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. 7052
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEALS OF DOCKET NOS.: EC410197RO
EC410264RT
IA410005RP
DRO DOCKET NO.: ZDD410035RP
MOTT AND PRINCE (Z057954)
AND
MARY DEVITT AND REGINA OVERATH,
TENANT: MARY DEVITT
AND
REGINA OVERATH
PETITIONERS
------------------------------------X
ORDER AND OPINION DENYING OWNER'S PETITION
FOR ADMINISTRATIVE REVIEW
AND
GRANTING TENANT'S PETITION FOR ADMINISTRATIVE REVIEW
IN PART
AFTER RECONSIDERATION PURSUANT TO JUDGMENT OF COURT
On March 1, 1990 the above-named petitioner-owner filed a Petition
for Administrative Review against an order issued on February 13,
1990, by the Rent Administrator, 92-31 Union Hall Street Jamaica,
New York, concerning the housing accommodations known as 31-33
Market Street, New York, New York, Apartment No. 7, wherein the
Rent Administrator determined the Fair Market Rent pursuant to the
Special Fair Market Guidelines promulgated by the New York City
Rent Guidelines Board for use in calculating Fair Market Rent
Appeals.
On March 19, 1990, the above-named petitioner-tenants filed a
Petition for Administrative Review against the aforementioned
order. These petitions were consolidated for disposition herein
and on May 6, 1993, the Commissioner issued an order and opinion
denying the owner's petition and granting the tenant's petition in
part.
Subsequent thereto, the petitioner-owner filed a petition in the
Supreme Court pursuant to Article 78 of the Civil Practice Law and
Rules requesting that the order of the Commissioner be annulled.
The proceeding was then remitted by court order for further
consideration.
The Administrative Appeals are being determined pursuant to the
provisions of Section 2526.1 of the Rent Stabilization Code
(hereafter RSC) and Section 26-513 of the Rent Stabilization Law
(hereafter RSL).
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 appeals.
This proceeding was originally commenced by the filing on July 23,
1985 of a Tenant Objection alleging a rent overcharge by the
tenants who stated in substance that no initial registration
(hereafter RR1) was served on them and that their rent upon
occupancy in March 1985 of $1,000.00 was an overcharge.
On June 14, 1988, the Rent Administrator issued an order rejecting
the Tenant's Objection as untimely having been filed in excess of
90 days after receipt of the RR1 form on August 13, 1984.
The tenants filed a timely petition for Administrative Review
(CG410040RT) which remanded the proceeding for processing on the
merits in that the subject apartment was vacant on April 1, 1984,
that the tenants herein first moved to the subject apartment in
March 1985 and therefore were clearly not served with the RR1 form
on August 13, 1984 so that their objection should not have been
dismissed as untimely.
Upon remand, the Rent Administrator proceeded to process the
tenants' complaint as a fair market rent appeal (hereafter FMRA)
based on the owner's submission of a Landlord's Report of Statutory
Decontrol filed April 8, 1985 showing the apartment as decontrolled
December 1983 and first rented in March 1985.
On February 13, 1990, the Rent Administrator issued order
ZDD410035RP which established the Fair Market Rent of the subject
apartment at $416.41 as of March 1, 1985 and directed that a refund
of $38,468.30 be paid to the tenants.
The tenants had also previously filed a complaint of rent
overcharge under Docket L001863R on May 7, 1985 which was closed
without action on February 13, 1990 as a duplicate of the instant
docket.
In the owner's petition, the owner alleges in substance that
although advised prior to the issuance of the order that the owner
was represented by counsel, the Rent Administrator failed to serve
Notices on the owner's Attorney; that the building had undergone
extensive renovation pursuant to a loan under Article VIIIA of the
Private Housing Finance Law (hereafter PHFL) for which HPD had
restructured the rent but that the Rent Administrator failed to
adjust the MBR by the increase granted prior to establishing the
fair market rent; that the Rent Administrator did not consider
$23,852.00 in renovations to the subject apartment which the
tenants concede were done and for which cancelled checks were
submitted below; that no bills are available because the owner used
laborers in his employ but that use of employees is not an
automatic bar to granting increases for renovations and that an
adequate explanation for why the owner's comparability submission
was not accepted was never given by the Rent Administrator. With
this petition, the owner submitted a copy of the loan agreement
executed in April 1981 under Article VIIIA of the PHFL for the
renovation of the subject building.
In answer to the owner's petition and in their own petition the
tenants stated in substance that they were not the first rent
stabilized tenants and therefore a FMRA was not the proper
procedure; that the apartment had been decontrolled in September
1973; that the last rent stabilized tenant paid $275.00; that their
rent should be calculated above the $275.00; that treble damages
should be imposed on the overcharge; and that the owner does not
provide hot water but requires that the tenant maintain and pay for
a separate hot water heater although hot water is a base date
service which should be included in the rent. With their petition
the tenants submitted a Landlord's Report of Statutory Decontrol
for the subject apartment filed in November 1973 (2DR50742) showing
a initial stabilized renting in September 1973.
