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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