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. HF410003RO
: DISTRICT RENT OFFICE
DOCKET NO. EJ410005RK
Estate of Sol Goldman, (ZBE410164R)
TENANTS: Jennifer &
Calman Phillips
PETITIONER :
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On June 2, 1993 the above-named petitioner-owner filed a Petition for
Administrative Review ("PAR") against an order issued on April 28, 1993
by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New York
concerning the housing accommodations known as Apartment 6B at 25 West
68th Street, New York, New York wherein the Rent Administrator
determined that the owner had collected excess rent from the tenants.
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 originally commenced by the filing in May, 1987 of
a rent overcharge complaint (Docket No. BE410164R) by the tenants, in
which they stated that they had commenced occupancy on September 1, 1986
at rent of $2,702.11 per month; that the previous tenant had been rent-
controlled at a rent of $604.00 per month ; that she had moved in March,
1986; that modernization probably costing less than $3,000.00 was done
during the vacancy; that they had never received DC-2A, RR-1, or RR-2A
forms; and that the "Status of Apartment and Last Tenant" section of the
rent stabilization rider was not completed by the owner.
In an answer dated June 23, 1987 the owner asserted that the tenants had
signed a DC-2 form as part of the original lease document. The owner
enclosed a copy of the front page of a DC-2 form formerly used by the
New York City Conciliation and Appeals Board. ("C.A.B.") In a blank area
at the bottom, not intended for a signature, is written "8/11/86" and
"Calman P. Phillips." The apartment number is given as "9B," not 6B.
There is no indication in the file of this proceeding that this
submission was sent to the tenants by the DHCR.
In an order issued on December 13, 1989 the Administrator denied the
fair market rent appeal since it had not been filed within 90 days of
service of the DC-2 notice.
The tenants filed both a PAR (Docket No. EA410012RT) and a request for
reconsideration . As a result of the request for reconsideration the
original December 13, 1989 order denying the fair market rent appeal
was reopened by an order dated October 15, 1990. In the new proceeding
(Docket No. EJ410005RK) the tenants contended among other things that
they did not see a copy of the owner's June 23, 1987 answer, including
the DC-2 notice, until the DHCR provided it on April 2, 1990; that the
DC-2 notice had the wrong apartment number; that Calman Phillips'name is
signed on the front of the notice even though there is no space for a
signature; that the back side of the notice was not made available to
the tenants, if indeed it was even submitted to the DHCR; and that in an
answer to the tenants' PAR No. EA410012RT the owner submitted another
copy of a DC-2 notice, identical in all ways to the earlier version
except for giving the apartment number as "6B" rather than "9B," and
except for the absence of lines for signature of guarantors and
witnesses. [The version submitted in 1987 was photocopied on a
reduction setting, and it is obvious that a 14-inch long lease form was
behind the 11-inch DC-2 notice and had the bottom portion show up on the
photocopy below the bottom edge of the DC-2 form.]
The files were transferred to the DHCR's Enforcement Section for an
investigation of possible fraud on the part of the owner. In response
to a subpoena the owner presented what appeared to be an original DC-2
notice signed by Calman Phillips in blue ink, although the apartment
number had obviously been changed to "6B" with the aid of correction
fluid. Since Calman Phillips had claimed that he had never signed such
a notice or, if the owner somehow got his name on a DC-2 notice, that
the owner had not complied with the requirements of Rent Stabilization
Code 2523.1, the files were returned so the Rent Administrator could
determine the issue.
Because of the October 15, 1990 order reopening Docket No. BE410164R and
processing it as Docket No. EJ410005RK, the PAR No. EA410012RT was
terminated on November 19, 1991 as being premature. A Notice of
Commencement of Proceeding to Reconsider Previous Order was sent to the
parties on November 21, 1991. On that date the owner was also sent a
Fair Market Rent answering package, since the owner had not submitted a
certified mail receipt to prove service of the DC-2 notice. On January
22, 1992 the owner was sent a Summary Notice stating that the Fair
Market Rent would be determined on the basis of the 1984 Maximum Rent
increased by the Special Guidelines Order. (The owner contends in its
PAR that it never received any Summary Notice or Final Notice.)
In a February 10, 1992 submission the owner enclosed an affidavit from
real estate agent Frank Bevilacqua, who stated that on August 11, 1986
the tenants signed both a lease and a DC-2 Notice; and that on or about
September 1, 1986 he met the tenants at their apartment and personally
handed them a fully executed lease and a fully executed DC-2 Notice.
With the submission was included a copy of a C.A.B. DC-2 Notice with
"8/11/86" and "Calman P. Phillips" for apartment "6B".
