Afshar v. Dist. of Columbia Rental Housing, 82-1457.

• Decision Date: 24 January 1986
• Docket Number: No. 82-1457.,82-1457.
• Citation: 504 A.2d 1105
• Parties: Khosrow B. AFSHAR, Petitioner, v. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, Respondent.
• Court: D.C. Court of Appeals

Page 1105

504 A.2d 1105

Khosrow B. AFSHAR, Petitioner, v. DISTRICT OF COLUMBIA RENTAL HOUSING COMMISSION, Respondent.

No. 82-1457.

District of Columbia Court of Appeals.

Submitted January 26, 1984.

Decided January 24, 1986.

Bernard A. Gray, Sr., Washington, D.C., was on brief for petitioner.

Inez Smith Reid, Corp. Counsel, Charles L. Reischel, Deputy Corp. Counsel, and Richard B. Nettler, Asst. Corp. Counsel, Washington, D.C., were on brief for respondent.

Before FERREN and TERRY, Associate Judges, and REILLY, Senior Judge.

TERRY, Associate Judge:

Petitioner's tenants filed a complaint with the Rental Accommodations Office (RAO) alleging that their rents exceeded the applicable rent ceilings. The Rent Administrator determined, after a hearing, that petitioner had charged rents in excess of the ceilings from August 1980 through May 1981, but found that he had become aware of the applicable ceilings only in November 1980. The Rent Administrator therefore ordered petitioner to refund to his tenants the excess rents collected from December 1980 through April 1981. On the tenants' appeal, the Rental Housing Commission held petitioner liable for treble the entire amount by which he was found to have overcharged his tenants. Petitioner then sought review in this court. Because we conclude that the rents which petitioner charged did not exceed the rent ceilings, we reverse the Commission's decision.

I

In August 1978, almost two years before petitioner Afshar purchased the apartment building involved in this case, the Rent Administrator in HP # 2085 granted a substantial rent-ceiling increase to its owner. The Administrator's order, however, conditioned any actual increase in rent on a certification by the Department of Housing that the building was in substantial compliance with applicable housing regulations. No such certification was ever made, and thus the rents remained unchanged.

When Afshar bought the building on July 30, 1980, he was unaware that already pending before the RAO was a complaint by the tenants alleging violations of housing regulations and a substantial reduction in services by the former owner. Nine days later, on August 8, the Rent Administrator issued a decision in that case, TP # 3803, finding violations of housing regulations, and ordering the building's rent ceilings lowered by seven dollars per unit. Because Afshar had failed to file an amended registration statement as required by D.C.Code § 45-1686(e) (1980 Supp.),¹ he did not receive a copy of the order.

In November 1980 Afshar's tenants filed a new complaint with the RAO, claiming among other things that their rents exceeded the applicable rent ceilings, as adjusted by the order in TP # 3803. The Rent Administrator ruled that from August 1980 through April 1981, the rents for all but one of the rental units were seven dollars above their respective ceilings. However, the Administrator also found that Afshar had no knowledge of TP # 3803, and thus of the applicable ceilings, until the tenants filed their complaint against him more than three months after the seven-dollar reductions had been ordered. Ruling that she could not hold Afshar liable for overcharges of which he was unaware, she ordered a refund of only the overcharges from December 1980 through April 1981, a total of thirty-five dollars per unit. In addition, she declined to treble the refunds, citing "the unusual circumstances in this case."²

The tenants appealed to the Commission, which reversed the Rent Administrator's refusal to hold petitioner liable for overcharges made before December 1980, and also held that she was required by the 1977 Act to treble any refund she ordered. Accordingly, the Commission ruled that the tenants were entitled to $189 per unit, three times nine months' overcharges of seven dollars.³ Afshar seeks review of this decision.

Afshar contends that the rents which he charged did not exceed the applicable rent ceilings, and that the Commission therefore could not impose any liability whatever upon him. Alternatively, he asserts that the Commission erred in modifying the Rent Administrator's award; the 1977 Act, he argues, neither renders him liable for unknowing overcharges nor requires the trebling of all refunded overcharges. We agree with the first argument, and thus we do not address the second.

II

Our review of the Commission's decision is governed by the District of Columbia Administrative Procedure Act, D.C.Code §§ 1-1501 through 1-1510 (1981 & 1985 Supp.). Section 1-1510(a)(3) authorizes us to "hold unlawful and set aside" any agency action, findings, or conclusions which we determine to be

(A) Arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) Contrary to constitutional right, power, privilege, or immunity;

(C) In excess of statutory jurisdiction, authority, or limitations or short of statutory jurisdiction, authority, or limitations or short of statutory rights;

(D) Without observance of procedure required by law, including any applicable procedure provided by this subchapter; or

(E) Unsupported by substantial evidence in the record of the proceedings before the Court.

