HJ410070RT; HJ410121RO
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
APPEALS OF DOCKET NO.: HJ410070RT
HJ410121RO
Isaac Hagoel, tenant, and DRO DOCKET NO.: ZHD410216R
West 34th Apts. Corp., owner,
PETITIONERS
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ORDER AND OPINION GRANTING TENANT'S PETITION FOR ADMINISTRATIVE
REVIEW AND DENYING OWNER'S PETITION FOR ADMINISTRATIVE REVIEW
On October 14, 1993 the above named petitioners filed Petitions for
Administrative Review against an order issued on September 10, 1993
by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New
York concerning the housing accommodations known as Apartment 8E at
455 West 34th Street, New York, New York wherein the Administrator
determined that the owner had overcharged the tenant.
The issue in these appeals is whether the Rent Administrator's
order was warranted.
The applicable sections of the Law are Section 26-516 of the Rent
Stabilization Law and Section 2526.1(a) and (f) of the Rent
Stabilization Code.
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 appeals.
This proceeding was originally commenced by the filing in April,
1993 of a rent overcharge complaint by the tenant, in which he
stated that he had commenced occupancy on April 1, 1992 at a rent
of $650.00 per month.
The owner was served with a copy of the complaint and was requested
to submit rent records to prove the lawfulness of the rent being
charged. In answer to the complaint, the owner submitted leases
and evidence of improvements.
In an order issued on September 10, 1993 the Rent Administrator
determined that the tenant had been overcharged in the amount of
HJ410070RT; HJ410121RO
$5,776.10 as of September 30, 1993, and directed the owner to
refund such overcharge to the tenant as well as to reduce the rent.
The Administrator allowed an increase for a tenant beginning
September 1, 1991, and disallowed most claimed increases because
the invoices had dates later than the date the tenant commenced
occupancy.
In his petition (Docket No. HJ410070RT), the tenant contends in
substance that there was no new tenant in occupancy from September,
1991 through April, 1992. [The owner claims mid-February, 1992.]
With his petition the tenant has enclosed a copy of an affidavit,
submitted in the earlier proceeding, in which the former handyman
states among other things that there was no new tenant between the
tenant registered on April 1, 1991 and the time the complainant
took occupancy on April 1, 1992.
In its petition (Docket No. HJ410121RO), the current owner asserts
in substance that the DHCR disallowed $3,733.60 claimed by the
former owner because the invoice dates were later than the
complainant's starting lease date; that purchase orders and
delivery were actually in March, and all work was actually done
prior to the tenant's occupancy; that the reason two bills have a
July date is because most of the former owner's bills were paid
after 90 days; that the purchase orders for the vendors submitting
those bills have an agreement that that they would be paid after 90
days; that there are affidavits from contractors showing that the
work was done in March; that the tenant signed a lease rider
showing the work that was to be done before he moved in; that he
has not claimed that the work was not done; that the building was
brought from a foreclosure; that the former owner was in bankruptcy
and paid all their bills late; and that the current owner should
not be held responsible for the former owner's damages.
With its petition the owner has enclosed the following documents,
all of which were submitted in the earlier proceeding:
1) A March 26, 1993 Referee's Deed wherein West 34th Apartments
Corporation was conveyed the subject building, which had earlier
been foreclosed upon against 455 West 34th Associates in a Supreme
Court judgment entered on June 4, 1992.
2) A purchase order signed by David Malek (hereafter referred to
as "former owner," although he was actually an agent) of Malek
Management for 455 West 34th Street Associates. This was for
Odessa Piping and Heating to "[i]nstall kitchen sink at new
cabinets and hook up gas line at new stove in apartment 8E" for
$450.00. It stated "Date Services Rendered March 27, 1993," which
is one day after the current owner bought the building from the
referee. [The date may have been intended to be 1992, which
mistake may have occurred because, as noted infra, of the
possibility that David Malek composed it in 1993 for the purpose of
HJ410070RT; HJ410121RO
the overcharge proceeding.]