On November 12, 1992 the owner was afforded an opportunity to submit a
copy of an Amended RR-1 Notice as well as proof of service on the
tenants. The file of Docket No. EJ410005RK does not contain any
evidence of the service of the Amended RR-1 notice.
In an order issued on April 28, 1993 the Administrator establish a Fair
Market Rent of $703.74 per month effective September 1, 1986, and froze
it at that amount due to an outstanding rent reduction order (Docket No.
CB410492S). A total refund due of $181,920.74 was calculated from
September 1, 1986 through April 30, 1993.
In this petition, the owner contends in substance that there was no
valid basis for revoking the order in Docket No. BE410164R, since no
fraud was ever determined and since no irregularity was ever noted or
given as a reason for reconsideration and revocation of the prior order;
that the reopening and reconsideration was the result of improper ex
parte communications by the tenants' attorney, without notice to the
owner and an opportunity to be heard on the merits; that, despite
protests regarding the processing of the matter as a fair market rent
appeal, and requests that the owner's attorney be notified if additional
information was required, an order was issued without first sending the
owner a Summary Notice or Final Notice giving a final opportunity to
submit any other documentation and/or comparability data; that, based
upon the affidavit of an independent licensed real estate agent, as well
as the tenants' acknowledgement of receipt signatures on the DC-2 Notice
itself, which signatures have been proven to be proper and valid as a
result of a hearing conducted by the DHCR, it is clear that the tenants
personally received the DC-2 Notice on or about September 1, 1986; that
the tenant's May 20, 1987 complaint was therefore untimely; that it has
long been the policy of the DHCR and its predecessor C.A.B. to fully
honor personal service and receipt of a DC-2 Notice as valid and proper;
that even in Alcoma Corp. v. DHCR, 566 N.Y.S.2d 254 (App. Div. 1st
Dept., 1991), cited by the Administrator, the DHCR conceded that its
established policy and practice had been to accept proof of the actual
receipt of the DC-2 Notice as satisfactory compliance with the
requirements of the statute, even if there had been no service by
certified mail; that even if, as a result of the 1991 Alcoma case, the
DHCR now requires service of the DC-2 Notice only by certified mail, in
view of the past policy and procedure detrimentally relied upon by the
petitioner, such new policy and procedure should not be retroactively
applied to the owner.
In answer, the tenants asset in substance that they have steadfastly
contended that they never received a copy of the DC-2 Notice; that the
owner, incorporating as a major portion of its PAR the dissenting
opinion in the Appellate Division ruling in Alcoma, does not mention the
fact that the Court of Appeals affirmed the majority opinion at 580
N.Y.S.2d 181; that there were no ex parte communications with the DHCR;
that the irregularity that resulted in the order reopening the
proceeding was the same as in Alcoma, namely that "service of the DC-2
notice was not made in the statutorily mandated manner"; that neither
the tenants nor their attorney heard of the alleged proof of personal
service of the DC-2, submitted on February 10, 1992, until the owner
filed its PAR; that the owner in Alcoma alleged service of the DC-2 in
1982, whereas in the present case the owner alleges that service was
made in 1986; and that, unlike Alcoma, where the DHCR found that the
tenant had actually received a DC-2 notice but where the Court of
Appeals held that the statutory requirement of certified mailing was
still not satisfied, in the present case the tenants did not even
receive a DC-2.
The Commissioner is of the opinion that this petition should be denied.
It was proper to reopen the proceeding based on denial of due process to
the tenants, even though the reopening order neglected to give a
specific reason. There is no transmittal letter in the file of Docket
No. BE410164R to indicate that the owner's June 23, 1987 submission,
which included the signed DC-2 for apartment 9B [not for 6B, the subject
apartment], which DC-2 was the basis of the Administrator's order, was
sent to the tenants. In addition, the Progress Sheet of Examiner does
not list any mailings other than the initial one of June 16, 1987
whereby the complaint and answer forms were sent to the owner and a
confirmation of the filing of the complaint was sent to the tenants.
The Commissioner does not consider the owner to have been denied due
process. On November 21, 1991 the owner was sent a Fair Market Rent
answering package which included instructions and forms for submitting
comparability data. Contrary to the owner's assertions, two months
later on January 22, 1992 a Summary Notice was sent to the owner,
stating that the Fair Market Rent would be determined on the basis of
the 1984 Maximum Rent of $586.45 increased by the appropriate Special
Fair Market Guidelines Order. (The file contains a copy of the letter
to the owner, with a copy to be sent to the tenants; the Progress Sheet
of Examiner states "Served Owner's estate with Summary Notice cc:
Tenant's Attorney" on January 22, 1992; and the tenants enclosed their
copy of the Summary Notice with a February 5, 1992 submission.) The
order was not issued until April 28, 1993, more than 15 months after the
owner was sent the Summary Notice. The owner had adequate notice and
opportunity to submit any documentation it desired, including
comparability data.
