IB410154RO



                                  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.  IB410154RO 
                                              :  DRO DOCKET NO. ZHC410043TC
          E.G.A. ASSOCIATES, INC.             :  TENANT:  RANDY LEE MOREY

                                PETITIONER    : 
          ------------------------------------X                             
             ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW

               On February 25, 1994, the above-named petitioner-owner filed a 
          Petition for Administrative Review against an order issued on       
          January 21, 1994, by the Rent Administrator, 92-31 Union Hall 
          Street, Jamaica, New York, concerning the housing accommodations 
          known as 324 East 66th Street, New York, NY, apartment number 4,    
          wherein the Rent Administrator determined the fair market rent 
          pursuant to the special fair market rent guideline promulgated by 
          the New York City Rent Guidelines Board for use in calculating fair 
          market rent appeals.

               The Administrative Appeal is being determined pursuant to the 
          provisions of Section 2522.3 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 issue raised by the administrative appeal.  

               This proceeding was commenced by the tenant's filing a Fair 
          Market Rent Appeal (hereinafter FMRA) on March 23, 1993.  The tenant 
          stated that he had commenced occupancy of the subject apartment on 
          April 7, 1981 at a rent of $450.00.  The tenant stated that he had 
          received mail which indicated that the subject apartment was 
          registered as rent controlled.  

               In answer to the complaint, the owner asserted that the 
          complainant was the first rent stabilized tenant in the subject 
          apartment and that the tenant's FMRA was barred by his failure to 
          respond within 90 days to a DC-2 notice which had been served
          by certified mail on the tenant in May 1981.  The owner submitted a 
          copy of said DC-2 notice and the envelope in which it had been 
          mailed as said envelope indicated that it had been unclaimed by the 
          tenant when delivery was attempted.  Although afforded the 
          opportunity to do so, the owner declined to provide comparability, 
          preferring to assert only the statute of limitations defense.  

               In reply to the owner's answer, the tenant stated that the 








          IB410154RO

          documents submitted by the owner were defective in that the envelope 
          did not have a mailing date thereon and the DC-2 notice was 
          incomplete as it did not include the 1974 Maximum Base Rent (MBR) as 
          was required by law.  

               The owner was notified by a summary notice dated December 6, 
          1993 that the initial legal rent would be determined on the basis of 
          the 1980 MBR and the 1980 fuel cost allowance.

               In the order here under review, the Rent Administrator adjusted 
          the fair market rent to $224.53 effective April 7, 1981 and directed 
          the owner to refund excess rent of $39,702.99 inclusive of excess 
          security to the tenant.  

               In its appeal, the owner contends that the FMRA is barred by 
          the statute of limitations.  Under the Code, a tenant challenge to 
          the initial stabilized rent is limited to the ninety day period 
          after service of a DC-2 notice.  The owner had fulfilled the legal 
          requirement of mailing the notice and the tenant should not be 
          permitted to object to the first stabilized rent some twelve years 
          later.  Moreover, in finding that the DC-2 notice was defective, the 
          Administrator had erred in dealing with the substance of the notice 
          which was a closed issue under the statute of limitations and not to 
          be considered on the merits.  Furthermore, the owner contends that 
          the 1974 MBR is relevant only for apartments which were vacancy 
          decontrolled between June 1, 1974 and June 30, 1975.  The owner 
          further contends that the owner should be credited with a rent 
          increase of 1/40th the cost of individual apartment improvements 
          made during the vacancy period before the tenant took occupancy.  

               After careful consideration, the Commissioner is of the opinion 
          that this appeal should be denied.   

                Pursuant to Section 2522.3 of the Rent Stabilization Code, the 
          tenant's right to file a fair market rent appeal was limited to 90 
          days after the DC-2 notice was served on the tenant by certified 
          mail.  This provision of the Code presupposes that the notice will 
          meet the requirements of the law, to properly advise the tenant of 
          his right to file a fair market rent appeal.  In the instant case,  
          the owner nominally complied with the mailing requirements of the 
          Code and such service would have precluded the FMRA, even though the 
          mailing was unclaimed by the tenant, had there been no defect in the 
          notice itself.  However, the owner omitted the 1974 MBR from the 
          notice and included a statement that the 1974 Maximum Base Rent was 
          based on the 1974 MBR as amended, comparables and an allowance for 
          individual apartment improvements.  The omission of the 1974 rent 
          coupled with the improper misleading statement is sufficient to 
          render the DC-2 notice invalid.  Further, the owner checked off the 
          box stating that there was currently pending a protest or court case 
          against the rent control order which established the 1974 maximum 
          rent.  However, DHCR rent records do not disclose the existence of 
          any such protest or court case.  Accordingly, the Commissioner finds 
          that proper service of a valid DC-2 notice was not made.  Therefore, 
          the tenant was not precluded from filing a fair market rent appeal.  


               With respect to the relevance of the 1974 MBR, the Commissioner 
          notes that the 1974 MBR as adjusted by appropriate guidelines 


          IB410154RO

          provides the basis  for the initial legal regulated rent even for 
          apartments vacancy decontrolled after that period.

               Code Section 2529.6 limits the Scope of Review of an appeal to 
          the facts or evidence which were before the Rent Administrator 
          unless the petitioner establishes that certain facts or evidence 
          could not reasonably have been offered in the proceeding prior to 
          the issuance of the Administrator's order.  Review of the record 
          reveals that on August 11, 1993 the owner was sent an answering 
          packet which afforded the owner the opportunity to submit proof of 
          equipment and improvements furnished for the challenged apartment. 
          Yet the owner did not submit any proof of improvements in the 
          proceeding before the Rent Administrator.  The owner's statement 
          that  the records were unavailable until recently retrieved from 
          remote archive storage does not establish that such evidence could 
          not be produced before the issuance of the Administrator's order.  
          Therefore,  the initial legal rent is correct as determined by the 
          Rent Administrator.

               The owner is directed to roll back the rent to the lawful 
          stabilized rent consistent with this decision and to refund or fully 
          credit against future rents over a period not exceeding six months 
          from the date of receipt of this order, the excess rent collected by 
          the owner.

               In the event the owner does not take appropriate action to 
          comply within sixty (60) days from the date of issuance of this 
          order, the tenant may credit the excess rent collected by the owner 
          against the next month(s) rent until fully offset.

               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.

               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.

          ISSUED
                                                                        
                                          JOSEPH A. D'AGOSTA
                                          Deputy Commissioner




                     









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