Similar language in the 1977 Act guides the Commission's review of the Rent Administrator's decision:

The Commission may reverse, in whole or in part, any decision . . . which it finds to be arbitrary, capricious, an abuse of discretion, not in accordance with the provisions of this subchapter, or unsupported by substantial evidence in the record of the proceedings before the Rent Administrator or his or her designee; or it may affirm, in whole or in part, the Rent Administrator's or his or her designee's decision.

D.C.Code § 45-1695(g) (1980 Supp.).⁴ We hold that the Rent Administrator erred in ruling that the rents charged by Mr. Afshar exceeded the applicable rent ceilings, and that the Commission erred in failing to reverse that ruling on the ground that it was "not in accordance with the provisions of" the 1977 Act.

It is important in this case to recognize the difference between the rent actually paid for an apartment and the rent ceiling established for that apartment. Under the 1977 Act, "no landlord of any rental unit subject to this subchapter may charge or collect rent for such rental unit in excess of [the applicable rent ceiling]." D.C.Code § 45-1687(a) (1980 Supp.). The rent ceiling is computed initially by adding to the "base rent" (the "rent legally charged or chargeable on October 31, 1977," D.C.Code § 45-1681(a) (1980 Supp.)) a percentage of that rent, which varies according to the number of services the rent covers. D.C.Code § 45-1687(a) (1980 Supp.). It can be altered later to reflect changed circumstances. On the landlord's petition, the RAO may allow an increase in a rent ceiling under D.C.Code § 45-1688 (1980 Supp.) for any of four reasons: to allow the landlord to recover the cost of capital improvements (D.C.Code § 45-1691 (1980 Supp.)); to include the cost of an increase in services or facilities provided (D.C.Code § 45-1692 (1980 Supp.)); to "generate . . . a rate of return" of not more than eight percent (a "hardship petition," D.C.Code § 45-1693 (1980 Supp.)); and to compensate for a vacancy in the unit, when the tenant either moves out voluntarily or is evicted for certain specified reasons, including non-payment of rent (D.C.Code § 45-1694 (1980 Supp.) ). The Commission may also adjust rent ceilings throughout the District of Columbia once a year to reflect changes in the Consumer Price Index. D.C.Code § 45-1687(b) (1980 Supp.).⁵

Not all adjustments of a rent ceiling need be upward, however. The rent ceiling may be raised upon a finding of a substantial increase in services or facilities provided, but it may be lowered if those services or facilities are found to have been substantially decreased. D.C.Code § 45-1692 (1980 Supp.). A tenant whose services are cut back may petition the RAO for a corresponding decrease in the rent ceiling. D.C. Code § 45-1695(a) (1980 Supp.). The rent ceiling for a particular unit can thus reflect any significant changes in its condition. Nevertheless, the ceiling does not dictate what the rent itself shall be; it only imposes a limit upon the landlord's bargaining power.

The 1977 Act states that any person who "demands or receives any rent for a rental unit" in excess of that unit's rent ceiling, or "substantially reduces or eliminates related services previously provided," shall be liable for "treble the amount by which the rent exceeds the applicable rent ceiling or for seventy-five dollars ($75.00), whichever is greater, and/or for a rollback of the rent to such amount as the Rent Administrator or Commission shall determine." D.C.Code § 45-1699.24(a) (1980 Supp.). Thus a landlord who even demands rent in excess of the established ceiling will be liable for either treble the excess (at least $75.00 in any case), a rollback of the rent, or both. The same penalties apply to a landlord who substantially cuts back or eliminates services to his tenants; but unless the rent actually charged exceeds the rent ceiling, he would be liable at most for $75.00, and the rent would be subject to a rollback. However, since a substantial reduction in services is also a ground for a reduction in the rent ceiling, D.C.Code § 45-1692 (1980 Supp.), which may be made retroactive to the date of the reduction in services, it can retroactively trigger treble-damage liability. See Delwin Realty Co. v. District of Columbia Housing Commission, 458 A.2d 58 (D.C. 1983).

The other available sanction for a rent-ceiling violation, a rollback of the rent, is a mysterious creature. Nowhere does the 1977 Act define a rollback or discuss its effect. It appears, however, to be an equitable measure akin to the reformation of a contract. Whereas an adjustment in the rent ceiling changes the maximum amount for which the landlord may lease his unit, a rollback directly affects the...