HB410082RO
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.HB410082RO
: DRO DOCKET NO.EF410422R
WENDY LYNN BERRA SUBTENANT: ANGELA M.
MACROPOULOS
PETITIONER :
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ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW
On February 10, l992, the above-named petitioner-prime tenant
timely refiled a Petition for Administrative Review against an order
issued on December 1, 1992 by the Rent Administrator, 92-31 Union
Hall Street, Jamaica, New York concerning the housing accommodation
known as 326 West 77th Street, apartment no. 4, New York, NY,
wherein the Administrator determined that the prime tenant had
overcharged the subtenant.
The Administrative Appeal is being determined pursuant to the
provisions of Section 2525.6 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 issues raised by the administrative appeal.
This proceeding was originally commenced on June 13,1990 when
the subtenant filed a complaint of rent overcharge (Docket No.
EF410422R), alleging that the prime tenant had collected overcharges
from October 1, 1987 through February 28, 1990, the subtenancy
period. The subtenant stated that she had commenced occupancy of
the subject apartment on October 1, 1987 at an initial rent of
$525.00 which subsequently was increased to $700.00 while the prime
tenant's rent was only $390.00.
In a letter received by the DHCR on August 15, 1990, the
subtenant advised that she wished to withdraw the complaint. On
September 23, 1991, while the withdrawal request was still pending,
the subtenant filed the complaint anew ( Docket No. FI 430457R).
Subsequently, in November, the subtenant resubmitted the complaint
of September 23, 1991, revising the section identifying the owner by
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substituting the words" prime tenant" for "owner".
On September 16, 1992, the Rent Administrator, who had been
advised of the duplication of complaints, issued an order
terminating Docket No. FI430457R and as a corollary consolidating
that complaint with the original complaint filed in June 1990.
In answer to the complaint, the prime tenant questioned, since
she no longer had the subject leasehold, whether the DHCR had
jurisdiction over her and further questioned the validity of the
complaint since the parties had negotiated a verbal settlement
whereby the subtenant had agreed to release the prime tenant from
all claims. In a subsequent communication, the prime tenant stated
that the sublet had been an unwritten informal arrangement and that
she could neither affirm nor deny the allegations made in the
complaint but that the subtenant had unlawfully retained furniture
belonging to the prime tenant. In November 1992, the prime tenant's
husband sent a letter to the subtenant, enclosing a check for the
amount of the overcharge (without interest) and said check was
returned uncashed by the subtenant. In the order issued on
December 1, 1992, the Rent Administrator determined that an
overcharge had occurred and directed the prime tenant to refund to
the subtenant an overcharge of $18,029.78 inclusive of interest on
the overcharge occurring from October 1, 1987 to June 30, 1988 and
treble damages on the overcharge from July 1,1988 through February
28, 1990.
In this petition, the prime tenant contends in substance that
the Administrator's order should be revoked on the following
grounds:
1) because it was withdrawn, the 1990 complaint is
ineffective;
2) the prime tenant's due process rights have been
violated in that not one of the three complaints filed is
valid: a) the 1990 complaint is invalid because it was
not timely served. Service must be effected within a
reasonable time, b) the 1991 complaint was defective, in
that the prime tenant was named as owner, c) the revised
complaint is invalid because: there was not a valid
amendment, the revised complaint was not properly served,
there was no application to amend the complaint;
3) the consolidation of the complaints is invalid because
it was improperly initiated by ex parte communications,
the prime tenant was not served with an application for
consolidation, the subtenant did not provide a basis for
activating the original complaint or consolidating the
1991 complaint with the 1990 complaint, said consolidation
was fraudulently induced, the notice of consolidation was
defective on its face because it did not advise of the
possible adverse effect on the prime tenant;
4) treble damages are precluded by the statute of
limitations, limiting any treble damages award to two
years prior to the complaint's filing. Treble damages
should not predate by more than two years the filing of
the second complaint in September 1991;
5) the complaint is precluded by the statute of
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limitations which limits the filing of overcharge
complaints to the four year period of the first overcharge
alleged; the claimed subtenancy began more than four
years prior to the filing of the complaint.
