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 S.J.R. NO. 7345
IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO. HJ210068RT
: DRO DOCKET NO.ZDE210017TC
JOANN STANGA
PETITIONER :
------------------------------------X
ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On October 12, 1993, the above-named petitioner-tenant filed a
Petition for Administrative Review against an order issued on
September 8, 1993, by the Rent Administrator, 92-31 Union Hall
Street, Jamaica, New York, concerning the housing accommodations
known as 9935 3rd Avenue, Brooklyn, New York, Apt. D1, wherein the
Rent Administrator determined the fair market rent pursuant to the
special fair market rent guideline promulgated by the New York City
Rent Guidelines Board for use in calculating fair market rent
appeals.
Subsequent thereto, the petitioner-tenant filed a petition in
the Supreme Court pursuant to Article 78 of the Civil Practice Law
and Rules requesting that the "deemed denial" of the petitioner's
administrative appeal be annulled. This proceeding was then
remitted to the Division for a determination of the petitioner's
appeal.
The Administrative Appeal is being determined pursuant to the
provisions of Sections 2521, and 2522.3 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 and an objection to registration in May, 1989.
In such complaints, the tenant stated in substance that she was not
served with a copy of the initial apartment registration form
(hereafter RR-1 form); that she first commenced occupancy pursuant
to a lease beginning February 1, 1988 at a rental of $600.00 per
month and that the subject apartment was rent controlled immediately
prior to her occupancy.
The owner and owner's managing agent were served with copies of
S.J.R. 7345, HJ210068RT
the tenant's complaints and directed to submit proof that the tenant
had been served with the RR-1 form. The owner and managing agent
were also afforded an opportunity to submit comparability data to
help establish the fair market rent. No response was received from
the owner or managing agent. It is noted that DHCR records list the
registered owner as "Menalon Realty, 1002 5th Avenue, Brooklyn, New
York, 11209". However some mail sent to this address was returned
by the Post Office with the notation "no such number". Accordingly
the Rent Administrator's order in this case was sent to the managing
agent and to the owner at the managing agent's address. It appears
that the managing agent then returned the copies of the Rent
Administrator's order to the DHCR with no explanation.
In Order Number ZDE210017TC, the Rent Administrator adjusted
the initial legal regulated rent by establishing a fair market rent
of $468.26 effective February 1, 1988, the commencement date of the
initial rent stabilized lease. The fair market rent was determined
solely on the basis of the special fair market rent guideline. In
addition, the Rent Administrator determined that the tenant had paid
excess rent of $6871.80 through January 31, 1992, and directed the
owner to refund such excess rent to the tenant.
In this petition and a supplement to such petition, the tenant
alleges in substance that the owner never served her with a copy of
the RR-1 form; that the owner never filled out that portion of the
vacancy lease rider that would have informed the tenant of the prior
tenant's status and rent level; that therefore the rent should have
been frozen at the last rent paid by the prior rent controlled
tenant pursuant to the decision in Smitten v. 56 MacDougal Street
Co., 167 A.D.2d 205, 561 N.Y.S.2d 585 (1990); that the overcharge
should have been deemed willful and treble damages imposed; and that
in establishing the fair market rent, the Rent Administrator should
at least have used the January 1, 1986 maximum base rent rate of
$278.73 as listed in DHCR rent records rather than the maximum base
rent rate of $324.87 actually used.
Copies of the tenant's petition and supplement were sent to the
owner at its last registered address and to the owner's managing
agent. The copy sent to the owner was returned by the Post Office.
The managing agent's copy was not returned. No response was
received on behalf of the owner.
The Commissioner is of the opinion that this petition should be
denied.
Section 2521.1(a)(1) of the Rent Stabilization Code provides
the following:
"For housing accommodations which on March 31, 1984, were subject to
the City Rent Law and became vacant after that date, and which are
no longer subject to the City Rent Law, and are rented thereafter
subject to the RSL, the initial legal registered rent shall be the
rent agreed to by the owner and the tenant and reserved in a lease
or provided for in a rental agreement subject to the provisions of
this Code, provided that such rent is registered with the DHCR
S.J.R. 7345, HJ210068RT
pursuant to Part 2528 of this Title (Registration of Housing
Accommodations), and subject to a tenant's right to a Fair Market
Rent Appeal to adjust such rent pursuant to Section 2522.3 of this
Title."
