rent to the (former) owner at 
      the request of the prime tenant, since the prime tenant was not always 
      around and such arrangement was more convenient for all parties; and that 
      the building was sold to the current owner on December 31, 1986.  During 
      the course of the proceeding the owner submitted three Certificates of 
      Occupancy.  One dated January 11, 1936 showed the building as having seven 
      apartments (one each on the first three levels, and two each on the top two 
      floors).  One dated June 19, 1978 showed six units.  One dated May 22, 1984 
      showed five units.  (The former owner claimed that the work for renovating 
      the premises was completed prior to May 1, 1983).  The former owner also 
      stated that he no longer had in his possession the lease that was in effect 
      on April 1, 1980; recited the rental history from July 1, 1980; and 
      submitted a copy of the lease with the prime tenant commencing May 1, 1983, 
      such lease having written on it "[T]his apartment is not subject to Rent 

      On October 13, 1988 in an "Order Determining Facts or Establishing Maximum 
      Rent" in another proceeding (Docket No. BE410002AD), naming the current 
      owner, the Administrator determined that, "upon the grounds stated in 
      Section 2202.22 of the Regulations...the housing accommodation is subject 
      to the Regulations as of July 28, 1984."  This order, which was not 
      appealed, was inadvertently issued on a form designed for rent controlled 
      rather than rent stabilized apartments.  The order should have cited   
      2522.6 of the Rent Stabilization Code and stated that the apartment was 
      subject to the Code, rather than citing     2202.22 of the [Rent and 
      Eviction] Regulations and stating that the apartment was subject to the 
      [Rent and Eviction] Regulations. 
      In an order issued on March 19, 1993 the Administrator, setting the 
      complainant's initial lawful rent by using a default formula since there 
      was not a  rental history from April 1, 1980; stating that the order in 
      Docket No. BE410002AD had already determined that the apartment was subject 
      to the Rent Stabilization Law; freezing the rent because of a failure to 
      register; finding that the current owner had waived the right to a rent 
      more than $500.00 per month from January 1, 1987 to November 30, 1991, and 
      $434.52 per month from December 1, 1991 to November 30, 1992; and imposing 
      treble damages; determined an overcharge of $9,028.86 from July 25, 1984 to 
      December 31, 1986. 

      The current owner did not appeal the Administrator's order.  In his 
      petition, the former owner contends in substance that he never received a 
      copy of the order in Docket No. BE410002AD [issued two years after he sold 
      the building]; that letters submitted by his attorney in the proceeding 
      before the Administrator clearly established that Apartment 5R was not 
      subject to rent stabilization; that the building was registered in 1986; 
      that the rental history for the subject apartment from July 1, 1980 to 
      December 31, 1986 is set forth in one of the letters; that the Certificates 
      of Occupancy show that Apartment 5R was not subject to Rent Stabilization; 
      that the Registration Statements do not include Apartment 5R as a 
      stabilized apartment; that the entire file may not have been considered in 
      the issuance of the March 19, 1993 order, since no reply was ever received 
      to the letter of February 26, 1987, and since the order was issued less 
      than a month after the letter of February 25, 1993; that the former owner 
      has consistently acted under a color of right and has not deliberately 
      intended to violate the law; and that there is no basis for the imposition 


      of treble damages.

      The former owner has incorporated as part of his petition several letters 
      by his attorney, all of them submitted in the proceeding below, and 
      previously detailed supra.

      In answer, the tenant assets in substance that the DHCR found in Docket No. 
      BE410002AD that her apartment was subject to rent stabilization, and that 
      the former owner had used an illusory tenant to increase the rent; that the 
      February 7, 1987 Registration Receipt Report cited by the owner, and not 
      including Apartment 5R, states that it is simply a record of information 
      received from the owner and does not certify that the data is correct; and 
      that her apartment has not been furnished at any point in her occupancy by 
      anyone but herself.

      The Commissioner is of the opinion that this petition should be denied.

      The base date for rent stabilization coverage for a building completed 
      prior to February 1, 1947 is July 1, 1974, since such building would not 
      have been subject to the Rent Stabilization Law of 1969, and became subject 
      to Rent Stabilization only as a result of the Emergency Tenant Protection 
      Act of 1974.  Buildings with six or more housing accommodations on the 
      applicable base date or any time therafter are subject to the provisions of 
      the Rent Stabilization Law and Code.  In the present case Certificates of 
      Occupancy show the building as having seven apartments in 1938, and six 
      units beginning in 1978.  The former owner contends that the number of 
      units was reduced to five in 1983.  This does not remove the building from 
      coverage by the Rent Stabilization Law, since the building contained six or 
      more units on the stabilization base date.  While the Commissioner 
      considers the 123 East 18th Street Corp. case (to which the DHCR's 
      predecessor N.Y.C. Conciliation and Appeals Board was not a party), cited 
      by the former owner, to have been decided in error, the decision does not 
      in any case support the former owner's position.  The judge found that the 
      building contained five units on the July 1, 1974 base date of the ETPA, 
      and decided that the 1978 creation of a sixth  unit did not subject the 
      building to rent stabilization.  The present case is precisely the 
      opposite: the building had seven units on the base date, and only later 
      fell below six.  In fact, the judge treats this situation hypothetically in 
      the first full paragraph of the second column of page 928 of 448 N.Y.S.2d: 
      "If a building contains six apartments on the base date and one (or more) 
      thereafter is legally eliminated, the other units remain stabilized."