6) DHCR has no jurisdiction in this matter - Code Section
2525.6 applies only to overcharges collected from
subtenants - the complainant stated that her occupancy was
illegal. Definitionally, the complainant was not a
subtenant but was only an occupant not protected by the
Code.
7) the order appealed was the result of illegality,
irregularity and fraud as follows: the complainant
submitted forged evidence, i.e., the complainant forged
the prime tenant's signature on two money orders; the
complainant misappropriated evidence- submission by the
complainant of a Board of Elections notice addressed to
the prime tenant shows that the complainant
misappropriated mail, a possible federal crime; the
complainant fraudulently induced the consolidation of the
withdrawn complaint to establish an earlier date for
purposes of receiving treble damages; the complainant's
affirmation is false in that she falsely stated that her
occupancy began October 1, 1987 when it actually began on
September 21, 1987; the complainant's statements are
inconsistent - in one instance, the complainant stated
that she had notified the prime tenant by mail, then she
said notification was by telephone.
8) the order incorrectly applied Code Section 2520.13 to
the verbal agreement as the settlement occurred before the
complaint was filed and after the cessation of the
subtenancy. The waiver agreed to did not require that the
complainant give up any rights to gain occupancy of the
subject apartment.
In her response to the appeal, the subtenant contends in
substance that the Administrator's order was correct and should be
sustained. The subtenant denies all allegations of fraud or
wrongdoing.
Subsequently in additional submissions, the prime tenant raised
supplementary issues in arguing against the Rent Administrator's
findings, including the following additional contentions: 1) the
order incorrectly stated that the petitioner had alleged a verbal
agreement with the subtenant as the basis for the subtenant to
withdraw the original complaint; 2)the DHCR failed to rebut the
petitioner's denial of service and to hold a traverse hearing on the
issue; 3) the Rent Administrator issued an order consolidating the
withdrawn complaint before the petitioner's time to answer said
complaint had expired; 4) an incorrect Code section was cited as the
basis of the overcharge award; 5) since the subject apartment was
not the complainant's primary residence during the alleged
overcharge period, the complainant was not entitled to the
protection of the Rent Stabilization Law or Code and was not
entitled to bring the complaint; 6) service of the 1991 complaint
was defective in that a binder incorporated in the complaint was not
served with the complaint; 7) the petitioner is not subject to the
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jurisdiction of the DHCR in that having relinquished a leasehold
interest in the subject apartment before the complaint was filed,
she is not a current owner (Code Section 2526.1 ascribes liability
for overcharges to current owners); and 8) treble damages are also
precluded due to the offer of refund by the prime tenant.
After careful consideration, the Commissioner is of the opinion
that this petition should be denied.
In explication, with respect to the validity of the complaints,
the Commissioner finds that the complaint filed June 13, 1990 is
valid and effective. The Rent Administrator was not compelled to
terminate the proceeding. The facts in docket no. AJ410571RO, Matter
of Sulzberger-Rolfe, which concerned a tenant's withdrawal submitted
by the owner, as cited by the prime tenant, are inapposite to the
instant proceeding where the subtenant requested a withdrawal
unbeknownst to the prime tenant and the subtenant could always
revoke the withdrawal. Since the Rent Administrator had not yet
acted upon the complainant's withdrawal request, the complaint
remained viable, notwithstanding the request. The filing in
September 1991 effectively negated or revoked the withdrawal and in
essence ratified and supplemented the original complaint. Although
the complaints were initially served on the owner of the subject
building (a party not charged in the proceeding) , the record
reveals that the complaints were served on the prime tenant, who,
the Commissioner notes, meets the Code's definitional criteria of
owner. Section 2520.6(i) of the Rent Stabilization Code
specifically includes in the definition of owner " a fee owner,
lessor, sublessor, assignee,net lessee." Hence, identifying the
prime tenant as such is not a fatal defect in the September 1991
complaint. Each of the complaints stated clearly who was the party
to be charged and under what circumstances the overcharge had been
collected. The so-called "revision", allegedly amending the
complaint filed by the complainant in November 1991 was never
docketed, did not change the previously filed complaints in any
material way, was not necessary to the Administrator's determination
and was merely a duplication of the previously filed complaints.
