HD410272RO
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.: HD410272RO
DRO DOCKET NO.: ZL002960R
Dr. T.K. Mong, CURRENT OWNER:Barbara Cohen
PRIME TENANT: Richard Fung
SUBTENANT: Debra S. Rubenstein
PETITIONER
------------------------------------X
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
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
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 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
HD410272RO
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
Stabilization."
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
HD410272RO
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
HD410272RO
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
furniture.
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.
HD410272RO
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.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
|