Opinion
December 9, 1999
In this Article 78 proceeding, Petitioner challenges as arbitrary and capricious the order and opinion of the Rent Administrator of the New York State Division of Housing and Community Renewal ("DHCR") which determined that Petitioner-Landlord (hereinafter "Petitioner," "Owner," or "Landlord") had substantially overcharged the tenant Buckley for rent for his apartment in a single room occupancy dwelling ("SRO") in Manhattan. DHCR imposed treble damages against petitioner.
Both the Rent Stabilization Law ("RSL") and the Rent Stabilization Code ("RSC") establish a system of residential regulation including the amount an owner may charge for a rent stabilized unit and prohibit overcharges. RSL § 26-512(s), 26-511(c)(2), 26-516(a), RSC § 2522.1 and 2525.1. The DHCR is the sole administrator of the regulatory system. (Omnibus Housing Act, 1983, N Y Laws CH. 403 § 3, Rent Stabilization Association v. Higgins, N.Y.2d 156, 165, 169, 608 N.Y.S.2d 930, 630 N.E.2d 626 (1993). It is well settled that a Court may not disturb an administrative decision unless the Agency's action was arbitrary, was in violation of lawful procedures or was made in excess of its jurisdiction. Pell v. Board of Education, 34 N.Y.2d 222, 356 N.Y.S.2d 833, 313 N.E.2d 321 (1974).
A landlord determined to have wilfully overcharged a protected tenant is liable to the tenant for treble damages. In this case, prior to the presently challenged determination, DHCR determined that treble damages were not warranted at that time. However, it is evident from the Administrative Record that the District Rent Administrator ("DRA") based its original findings on the Owner's provision of rent credits to the tenant prior to the Owner's entering into a stipulation with DHCR that is discussed below. Based on that stipulation, and the facts discussed below, it was well within the Commissioner's purview and scope of authority to impose treble damages following a further examination of the facts before him. RSL § 26-516(a).
Petitioner argues that he was entitled to rental increases under the Rent Guidelines Board Hotel Orders 18, 19 and 20 and insists that the Stipulation entered into between the Owner and the Enforcement Division of DHCR did not prevent him from imposing rental increases and thus DHCR has no basis for disallowing rental increases. That argument is without merit. The Stipulation was entered into while the tenant, Buckley's, overcharge complaint was pending. It provided that the Landlord would not be allowed to collect any lawful rent stabilization increases accruing after the Stipulation was signed and corrected registrations were filed with the DHCR. The Stipulation was executed on February 20, 1992, but the registrations were not filed until 1993. The Stipulation provided that:
"Nothing in this agreement is to be interpreted to negatively affect currently pending tenant overcharge complaints or to prevent tenant from filing overcharge complaints for the past overcharges. Any such pending or future complaints will be determined by DHCR's overcharge unit." [Return: A-1, Stipulation, p. 3, ¶ 6.]
It is undisputed that the Petitioner had evaded the statutory requirements of the Rent Stabilization Code and as such was required to pay a penalty. The administrative record discloses that not only did the Petitioner fail to comply with the Division's registration requirements; but, the Commissioner found that nearly all the registrations in the building were deliberately false, and the false registrations were supported by falsified ledgers and altered tax returns. As such, the Commissioner determined that these fraudulent registrations based upon false information constituted the functional equivalent of non-registration, and the owner in such a situation is not entitled to the rent increases normally given an owner who has made a good faith registrations of at least 80 percent of the units in the building. As a result of the Owner's intentional and flagrant violations of the rent regulatory laws, the Owner agreed to correct and amend these registrations and file them with the DHCR. Pursuant to the Stipulation entered into between the DHCR and the Owner, Petitioner conceded that he had not filed properly registered individual units for the years 1984, 1985, 1986, 1987, 1988, 1989, 1990 and 1991.
As established, it is clear that the DHCR has the authority to determine whether an owner has collected an overcharge, to direct the refund of an overcharge and to award interest and/or treble damages. RSL § 26-516(a). The subject premises are categorized as a Class B Hotel comprised of 120 single room occupancy units ("SRO's"), and the Rent Guidelines Board ("RGB") as established in RSL § 26-510 is statutorily mandated to annually determine guidelines for rent adjustments and increases. In compliance with the statute, the RGB published its Rent Guidelines Board Hotel Orders Nos.: #18 (7/1/88 to 6/30/89), #19 (10/1/89 to 9/30/90) and #20 (10/1/90 to 9/30/91), and in footnote 7, warned owners that:
"If the affected building contains A) 20 more units; and 10 percent or more of the units have been deliberately withheld from the rental market for a period exceeding 30 days OR B) 20 percent or more of the units are not registered with the DHCR; then the allowable level of rent adjustment shall be 0 percent."
Thus it is clear that the Rent Guidelines Board barred owners from collecting any rent increases when 20 percent of the units in a Class B Hotel with twenty or more units were not registered with the Division.
Thus, due to the Owner's egregious and criminal conduct in attempting to deceive the Agency in offering false instruments for filing and in accordance with the Rent Stabilization Law § 26-517(e), Rent Stabilization Code § 2528.4, and the Rent Guidelines Board Hotel Orders, the Commissioner froze the rent for the subject unit. However, the Rent Commissioner noted in his order that increases were allowed beginning in 1993, after the owner began filing registrations that were no longer false.
The Owner now argues that the award of treble damages was unwarranted in that the overcharges were not wilful, that the Respondent used the prior Stipulation in a related proceeding to form the basis for the award of treble damages against him and this action by the Agency constitutes "civil double jeopardy."