      The Mt.Sinai and M.O.M.A. cases cited by the former owner are also not 
      applicable.  They both involved non-profit organizations which purchased 
      buildings after the stabilization base date for staff or office use.  The 
      courts found that the housing accommodations were not subject to rent 
      regulation.  However, the ETPA specifically exempts housing accommodations 
      owned or operated by hospitals or nonprofit educational institutions from 
      the declaration of emergency otherwise applicable to most other classes of 
      housing accommodations.  The former owner, who is not a hospital or 
      nonprofit educational institution, presumably believes that the two cases 
      show that a change after the stabilization base date, to a situation that 
      would normally exempt them from rent stabilization, also does so if 
      occurring after the stabilization base date.  It has been the consistent 
      policy of the C.A.B. and the DHCR that this is not so when it involves a 
      reduction in the number of units below six.  See, for example, 122 East 
      18th Street Corp. v. Gisler, cited by the former owner, where citations are 


      given for precisely this situation.  See also Shubert v. DHCR, 556 N.Y.S.2d 
      619 (A.D. 1st Dept. 1990), and the order in DHCR Administrative Review 
      Docket No. FI210079RT/FJ210182RO (issued November 24, 1992).  Section 
      2520.11(d) of the current Rent Stabilization Code (effective May 1, 1987) 
      also makes clear that the exemption from stabilization applies to 
      "buildings containing fewer than six housing accommodations on the date the 
      building first became subject to the RSL."  [Emphasis added]  Further, the 
      prior owner has not established that the overcharges was not willful, so 
      the imposition of treble damages was warranted.  

      The former owner's recitation in a letter of names and dollar amounts is 
      not the sort of documentation required for a rental history, and in any 
      event it does not extend back to the base date of April 1, 1980, so it was 
      proper for the Administrator to default the (former) owner for having 
      failed to submit a complete rental history.  The alleged furniture (denied 
      by the tenant) would not change the default rent, and in any event the 
      default procedure was applied to the complainant's initial rent of $650.00, 
      which would presumably have already included any increase taken because of 

      Because  neither the former nor the current owners appealed that aspect of 
      the Administrator's order dealing with the current owner's waiver of the 
      right to a rent higher than $500.00 per month from January 1, 1987 to 
      November 30, 1991, and $434.52 per month from December 1, 1991 to November 
      30, 1992, this order will not consider it, other than noting that $434.52 
      is the new permanent rent on which future increases are to be based.  That 
      is, at the time when the rent freeze due to non-registration is removed, 
      the lawful rent will be based on increases over $434.52 as of November 30, 
      1992 (unless the current owner continued to waive increases in subsequent 
      leases), and not over either $500.00 or $546.22.

      The Commissioner notes two typographical errors in the Administrator's rent 
      chart.  For the period for January 1, 1987 to March 31, 1987 the chart 
      explains "LRR&CR [Legal Regulated Rent & Collectible Rent] set to $500.00", 
      and correctly puts $500.00 in the "Leg. Reg. Rent" column, but 
      inadvertently (and illogically, since the lawfully collectible rent may not 
      be higher than the lawful rent) puts $546.22 rather than $500.00 in the 
      "Collect. Rent" column.  Likewise, for the period from December 1, 1991 to 
      March 31, 1992 the chart correctly explains "LRR&CR set to $434.52," and 
      puts $434.52 in the "Leg. Reg. Rent" column, but puts $500.00 rather than 
      $434.52 in the "Collect Rent" column.

      While the former owner appealed the Administrator's order because the 
      entire overcharge occurred during the time that he owned the building, the 
      Commissioner notes that the current owner was served in the proceeding on 
      January 11, 1989, July 21, 1992, October 8, 1992 and November 23, 1992; 
      that the only response from her was an August 24, 1992 request for an 
      extension of time; and that she was named in the Administrator's order, 
      although a copy of the order was also sent to the former owner's attorney.  
      Section 2526.1 (f)(2) of the Rent Stabilization Code provides in pertinent 
      part that:

           For overcharge complaints filed or overcharges collected on or 
           after April 1, 1984, a current owner shall be responsible for all 
           overcharge penalties, including penalties based upon overcharges 
           collected by any prior owner.


      The current owner is therefore jointly and severally liable with the former 
      owner for refunding the overcharges collected by the former owner.  This 
      order is without prejudice to any action that the current owner may have 
      against the former owner for overcharges reimbursed by the current owner which the 
      former owner had collected.

      Since the complainant has vacated, a copy of this order is being sent to 
      the current tenant.

      The owner is directed to reflect the findings and determinations made in 
      the Administrator's order on all future registration statements, including 
      those for the current year if not already filed, citing the Administrator's 
      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 the Administrator's order.  The owner is further 
      directed to adjust subsequent rents to an amount no greater than that 
      determined by the Administrator's order plus any lawful increases.

      The Commissioner has determined in this Order and Opinion that there were 
      overcharges of $9,028.86.  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.  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 the 
      Commissioner's Order.   

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

      ORDERED, that this petition be, and the same hereby is, denied and that the 
      Rent Administrator's order be, and the same hereby is, affirmed. The total 
      overcharge is $9,028.86.  The lawful permanent stabilization rent is 
      $434.52 per month in the lease from December 1, 1991 to November 30, 1992.


                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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