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
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IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEAL OF DOCKET NO. IB410036RO
: DRO DOCKET NO. ZGG410431R
CECILIA SCHMIDT-SAROSI TENANT: Michael Miller
PETITIONER :
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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
IB410036RO
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