In a response to the tenants' petition, the owner contended in
substance that the petition should be dismissed because neither of
the tenants signed the petition which was prepared by their
attorney.
The Commissioner is of the opinion that the tenants' petition
should be granted in part and the owner's petition should be
denied.
An examination of the records in this case discloses that a report
of statutory decontrol (form R42) was filed under Docket 2DR50742
on October 29, 1973 for the subject apartment indicating that the
apartment was vacated July 1, 1973 and rented September 1, 1973 to
a tenant Wing Pui Leung; that no further rent control activity is
recorded for the subject apartment on the rent registration card
until the October 5, 1983 issuance of a Certified Report of
Restructured Rent and Order increasing Maximum Collectible Rent
(Section 33.9 of the Rent Regulations) under docket 2ACS1164 where
the District Rent Administrator granted a restructured Maximum Base
Rent adjustment of $30.00 per room and increased the current
maximum collectible rent for tenant Wing-Pui Leung from $186.84 to
$336.84; that a secondary report of statutory decontrol was filed
April 8, 1985; that the complainants had filed only a complaint of
rent overcharge in their tenant objection docket and not a FMRA;
that the owner had been granted a loan subject to Article VIIIA of
the PHFL for renovations to the subject building; that the RSA 1984
Registration Work Sheet lists the subject apartment No. 7 as
"vacant" on April 1, 1984 at a rent of $336.84 and that the
Restructured Rent Report issued on October 5, 1983 was on file with
DHCR.
Section 4(c) of Part IV of the Rules and Regulations governing
rehabilitation loans pursuant to Article VIIIA of the PHFL and
Title I of the Housing and Community Development Act of 1974
provide in pertinent part that loans may be made irrespective of
the current status of the apartments and that such loans will not
have any effect upon the present or future status of the
apartments.
Therefore, the subject apartment which was decontrolled pursuant to
the Vacancy Decontrol Law of 1971 effective July 1, 1973 and made
subject to the Rent Stabilization Law on July 1, 1974 pursuant to
the Emergency Tenant Protection Act would not lose its rent
stabilized status as a consequence of the receipt of a loan granted
under Article VIIIA, of the PHFL. Further there exists no evidence
in the record which would render the original decontrol report
filed in 1973 as void or change the status of the first stabilized
tenant Wing Pui Leung from rent-stabilized to rent-controlled in
October 1983.
Section 2522.3(a) of the RSL provides in pertinent part that . . .
an appeal of the Initial Legal Regulated Rent on the ground that it
exceeds the Fair Market Rent for the housing accommodation may be
filed by the tenant of a housing accommodation which was subject to
the City Rent Law on December 31, 1973.
The subject apartment was decontrolled in September 1973.
Therefore the Rent Administrator's establishment of the rent in
March 1985 under the procedures promulgated for FMRA's was
unwarranted because the subject apartment failed to meet the
criteria cited above, that is, it was not subject to the city rent
law on December 31, 1973 since it had already been vacancy
decontrolled in July 1973. Consequently, the Owner's contentions
with regard to the MBR, comparability and the calculation of the
Fair Market Rent are moot.
Part III, Section A of the Housing and Development Administrator's
(now Department of Housing Preservation and Development hereafter
HPD) Notice of Rules Governing Rehabilitation and Rent
Restructuring under the Article VIIIA Loan Program promulgated in
1976 restricts the "rules" to those units subject to rent control
and adjustments in legal maximum rents to be charged rent
stabilized units are referred to the Conciliation and Appeals Board
(C.A.B.), the predecessor Agency to DHCR.
Contrary to the above cited HPD rules, it appears that a rent
control rent restructuring order was issued effective October 1983
which adjusted the rent stabilized rent of $186.84 paid by the
prior tenant to $336.84 in order to reflect renovations completed
through the Article VIIIA loan program. This increase represents
an adjustment of $30.00 per room or a total rent increase of
$150.00 for the subject apartment.
The Commissioner notes that Part II, Section A of the
aforementioned Notice of Rules Governing Rehabilitation and Rent
Restructuring provides that rent restructuring shall be granted
only when in conjunction with a qualified program, there has been
an improvement of a substandard or deteriorated property to decent,
safe, and sanitary conditions through the performance of more than
routine or minor repairs and improvements. Part II, Section A
further provides that the restructured rents of the rent controlled
units shall provide sufficient rental income to cover their
proportionate share of the following components: maintenance and
operating expenses; real estate taxes after tax abatement, rental
income losses due to vacancies, debt service (annual interest,
principal, and administrative charges) and return on equity. In
determining the restructured rent, consideration will also be given
to the eligibility for and proximity of other rental increases for
the controlled units.
The Commissioner has examined the above criteria for setting the
rent controlled restructured rentals and finds that the same
criteria should be applied to setting the rent stabilized
restructured rents and that there is no reasonable basis to set the
stabilized restructured rent differently.
Accordingly, the Commissioner is of the opinion that applying the
rent adjustment of $150.00 granted by HPD to the last stabilized
rent in this case would be appropriate.