The burden is on the owner to establish that the overcharge is not willful. Matter of Wai Leung Chang v. New York State Division of Housing and Community Renewal, 207 A.D.2d 552, 616 N.Y.S.2d 251 (2nd Dept. 1994). Willfulness has been defined as ". . . intentionally doing an act and knowing the act is being done"Matter of 430 Realty Corp. v. New York State Division of Housing and Community Renewal, 196 A.D.2d 72 5, 602 N.Y.S.2d 9 (1st Dept. 1993), Matter of Gattiboni v. Aponte, (Sup.Ct., N Y Co., May 20, 1991, Stecher, J.) Index No. 28546/1990, aff'd 188 A.D.2d 434, 592 N.Y.S.2d 1 (1st Dept. 1992), Matter of 985 Fifth Avenue, Inc. v. State Division of Housing and Community Renewal, 171 A.D.2d 572, 567 N.Y.S.2d 657 , app. den'd 78 N.Y.2d 861, 576 N.Y.S.2d 219, 582 N.E.2d 602 (1991). Thus, once it is determined that the Petitioner herein had overcharged the complaining tenant for rent, it was incumbent upon the Petitioner to establish by preponderance of the evidence that such overcharges were not willful. In theMatter of Chu v. New York State Division of Housing and Community Renewal, 231 A.D.2d 567, 647 N.Y.S.2d 285 (2nd Dept. 1996); Matter of Wai Leung Chan v. New York State Division of Housing and Community Renewal, supra; Matter of Branch v. State Division of Housing and Community Renewal, 217 A.D.2d 581, 628 N.Y.S.2d 975 (2nd Dept. 1995); Goldstein v. New York State Division of Housing and Community Renewal, 226 A.D.2d 722, 642 N.Y.S.2d 5 30 (2nd Dept. 1996); HR Executive v. DHCR, 235 A.D.2d 259, 652 N.Y.S.2d 27 (1st Dept. 1997); Gandler v. Halperin, as Commissioner, et al.,232 A.D.2d 637, 648 N.Y.S.2d 998 (2nd Dept. 1996).
In the case at bar, the record clearly shows that the Owner completely failed to rebut the presumption of wilfulness.
Petitioner misconstrues and misinterprets the purpose of the fine imposed on him as well as the Agency's requirement that the Owner properly fix the building's elevators for the benefit of all the tenants as well as the Owner, who is a resident in the building. As clearly stated in the Stipulation, any penalties imposed represented his violations of RSC § 2525.2 for his deceptive endeavors and devious tactics by offering false instruments for filing including but not limited to altered tax returns, false ledger entries and false registrations all in an effort to circumvent the rent regulatory laws. The award of treble damages by the Rent Commissioner represents the Owner's excessive and wilful overcharge of rent as articulated in the Stipulation.
It should be noted that the payment of $30,000 fine is payable to the State of New York, whereas the treble damage award is payable to the tenant. Clearly, these are two separate items. Moreover, as petitioner is a resident of the premises, elevators in good working order and condition would clearly benefit him as well.
The Owner asserts that the Rent Commissioner's only basis for his award of treble damages is contained in the 1992 Stipulation where he acknowledged an overcharge existed and thus agreed that he would charge only those amounts for the rent stabilized units listed in the 1984 registrations ($300.00 per month for unit 96), plus any lawful increases accruing after the stipulation was signed and corrected registrations were filed, thereby. Petitioner is incorrect.
The overcharge was willful and knowing when it occurred, from the inception of the stabilized tenancy in 1988, which is a violation of rent regulatory laws and is a separate and distinct act from attempting to file numerous false instruments with a State Agency, which is quasi-criminal in nature as well as violative of the RSC and RSL. In fact, the Agency agreed that if the Owner complied with Stipulation, as partial consideration therefor, DHCR agreed that it would not refer the matter to the District Attorney, Attorney General or any other agency, or entity which might have had an interest in the proceeding. [Return: A-19, Stipulation, p. 3, ¶ 6.)
This forbearance, it should be noted, is not binding on this Court.
Petitioner admits that although he did not know the exact amount of the overcharge, he acknowledged he was indeed overcharging Tenant Buckley. The fact that he may have stopped billing the subject Tenant for rent once his fraudulent activity came to light does not negate or rebut the presumption that he wilfully overcharged the Tenant. This should come as no surprise to the Owner, who was warned by the DHCR five months before he executed the Stipulation of his possible exposure to treble damages. If Petitioner had any concern that he might had been subject to an additional penalty, it should have been addressed at the time the Stipulation was being prepared. The Owner's cessation of continued collection from rent overcharges from the tenant ex post facto is not evidence of an effort to rectify a simple mistake. In any event, once a tenant is overcharged, he or she is allowed to recover any overcharges by deducting it from the rent due the present owner. RSC § 2526.1(e). Moreover, a Tenant is entitled to a cash refund plus interest. The record is devoid of any offer in cash by the Landlord of the full amount together with interest despite his contentions to the contrary. The Owner instead conceded that he did not have the money to repay the Tenant, and at the Owner's option, ceased billing the Tenant for rent and, two years later, sent the Tenant an unexplained check in the sum of $3,972.84.
For the above reasons, the cross-motion, is granted and the petition is dismissed and the Clerk shall enter judgment dismissing the petition.
This constitutes the Decision, Order and Judgment of the Court.