The various courts in Alcoma found that the DHCR's order was rational in
finding that statutory requirements had not been met where a DC-2 was
not served by certified mail. This is not a new standard being
retroactively applied to the present case. The tenant in Alcoma had
commenced occupancy in 1982, and allegedly received a DC-2 by regular
mail shortly thereafter. She filed a fair market rent appeal in
January, 1984. It was initially denied as untimely in October 1986.
After various permutations in the proceeding the DHCR granted the PAR in
May, 1989, requiring certified mailing. Supreme Court, Appellate
Division and Court of Appeals decisions were issued in 1990, 1991 and
1992. In the present case the tenants commenced occupancy in 1986, and
filed a complaint in May, 1987. The Administrator in December, 1989
denied their fair market rent appeal as untimely even though the
Commissioner had earlier, in May, 1989, found in the case of the Alcoma
tenant that certified mailing was required. The Administrator's April
28, 1993 decision in Docket No. EJ410005RK, citing Alcoma, was not
retroactively applying a new standard, but was just applying a standard
that the courts had in the recent orders in the Alcoma cases recognized
as applying to a DC-2 served in 1982, four years prior to the alleged
service of a DC-2 in the present case.
Further, in the instant case the Commissioner does not consider that the
owner has shown that the tenants actually received a DC-2. It appears
that one of the tenants, at the time on August 11, 1986 that he filled
out an application, and signed a lease, to rent Apartment 6B, also
signed his name at the bottom of a DC-2 form in an area not meant for a
signature. This was a C.A.B. form, revised in 1979, which among other
things offered the possibility of applying to the C.A.B. for a rent
reduction, even though the C.A.B. had gone out of existence more than
two years prior to the time the tenant signed the DC-2. The owner
initially submitted a copy of this form, which named Apartment 9B, as
evidence that the DC-2 had been personally served on August 11, 1986.
The owner later submitted an affidavit from the rental agent that he had
actually personally served the DC-2 at the subject
apartment on or about September 1, 1986. It is not clear exactly what
version that alleged DC-2 might have been, since the DC-2 copy submitted
with the affidavit named Apartment 6B, rather than 9B. In comparing the
two copies it can be seen that all handwriting on them is identical in
the minutest detail, other than a "6" replacing a "9," indicating that
one is a photocopy of the other. In fact, the original presented at the
Enforcement Bureau had clearly been altered. It is also interesting
that the owner possesses the original. The fact that a tenant signs a
document on August 11, 1986, which original document the owner retains,
does not constitute proof that such tenant received his own copy of the
document on that date, and certainly does not constitute proof that he
received his own copy of an altered document at a later date. It is
proof only that his pen briefly touched the front of the document before
the rental agent took it back.
In fact, there is no proof that the tenants received, prior to filing
their complaint, any documents relating to their being the first
stabilized tenants and having a right to appeal the initial stabilized
rent to the DHCR or even the C.A.B. The rent stabilization rider is not
filled out regarding the prior tenant. While the Fair Market Rent
answering package sent to the owner on November 21, 1991 offered the
opportunity to submit proof of service of an RR-1 Initial Apartment
Registration on the first stabilized tenant, and while the owner was
specifically requested on November 12, 1992 to submit proof of service
of an Amended RR-1 Notice on the tenants, the owner did not do so, and
DHCR registration records do not indicate that the owner made this
required registration at all. [At the top of page 5 of the 1986
Instructions for Rent Registration, it was stated that "[i]f a rent
controlled apartment was vacant on or after April 1, 1986 and has since
been rented to a decontrolled (stabilized) tenant, you must file an initial
registration immediately." The apartment is registered as vacant on April
1, 1986, and the next registration is for April 1, 1987.] DHCR records
also do not contain an R-42V Report of Statutory Decontrol for the
apartment.
While the lawful permanent stabilization rent is $933.82 per month in
the lease from September 1, 1992 to August 31, 1993, the Commissioner
notes that the collectible rent remains frozen at $703.74 until the
owner obtains orders restoring the rents that were frozen because of
service decreases.
The owner is directed to roll back the rent to the lawful stabilized
rent consistent with this decision and to refund or fully credit against
future rents over a period not exceeding six months from the date of
receipt of this order, the excess rent collected by the owner.
In the event the owner does not take appropriate action to comply within
sixty (60) days from the date of this order, the tenant may credit the
excess rent collected by the owner against the next month(s) rent until
fully offset.
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.
THEREFORE, in accordance with the provisions of the Rent Stabilization
Law and Code, it is
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. The total refund due is $181,920.74 as of
April 30, 1993, including excess security of $2,651.69.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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