3) A July 1, 1992 invoice from Odessa for $450.00 to hook up the
kitchen sink, move the gas line and hook up a new stove.
4) A cancelled check for $220.00 dated August 20, 1992 and made out
to Yefim Goldshmidt, the owner of Odessa.
5) A July 29, 1993 affidavit by Yefim Goldshmidt that he did the
work in March of 1992 and received payment in full in August, 1992.
This affidavit was notarized by David Malek.
6) A purchase order from David Malek for Mikhail Mandel to "[r]ip
out all old cabinets and install new sheet rock and prepare it so
we can install the new kitchen and remove all garbage at apartment
8E." This purchase order also states "Date Services Rendered March
27, 1993."
7) A July 7, 1992 invoice from Mikhail Mandel for $575.00 for
having "[g]utted entire kitchen," "[i]nstalled new sheet rock,"
"[i]nstalled new plywood floor," and "[r]emoved all debris."
8) Cancelled checks to Mikhail Mandel dated August 27, 1992 and
September 2, 1992 for $285.00 and $290.00.
9) A July 29, 1993 affidavit by Mikhail Mandel that he "gutted the
entire kitchen, prepared kitchen for installation and removed all
debris in March of 1992," and that he was paid in full with checks
in August and September of 1992. This affidavit was also notarized
by David Malek.
10) An invoice from Empire State Supply Company, dated April 1,
1992 for $2,408.55, stating that it had "[d]elivered new kitchen
cabinet with all the [indecipherable] attachments."
11) Cancelled checks to Empire State dated May 13, 1992, October 5,
1992 and December 10, 1992 for $978.37, $851.88 and $578.30.
Between the three checks, memorandum notations refer to #162721,
152901, #127620, #128949 and #121105. (The single invoice from
Empire State does not have a number visible.) There is no
affidavit from anyone connected with this vendor.
12) A proposal from Schwartz and Rinaldo Construction, Inc. for
"[i]nstallation of a kitchen cabinets in apt. 8E" for $300.00 on
completion. It does not mention any apartment number. This
proposal is dated April 1, 1992, the beginning date of the tenant's
lease.
13) A cancelled check to Schwartz and Rinaldo dated April 2, 1992
for $300.00.
HJ410070RT; HJ410121RO
14) A July 29, 1993 affidavit by someone signing for Schwartz and
Rinaldo that "I installed the new kitchen cabinets in the above
mentioned apartment in the month of March of 1992 and I was paid in
full." This affidavit was also notarized by David Malek.
The preceding claimed increases had all been disallowed by the
Administrator, who had allowed an increase only for a new stove,
new refrigerator, and reglazing of the tub and tub wall tiles.
In answer, the tenant asserts in substance that the receipts and
payments claimed by the owner are fabrications; that no
improvements were made after his tenancy began; that the
improvements are not noted on the 1992 registration as they would
have been if they had actually been done before he commenced
occupancy on April 1, 1992; that Odessa Piping and Heating never
did the work claimed; that the kitchen walls show only the
"original" and unimproved appearance; that the kitchen was never
"gutted"; that no plywood was installed on the floor; that acrylic
tiles were simply glued directly on the cement floor in a haphazard
manner; that $773.99 is highly suspect for the mini-size stove and
refrigerator; that only the bathtub was resurfaced; that the wall
tiles remain in their original worn condition; that $2,408.55 is an
unbelievable price for two small kitchen cabinets of simple pressed
woodboard, with handles missing; that installation of the cabinets
was done by the superintendent with another building worker, rather
than by Schwartz and Rinaldo for $300.00; and that there was no new
tenant from September, 1991 to February, 1992.