As shown in the restructured rent report, the last rent paid by the
former tenant prior to the October 1983 adjustment, was $186.84.
Applying the $150.00 adjustment equals a rent stabilized rent of
$336.84 effective October 1, 1983.
The owner claims and the second Statutory Decontrol Report filed
March 12, 1985 indicates that the subject apartment was vacant from
December 1983 through March 1985. The tenants concur that the last
tenant was prior tenant Wing Pui Leung by the submission of an
envelope addressed to Wing Pui Leung at the subject address. The
submission of a copy of the 1984 Registration work sheet for the
subject building shows that apartment No. 7 was "vacant" on April
1, 1984 at a rental of $336.84 - erroneously cited as a rent-
controlled rent.
Taking the above factors into account, the Commissioner has
recalculated the lawful stabilization rent for the subject
apartment using the last known stabilized rent of $336.84 as the
base rent.
Although the owner is correct in its contention that labor
performed by employees of the owner may not be automatically
excluded but is subject to closer scrutiny, the Commissioner is of
the opinion that in the instant case, the documentation of costs by
the owner's submission only of cancelled checks does not even meet
the minimum criteria because the submitted checks do not indicate
the nature of the renovations, the apportionment of cost per job
designated solely for work in the subject apartment nor whether the
cancelled checks payable to various employees of the owner involved
labor in the subject apartment and were, therefore correctly deemed
by the Rent Administrator as insufficient evidence for the granting
of an increase for improvements to the subject apartment.
However, the Commissioner is of the opinion that treble damages
should not be assessed. In prior cases before DHCR where the
owner's allegation that it was entitled to a first or market rent
was rejected, the issue of treble damages was determined on a case
by case basis to assess the degree of willfulness on the owner's
part and to ascertain whether evidence of a good faith belief by
the owner that it was entitled to a first/market rent was
sufficient to rebut the presumption of willfulness.
In the instant case, because the issuance of a "Certified Report of
Restructured Rent and Order increasing Maximum Collectible Rent" by
the Office of Rent Control on October 1983 for the prior tenant
could give rise to a good faith belief that the last prior tenant
was rent-controlled and therefore, that the owner was entitled to
negotiate a market rent with the next tenant taking occupancy of
the subject apartment as an initial stabilized tenant, the
Commissioner is of the opinion that the overcharge should not be
considered willful. Interest rather than treble damages has
therefore been imposed.
With regard to the tenants' ancillary contentions concerning base
date services and the installation of individual hot water heaters,
the Commissioner notes that this issue was previously adjudicated
in a separate service complaint under Docket LS003620S and was not
raised in the original complaint before the Rent Administrator
which resulted in the order appealed herein. It is therefore
inappropriate to consider this issue in this proceeding.
With regard to the owner's contention that the tenants' PAR should
be dismissed because it wasn't signed by the tenants, the
Commissioner notes that in a companion proceeding before the Rent
Administrator (docket ZL001863R), the tenants' attorney had filed
a Notice of Appearance to represent the tenants and had also
represented the tenants in the earlier PAR proceeding (CG410040RT)
resulting in a remand to the Rent Administrator. In view of the
above and in light of the protracted proceedings herein, a
dismissal of the tenants' PAR on this basis is not warranted.
With regard to the owner's contention that the Rent Administrator
failed to serve notices on the owner's attorney although advised
that the owner was represented by counsel, the Commissioner notes
that the owner's attorney fully participated in the proceeding at
the appeal level and raised all objections and evidence counsel
deemed pertinent both in the owner's own appeal and in answer to
the tenant's appeal thus satisfying due process requirements.
With regard to the tenants' contention that they were not served
with a copy of the initial registration upon taking occupancy of
the subject apartment in March 1985, it is noted that rent records
disclose that the subject apartment has been registered every year
since 1985 and that in April 1984 the subject apartment was vacant
and not required to be registered. Further the tenants stated in
companion case L001863R that they received a registration form on
March 20, 1985 although they also stated that the subject apartment
had not been registered. In view of the DHCR registration records
showing proper registration and this ambiguity on the tenants'
part, the Commissioner deems it appropriate to find that the
subject apartment has been registered since 1985.
The lawful stabilization rents and amount of rent overcharge
including interest on overcharges occurring on and after April 1,
1984 are set forth on the amended rent calculation chart attached
hereto and made a part hereof.
Because this determination concerns lawful rents only through
February 28, 1990, 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
owner collected overcharges of $49,447.12. 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 provisions of the Rent
Stabilization Law and Code, it is
ORDERED, that the tenants' petition for administrative review be,
and the same hereby is, granted in part, and the owner's 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, modified in accordance with this order and opinion. The lawful
stabilization rents and the amount of the rent overcharge are
established on the attached chart which is fully made a part of
this order. The amount of the rent overcharge through February 28,
1990 is $49,447.12 including excess security of $700.60.
ISSUED
JOSEPH A. D'AGOSTA
Deputy Commissioner
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