The Commissioner finds that the consolidation of the September
1991 and June 1990 complaints is valid. Section 2527.5 of the Rent
Stabilization Code provides, inter alia, that the DHCR may, at any
stage of a proceeding, consolidate two or more applications,
complaints or proceedings which have at least one ground in common.
The complaints filed in June 1990 and in September 1991 were
essentially the same, involving the same premises and parties and
covering the same rental period at the same rent. Pursuant to the
Code, no formal application to consolidate the proceedings was
required. The complainant's bringing the duplicate complaints to
the attention of the tenant counselor and ultimately to the
attention of the Administrator was not fraudulent. Tenants are
routinely questioned as to other filed complaints. This permits the
Administrator to clear unnecessary dockets. The termination of the
second docket number with the attendant consolidation was
essentially a ministerial task, adding no possible adversity to the
petitioner herein and in no way interfered with the prime tenant's
ability to answer the complaint.
HB410082RO
Part 2527 of the Rent Stabilization Code governs the
administration of proceedings before the DHCR. Section 2527.3, cited
by the prime tenant for the proposition that service of the 1990
complaint was untimely, provides in pertinent part that the DHCR
shall serve all parties adversely affected with a copy of such
application, complaint, answer or reply but the section articulates
no standard of how or when service shall be effected. The complaint
filed on June 13, 1990 was served on the prime tenant on September
11, 1992. The September 1991 complaint was served at the time of
its filing and was re-served with all attached materials on November
6, 1992. The Commissioner finds that service of the complaints
pursuant to Code Section 2527.3 was made.
The Rent Stabilization Code contains no provision for a
traverse hearing. In instances where there is an allegation that
service has not been made, the defect is remedied by re-serving,
e.g. the complaint and materials were re-served on November 6, 1992.
The granting of hearings is discretionary and a hearing will not be
ordered where oral testimony is not required, where the matter can
be dealt with solely on the papers as here. Accordingly, the
Administrator was correct in not granting a hearing.
Due process requires that notice and the opportunity to be
heard must be afforded to one who may be deprived of property by
governmental action prior to the deprivation. Review of the record
reveals that full compliance with Code Section 2527.3 was effected,
providing adequate notice to the petitioner who was afforded ample
opportunity to respond. The prime tenant has had the opportunity
to examine the entire record and to make comment thereon. In the
interest of due process protection, the Commissioner has considered
all of the prime tenant's submissions in this appeal. The
Commissioner finds that the petitioner's due process rights have not
been violated.
The Commissioner finds that the DHCR has jurisdiction in this
matter. The misconduct covered in the order herein appealed is the
very activity proscribed by Section 2525.6 of the Rent Stabilization
Code and the proscribed behavior cannot act to remove the parties or
the premises from the protection of the Code. The evidence confirms
that a subtenancy existed, that there was a sublessor-sublessee
relationship. The prime tenant was paying rent for a leased
apartment in which she no longer resided and was collecting rent
from another who resided therein with the permission of the prime
tenant. Any alleged illegality arose from the prime tenant's
failure to get the lessor's authorization and the subsequent
overcharge by the prime tenant. Issues of primary residency are
determined by a court of competent jurisdiction after application by
the "owner" for a ruling of non-primary residence and such
application not having been sought, the issues are not germane to
the instant proceeding. The record discloses that the prime tenant
has relinquished the leasehold and that the subtenant herein is the
current lessee of the subject apartment. The DHCR retains
jurisdiction of the parties and the subtenancy even though the
subtenancy had been terminated when the subtenant filed the
overcharge complaint against the prime tenant.
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Code Section 2526.1(f) provides for apportionment of liability
for overcharges collected between a current owner and prior owners.
Apportionment is not an issue in the instant proceeding since there
was only one prime tenant and one subtenant and Section 2526.1(f) is
inapplicable. The prime tenant, therefore, has sole liability for
the overcharges collected.
The complaint was not precluded by the statute of limitations.