With his answer the tenant has enclosed the original of a letter
prepared by him (and identical, other than the date and a fresh
signature, to an original letter submitted in the earlier
proceeding), and signed by John Smith, in which Mr. Smith states
that he was the former handyman of the subject building; that he
and another co-worker did certain work in the subject apartment in
preparation for the complainant's occupancy; that they glued
acrylic tile directly to the cement floor, using no plywood; that
he installed the sink, without having to do any additional plumbing
work; that neither Odessa Plumbing nor Mikhail Mandel had any
involvement in the work; that he, rather than Schwartz and Rinaldo,
installed cabinets, which were worth no more than $300, not $2,408;
that the bathroom wall tile was never refinished; that only
reglazing on the bathtub was done; and that no new tenant lived in
the apartment between the tenant in occupancy on April 1, 1991 and
the complainant.
In response, the owner contends that the tenant's lease stated that
renovations would be done prior to his moving in.
In answer, the tenant asserts that the lease referred to work that
was to be done; that not all items were done, or done by the
contractor claimed; and that the costs are inflated.
HJ410070RT; HJ410121RO
A hearing was scheduled to resolve the factual disputes. The
Notice of Hearing stated among other things that the owner should
produce the contractors who allegedly performed the work. In
preparation for the hearing, a DHCR staff member inspected the
subject apartment on December 24, 1993. He reported that the
kitchen walls were plaster, not sheetrock; that the wall cabinets
were of painted pressed board, with no handles; that the sink
[probably actually sink base] was of painted sheet metal; that it
could not be ascertained if there was plywood under the kitchen
tiles; that the bathtub had been reglazed; and that the wall tiles
were the originals as installed many years ago.
A hearing was held on January 4, 1994. The owner did not bring in
either contractors, or David Malek (the former owner at the time of
the alleged improvements, who also notarized the 1993 affidavits
from the contractors). The owner did bring in the originals of
five invoices, copies of three of which had been submitted
previously, and another copy of the lease of the alleged
immediately prior tenant. The tenant brought in John Smith. Based
on the credible evidence of record, the Administrative Law Judge
found that there was insufficient evidence to support the owner's
claim for improvements beyond those items (stove, refrigerator, and
reglazing of the bathtub and tub walls) already allowed; that the
statements of contractors notarized by David Malek were a
fabrication; that it appeared that there had been an attempt by the
current and/or former owner to exaggerate or fabricate some of the
improvements; and that there was insufficient evidence to find that
a new tenant had lived in the apartment beginning in September,
1991, both because of the testimony of John Smith as well as
because the lease of the alleged tenant contained no address or
apartment number for the housing accommodations.
The Commissioner is of the opinion that the tenant's petition
should be granted, and that the owner's petition should be denied.
Based on the inspection, the testimony of John Smith at the
hearing, and the owner's failure to present evidence to controvert
them or to support a claim for the allowance of the claimed
additional improvements or the occupancy of the alleged new tenant,
the Commissioner adopts the recommendation of the Administrative
Law Judge that the owner not be allowed any additional
improvements, and that the alleged new tenancy (accepted by the
Administrator) from September, 1991 to February, 1992 be
disallowed.
While the Administrative Law Judge found that some of the
previously-submitted invoices were suspicious, there is also reason
to suspect that the two (original) invoices submitted for the first
time at the hearing are false. One is a handwritten March 16, 1992
invoice on a form from Mikhail Mandel for kitchen tiles for
HJ410070RT; HJ410121RO
$622.43. (His only other invoice had been a typed one dated July
7, 1992, which included installation of a new plywood floor in the
kitchen.) The other new (original) invoice is on a form from
Odessa Piping and Heating dated March 17, 1992 for $3,139.25 to
"[i]install new kitchen sink with cabinets for 2 walls in kitchen.