The penalty for non registration is provided in Section
2522.3(a) of the Rent Stabilization Code which provides in pertinent
part that if a housing accommodation was registered in accordance
with Part 2528 of this Title, the right to a Fair Market Rent Appeal
is limited to the first tenant taking occupancy on or after April 1,
1984, except where such tenant had vacated the housing accommodation
prior to the service by the owner of the Notice of Initial Legal
Registered Rent (RR-1 form). In such event, any subsequent tenant
in occupancy shall also have a right to file a Fair Market Rent
Appeal until the owner mails the required Notice and 90 days shall
have elapsed without the filing of an appeal during said 90 day
period.
With regard to the tenant's contention in the instant case that
the rent should have been frozen at the last rent controlled rent
due to the owner's failure to serve the RR-1 form, it is noted that
the correct penalty in such a case is to consider any fair market
rent appeal filed by a tenant to be timely and to process such
appeal on the merits in acccordance with Section 2522.3(a). That is
what was done in this case by the Rent Administrator and no
additional penalty such as freezing the rent is warranted. The
purpose of service of the RR-1 form is to provide the tenant with
the opportunity to file a fair market rent appeal which has already
been done in this case. It is noted that there is nothing in the
Rent Stabilization Law or Code which provides that if the initial
rent is not properly registered, the rent then becomes the last rent
controlled rent. Rather Section 2528.4 states that the failure to
register will bar the owner from collecting any rent in excess of
the "legal regulated rent in effect on the date that the housing
accommodation became subject to the registration requirements".
Clearly such "legal regulated rent" is not the last rent controlled
rent. With regard to the Smitten case cited by the tenant, it is
noted that the DHCR was not a party to this proceeding so there is
no issue of res judicata or collateral estoppel and since the DHCR
and the courts have concurrent jurisdiction, DHCR has the right to
independently interpret the Rent Stabilization Law and Code in cases
coming before the DHCR.
With regard to the tenant's contention that an incorrect
maximum base rent was used in establishing the fair market rent, it
is noted that the owner had been denied 1984-85 maximum base rent
increases but had been found entitled to 1986-87 maximum base rent
increases. Therefore in accordance with established policy, the
1986 maximum base rent for purposes of calculating the fair market
rent contained an allowance for the 1984-85 maximum base rent and
was correctly determined by the Rent Administrator.
S.J.R. 7345, HJ210068RT
With regard to the imposition of treble damages, Section 2526.1
of the Rent Stabilization Code provides that any owner found to have
collected an overcharge above the authorized rent shall be liable
for a penalty equal to three times the amount of such overcharge but
that if the owner established by a preponderance of the evidence
that the overcharge was not willful, the DHCR shall establish the
penalty as the amount of the overcharge plus interest. Further
treble damages may not be based upon an overcharge having occurred
more than two years before the complaint is filed or upon an
overcharge which occurred prior to April 1, 1984. This section does
not apply to fair market rent appeals. It was proper to treat the
tenant's complaints herein as a fair market rent appeal since the
tenant was the first rent stabilized tenant. Pursuant to Section
26-512(b)(2) of the Rent Stabilization Law, for apartments which are
removed from rent control and become subject to the Rent
Stabilization Law by virtue of a vacancy occurring after June 30,
1974, the owner is permitted to charge an initial fair market rent
as "agreed to by the landlord and the tenant", subject to the
tenant's right to challenge the initial rent as exceeding the fair
market rent. If the tenant does not challenge the initial rent, it
becomes the legal base rent. If the tenant challenges the initial
rent, a determination may be made that the tenant's initial rent
exceeds the proper fair market rent for the apartment. In such
cases, the owner is required to give the tenant a refund or credit
for the amount collected in excess of the fair market rent. However
such determination that the initial rent exceeds the fair market
rent is considered in the nature of a rent adjustment rather than a
rent overcharge and thus the imposition of treble damages and/or
interest is not warranted. It is noted that rent overcharge
proceedings where treble damages may be imposed generally involve
cases where an initial legal regulated rent (Fair Market Rent) is
already established and an owner willfully charges rents higher than
permitted by the Rent Guidelines Board upon subsequent renewal
leases or refuses to submit a complete rental history thus leading
to the conclusion that rent overcharges occurred. In addition
Section 2526.1(g) of the Rent Stabilization Code provides that
"[t]he provisions of this section [Section 2526.1, concerning
overcharge penalties and assessment of costs] shall not apply to
a proceeding pursuant to Section 2522.3 of this Title (Fair Market
Rent Appeal)."
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 issuance of this
order, the tenant may seek to enforce this order by filing an
appropriate action in a court of competent jurisdiction. A copy of
this order is being sent to the current occupant of the subject
apartment.
S.J.R. 7345, HJ210068RT
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.
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.
ISSUED
JOSEPH A. D'AGOSTA
Deputy Commissioner
S.J.R. 7345, HJ210068RT
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