IB410036RO



                                  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 
          IN THE MATTER OF THE ADMINISTRATIVE :  ADMINISTRATIVE REVIEW
          APPEAL OF                              DOCKET NO.  IB410036RO
                                              :  DRO DOCKET NO. ZGG410431R
                               
          CECILIA SCHMIDT-SAROSI                 TENANT:  Michael Miller
                                PETITIONER    : 
          ------------------------------------X                         
              
           ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE REVIEW IN 
          PART

               On February 9, 1994, the above-named petitioner-owner timely 
          filed a Petition for Administrative Review against an order first 
          issued on  January 22, 1993 and then issued as amended on January 4, 
          l994 by the Rent Administrator, 92-31 Union Hall Street, Jamaica, 
          New York, concerning the housing accommodations known as 51 E. 67 
          Street, New York, Apartment No. 3A wherein the Rent Administrator 
          determined that the owner had overcharged the tenant. 

               The Administrative Appeal is being determined pursuant to the 
          provisions of the Rent Stabilization Law and 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 on July 24, 1992 when the tenant 
          filed a complaint of rent overcharge in which the tenant alleged 
          that the owner had failed to properly register the subject 
          apartment.  
            
               Although a copy of the complaint was served on the putative 
          owner, that owner failed to respond to the complaint.

               Subsequent examination of DHCR records affirmed the tenant's 
          allegation in that no registration had been filed for the years 
          1986-1991.  

               On December 10, 1992, a final notice was sent, affording the 
          owner an opportunity to rebut a finding of willfulness.  There was 
          no response from the owner.  

               The order here under review, issued on January 22, l993 lacked 
          the first page of the rent calculation chart showing the computation 
          of rent overcharges.  In said order, amended and issued on January 
          4, 1994, the Administrator determined that the tenant had been 







          IB410036RO

          overcharged from August 1,1988 through January 31, 1993 in the 
          amount of $12,949.81 inclusive of excess security, interest on the 
          overcharge from August 1, 1988 through July 31, 1990 and treble 
          damages on the overcharge occurring from August 1, 1990 through 
          January 31, 1993 and directed the prior owner to refund the 
          overcharge to the tenant.  

                In her appeal, the  current owner contends that the 
          Administrator's order should be reversed or in the alternative 
          modified to reduce her liability for the refund.  The owner asserts 
          that she purchased the property on May 27, 1992 and was not informed 
          of the pending proceeding, that she was thereby denied due process 
          rights in that she was denied the right to respond to the complaint.  
          The owner further asserts that the manner of purchase was the 
          equivalent of a judicial sale and that therefore she should be given 
          the benefit of section 2526.1(f)(2) of the Rent Stabilization Code 
          which limits the responsibility of purchasers at a judicial to 
          refund overcharges which it actually collected.  The owner alleges 
          that the subject property was the subject of a foreclosure action 
          wherein the mortgagee had moved for summary judgment and that the 
          purchase occurred subsequent to the granting of the order.    The 
          owner further alleges that the transfer of the property was the 
          result of an agreement negotiated with the mortgagee and that she 
          was unable to get the pertinent documents from the former owner.  To 
          substantiate this claim, the owner submits a copy of an unrecorded 
          deed and an assumption agreement with the mortgagee.  

               In response to the appeal, the tenant contends that the order 
          should be sustained  in light of the petitioner's failure to notify 
          the Division of a change in ownership prior to the orignal issuance 
          of the order.  Moreover, the complaint was sent to the former 
          owner's managing agent who has been retained as managing agent by 
          the current owner.  Because the owner's managing agent  kept and had 
          access to all rental records, the owner cannot attempt to evade 
          responsibility for the overcharge on the basis of ignorance.   

               In a reply to the tenant's response, the owner asserted that 
          (1) there was no independent requirement of notification  of change 
          of ownership and that it had registered the premises when required 
          to do so; 
          (2)although the owner had employed the services of the prior owner's 
          managing agent to ease the change in ownership, the agent's 
          knowledge of the complaint filed before the owner took title cannot 
          be imputed to the owner;  in fact, the owner discharged the agent 
          because of his refusal to cooperate;  (3) the tenant's claim that 
          rent payments were made to the prior owner supports the owner's 
          claim of lack of responsibility;  and (4) since filing a PAR stays 
          reimbursement of the retroactive overcharge, the tenant is not 
          permitted to credit current rent payments against the overcharge.

               The Commissioner is of the opinion that this petition should be 
          granted in part.  

               Although the owner did not provide the requisite notice of 
          change of ownership (see Code Section 2523.8) in December 1992 when 
          the property purchase was complete, the owner did register the 
          subject apartment in 1993.  This registration provided notice of the 
          change prior to the Administrator's issuance of the amnended order.  


          IB410036RO

          Because the owner did not have an opportunity to respond to the 
          complaint before the order's issuance, the Commissioner has fully 
          considered the owner's response to the complaint in this appeal, 
          thus affording the owner full due process.  The Commissioner notes, 
          however, that the owner has not yet filed the  registrations for the 
          missing years. 
               
               The owner's contentions regarding her entitlement to the 
          benefit given to a purchaser at a judicial sale as provided by Code 
          Section 2526.1(f)(2) are not persuasive.  The property appears to 
          have been transferred directly by the former owner to the current 
          owner.  The deed was executed by the former owner.  Although the 
          bank may have initiated foreclosure proceedings, such forclosure was 
          not completed.  The bank's consent to the transaction is indicative 
          of the bank's desire to protect its loan.  Moreover, the tenant's 
          allegation regarding the retention of the managing agent, as 
          admitted by the owner, seems to indicate a relationship between the 
          former and current owners. 

               The Commissioner determines, however, that treble damages are 
          inappropriate in the instant case.  The Rent Regulation Reform Act 
          of 1993 provides in pertinent part that where an overcharge 
          complaint is filed after July 1, 1991, no treble damage penalty 
          shall be assessed  against an owner whose overcharge is based solely  
          on the failure to file a proper initial or annual rent registration 
          statement.  Therefore, the Commissioner has recomputed the 
          overcharge to be refunded to eliminate treble damages entirely and 
          to instead assess interest on the entire overcharge.  In accordance 
          with the Rent Regulation Reform Act of 1993, the total overcharge to 
          be refunded for the period commencing August 1,1988 through January 
          31, 1993 is $6838.88 inclusive of excess security and interest in 
          the overcharge.

              Accordingly, the Commissioner finds that the Administrator did 
          not err in directing the owner to refund the overcharge.  
          Nevertheless. the Commissioner modifies the Administrator's order  
          to find the current owner and the prior owner jointly and severally 
          liable for the overcharges collected by the prior owner through 
          December 1992 when the current owner's purchase was completed or 
          $6735.42.  The current owner is solely liable for the overcharge 
          collected from January 1, 1993 or $103.46.    

               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.

               The Commissioner has determined in this Order and Opinion that 
          the prior owner collected overcharges of $6735.42 for which the 
          prior and current owners are jointly and severally liable and that 
          the current owner is solely liable for an overcharge of $103.46.  
          This Order may, upon expiration of the period for seeking review of 
          this Order and Opinion pursuant to Article Seventy-eight of the 







          IB410036RO

          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 this petition for administrative review be, and 
          the same hereby is, granted in part , and, that the order of the 
          Rent Administrator be, and the same hereby is, modified in 
          accordance with this order and opinion.

          ISSUED



                                                                        
                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner




                     





























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