Remove old kitchen from apartment and remove rubbish. Everything
in kitchen." (Their only other invoice had been one dated July 1,
1992 to hook up the sink and stove, and move pipes as necessary,
for $550.00.) The invoice from Odessa for $3,139.25 appears to
almost completely overlap the approximately $3,500 in invoices to
gut the entire kitchen and remove all debris (Mikhail Mandel), to
hook up the sink and stove (Odessa), to furnish cabinets (Empire
State Supply), and to install the cabinets (Schwartz and Rinaldo).
This new invoice from Odessa also appears to be in the same
handwriting (actually printing) as the new invoice from Mikhail
Mandel. The previously submitted documents concerning Odessa are
also suspect. The printing on the purchase order by David Malek
for Odessa to install the sink and stove is also very similar to
the July 1, 1992 letter on letterhead from Odessa. (Actually,
the letter is on a concocted letterhead. It can be seen that a
sheet of paper was put over most of an invoice form from Odessa.
Portions of the tops of several words on the invoice form are
visible where they were not quite covered over.) Basically, based
on the foregoing observations, as well as John Smith's credible
testimony, the inspection, and the tenant's photographs, there is
good reason to suspect that (other than the invoice for the stove
and refrigerator in an amount consistent with current prices) every
single purchase order, invoice and affidavit concerning
improvements is false, whether or not David Malek had a hand in
them.
Taking the disallowance of the alleged prior tenancy into account,
the Commissioner has recalculated the lawful stabilization rent and
the amount of overcharge. They are set forth on an amended rent
calculation chart attached hereto and made a part hereof.
With regard to the owner's contention that it bought in foreclosure
and should not be responsible for the former owner's damages,
Section 2526.1(a)(1) of the Rent Stabilization Code provides that:
Any owner who is found by the DHCR, after reasonable
opportunity to be heard, to have collected any rent or
other consideration excess of the legal regulated rent
shall be ordered to pay to the tenant a penalty equal to
three times the amount of such excess, except as provided
under subdivision (f) of this section. If the owner
establishes 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
from the date of the first overcharge on or after April
HJ410070RT; HJ410121RO
1, 1984, at the rate of interest payable on a judgment
pursuant to Section 5004 of the Civil Practice Law and
Rules, and the order shall direct such a payment to be
made to the tenant.
Further, Section 2526.1(f)(2) of the Rent Stabilization Code
provides 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. However, in the absence of collusion or any
relationship between such owner and any prior owner,
where no records sufficient to establish the legal
regulated rent were provided at a judicial sale, a
current owner who purchases upon such judicial sale shall
be liable only for his or her portion of the overcharges,
and shall not be liable for treble damages upon such
portion resulting from overcharges caused by any prior
owner. Such penalties shall be subject to the time
limitations set forth in paragraph (2) of subdivision (a)
of this section. [Emphasis added]
However, this is not a situation where an owner defaulted because
of not obtaining rent records from a receiver. There are plenty of
rent records in the present case. There is the lease of the tenant
in occupancy on April 1, 1991; there are cancelled checks; there
are purchase orders and invoices; there are even affidavits,
supposedly from contractors, obtained by the former owner during
the course of the overcharge proceeding. It might be thought that
the receiver would also have had access to most of these records.
There is no reason not to hold the current owner liable for treble
damages on all overcharges collected from the tenant since the
inception of his tenancy in April, 1992.
This order is without prejudice to any rights the owner may have to
proceed against any prior owner in a court of competent
jurisdiction.
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 increase.
The Commissioner has determined in this Order and Opinion that the
HJ410070RT; HJ410121RO
owner collected overcharges of $7,598.80. 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 Rent Stabilization Law and Code,
it is
ORDERED, that the tenant's petition be, and the same hereby is
granted; that the owner's petition be, and the same hereby is,
denied; and that the Rent Administrator's order be, and the same
hereby is, modified in accordance with this order and opinion. The
lawful stabilization rent and the amount of the rent overcharge are
established on the attached chart, which is fully made a part of
this order. The total overcharge is $7,598.80 as of September 30,
1993, including excess security of $138.16.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
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