The limitation imposed by Code Section 2526.1 (a)(2) requires that
a complaint be filed within four years of the first overcharge
alleged. The relevant dates in the instant case are October 1, 1987,
the first overcharge alleged, and June 13, 1990, the date the
initial complaint was filed, well within the limitations. Likewise
the 1991 refiled complaint was within the four year period. The
Administrator did not err in the time constraints with respect to
treble damages, assessing interest on the overcharge from October 1,
l987 to June 30, 1988, a period more than two years before the
filing of the complaint and treble damages thereafter. The
allegation that the subtenant may actually have moved to the subject
apartment in late September 1987 has no relevance; the subtenant
paid no rent for any period prior to October 1, 1987 and no
overcharge was found for any earlier period.
The Commissioner finds that treble damages were appropriately
imposed. Code Section 2525.6(b) provides in pertinent part that
where a tenant charges more than the legal regulated rent, the
subtenant shall be entitled to treble damages (emphasis added).
The cases cited by the petitioner, Matters of Milford Management,
Rose, and Green do not involve overcharges by the prime tenant but
do concern instances where a conventional owner attempted to
establish that an overcharge was not willful. Pursuant to Code
Section 2526.1, where an owner [here not including a tenant who
sublets since that is specifically covered by Code Section
2525.6(b)] is found to have overcharged, said owner will be ordered
to pay treble damages unless it can establish by a preponderance of
the evidence that the overcharge was not willful. Policy Statement
89-2 articulates the reasoning and standard to be applied to
determine willfulness. Since the Rent Stabilization Code's treble
damages provision in subletting cases is non-discretionary, the
Administrator was correct in not weighing the evidence and equities
to the "willfulness" standard on the overcharges collected herein.
Accordingly, the refund tendered by the prime tenant does not
mitigate against the assessment of treble damages. Further, it is
noted that the prime tenant's tendered refund did not include
interest so that in any event said refund did not meet the
requirements of Policy Statement 89-2 to establish non-willfulness.
The typographical error which misstated the applicable Code
section on p. 2 of the rent calculation chart in the Rent
Administrator's order is hereby corrected to read Section 2525.6(b).
Pursuant to Section 2520.13, an agreement by a tenant to waive
the benefit of any provision of the RSL or the Code is void.
However, based upon a negotiated settlement between the parties and
with the approval of the DHCR or a court of competent jurisdiction
where a tenant is represented by counsel, a tenant may withdraw,
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with prejudice, any complaint pending before the DHCR. Since the
alleged verbal agreement (whose existence was challenged by the
subtenant) did not meet the requirements of the referenced section
of the Code, the Administrator did not err in discounting the
allegation. Nor was the order in error in citing to the section.
The Commissioner finds that it is unnecessary to investigate or
discuss the prime tenant's various allegations of fraud and
illegality which have not previously been dealt with in this opinion
as the alleged instances of fraud or illegality are collateral
issues and are not germane to the complaint or its proper
determination. The evidence of record shows that the tenant
collected an overcharge from the subtenant and that such collection
has not been denied.
The Commissioner has determined in this Order and Opinion that
the prime tenant collected overcharges of $18, 029.78. This order
may, upon the 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 subtenant 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.
While determination of this proceeding was pending, the
petitioner requested time extensions in order to complete various
responses. On May 23, 1994, the Commissioner received a letter
dated May 16, 1994, an extension date previously requested by the
prime tenant to submit her final response (which was originally due
in February 1994), in which the prime tenant indicated her
understanding that all orders had been stayed, that therefore it
was unnecessary for her to complete her final response and that if
her understanding was incorrect, she required written notice of
such, giving her an additional 45 days to complete her response.
The petitioner's request for a stay beyond that which is provided by
Code Section 2529.12 was never granted. The petitioner cannot
assume that her requests for time extensions or stays are
automatically granted without some affirmative action on the part of
the Commissioner. The prime tenant was given every possible
consideration and several extensions of time to prepare answers and
submit additional evidence during the PAR proceeding, including a
chance to examine the voluminous files(both the Rent Administrator's
file and the file in the PAR proceeding) in person pursuant to a
F.O.I.L. request and a chance to submit additional comments after
such examination.
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 as modified to
correct a typographical error.
ISSUED
HB410082RO
JOSEPH A. D'AGOSTA
Deputy Commissioner
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