senate Bill S1298

Relates to alternative hardship applications for properties subject to the rent stabilization code

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 06 / Jan / 2011
    • REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
  • 04 / Jan / 2012
    • REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT

Summary

Relates to alternative hardship applications for properties subject to the rent stabilization code.

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Bill Details

See Assembly Version of this Bill:
A2881
Versions:
S1298
Legislative Cycle:
2011-2012
Current Committee:
Senate Housing, Construction And Community Development
Law Section:
New York City Administrative Code
Laws Affected:
Amd §26-511, NYC Ad Cd; amd §6, Emerg Ten Prot Act of 1974
Versions Introduced in 2009-2010 Legislative Cycle:
S7079, A8668

Sponsor Memo

BILL NUMBER:S1298

TITLE OF BILL:
An act
to amend the administrative code of the city of New York and the
emergency tenant protection act of nineteen seventy-four,
in relation to
hardship applications

PURPOSE:
To extend the number of ownership years from three years to
six years in respect to eligibility for an alternative hardship rent
adjustment.

SUMMARY OF PROVISIONS:
Section 1 of the bill amends paragraph 6-a of
subdivision c of section 26-51 of the administrative code of the city
of New York to revise the number of ownership years required to apply
for an alternative hardship rent adjustment through the New York
State Division of Housing and Community Renewal (DHCR) from three
years to six years.

Section 2 of the bill amends paragraph 5 of subdivision d of section 6
of section 4 of chapter 576 of the laws of 1974, constituting the
emergency tenant protection act, to revise the number of ownership
years required to apply for an alternative hardship rent adjustment
through DHCR from three years to six years for building owners
outside a city of one million or more.

JUSTIFICATION:
Both subdivision c of section 26-511 of the
administrative code of New York City and paragraph 5 of subdivision d
of section 6 of section 4 of chapter 576 of the emergency tenant
protection act are designed to provide an alternative means by which
building owners can apply to the DHCR commissioner for rent increases
greater than those allowed by the applicable guideline increases
prescribed. In order to be granted the hardship exemption, DHCR must
find that the set rent increases will be insufficient for the owner
to accrue a profit of at least five percent when considering the
annual gross rent income collectible minus the annual operating
expenses. Currently, building owners must have acquired the property
at least three years prior to the application to file for the
alternative hardship exemption. This proposed change will adjust
paragraph 6-a of subdivision c of the administrative code to
replicate the years of ownership required in paragraph 6 of the same
subdivision in regards to applications for comparative hardship
exemption. Paragraph 6 mandates that hardship be determined by
comparing the annual net income of the past three years with that of
either the three years prior, under the same ownership, or 1968
to 1970. Since many applicants are therefore required to have owned a
property for the three base years plus the three years of comparison,
the standard time of ownership required for many building owners is
six years. This change
would align the ownership years required in paragraph 6a with those in
paragraph 6. Similarly, the alternative to the hardship
application described in the emergency tenant protection act also


requires only three years of ownership whereas this bill would extend
that to six.

Moreover, since three years is a short amount of time to judge an
owner's equity portfolio, this extension will encourage potential
building purchasers to consider their assets more comprehensively and
to avoid over leveraging since the prospect of hardship relief will
be contingent an an initial six-year ownership period. The bill will
further provide the DHCR with a reasonable timeframe from which to
understand the owner's capacity to make a sufficient profit relative
to the profit anticipated when the property was first purchased.

LEGISLATIVE HISTORY:
2009: A.8668, Died in Housing
2010: S.7079, Died in Housing, A.8668, Passed Assembly

FISCAL IMPACT ON THE STATE:
None.

EFFECTIVE DATE:
Immediately, with provisions.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1298

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                             January 6, 2011
                               ___________

Introduced  by  Sen.  DUANE  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Housing, Construction  and
  Community Development

AN  ACT to amend the administrative code of the city of New York and the
  emergency tenant protection act of nineteen seventy-four, in  relation
  to hardship applications

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Paragraph 6-a of subdivision c of  section  26-511  of  the
administrative  code  of  the  city  of  New  York is amended to read as
follows:
  (6-a) provides criteria whereby as  an  alternative  to  the  hardship
application  provided  under paragraph six of this subdivision owners of
buildings acquired by the same owner or a related entity  owned  by  the
same  principals  [three] SIX years prior to the date of application may
apply to the division for increases in excess of the level of applicable
guideline increases established under this law based on a finding by the
commissioner that such guideline increases are not sufficient to  enable
the  owner  to  maintain  an  annual gross rent income for such building
which exceeds the annual operating expenses of such building  by  a  sum
equal  to  at least five percent of such gross rent. For the purposes of
this paragraph, operating expenses shall consist of the actual,  reason-
able,  costs  of  fuel,  labor,  utilities,  taxes, other than income or
corporate franchise taxes, fees, permits, necessary contracted  services
and  non-capital repairs, insurance, parts and supplies, management fees
and other administrative costs and mortgage interest. For  the  purposes
of this paragraph, mortgage interest shall be deemed to mean interest on
a  bona  fide mortgage including an allocable portion of charges related
thereto. Criteria to be considered in determining a bona  fide  mortgage
other  than  an  institutional  mortgage shall include; condition of the
property, location of the property, the existing mortgage market at  the

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01026-01-1

S. 1298                             2

time  the mortgage is placed, the term of the mortgage, the amortization
rate, the principal amount of the mortgage, security and other terms and
conditions of the mortgage. The commissioner shall set  a  rental  value
for  any  unit occupied by the owner or a person related to the owner or
unoccupied at the owner's choice for more than one  month  at  the  last
regulated rent plus the minimum number of guidelines increases or, if no
such regulated rent existed or is known, the commissioner shall impute a
rent consistent with other rents in the building. The amount of hardship
increase  shall  be such as may be required to maintain the annual gross
rent income as provided by this paragraph. The division shall not  grant
a  hardship  application  under  this paragraph or paragraph six of this
subdivision for a period of three years subsequent to granting  a  hard-
ship  application under the provisions of this paragraph. The collection
of any increase in the rent for any housing  accommodation  pursuant  to
this  paragraph shall not exceed six percent in any year from the effec-
tive date of the order granting the increase over the rent set forth  in
the  schedule  of  gross rents, with collectability of any dollar excess
above said sum to be spread forward in similar increments and  added  to
the  rent as established or set in future years. No application shall be
approved unless the owner's equity in such building exceeds five percent
of: (i) the arms length purchase price of the property; (ii) the cost of
any capital improvements  for  which  the  owner  has  not  collected  a
surcharge; (iii) any repayment of principal of any mortgage or loan used
to  finance the purchase of the property or any capital improvements for
which the owner has not collected a surcharge and (iv) any  increase  in
the  equalized  assessed value of the property which occurred subsequent
to the first valuation of the property after purchase by the owner.  For
the purposes of this paragraph, owner's equity shall mean the sum of (i)
the purchase price of the property less the principal of any mortgage or
loan  used to finance the purchase of the property, (ii) the cost of any
capital improvement for which the owner has not  collected  a  surcharge
less the principal of any mortgage or loan used to finance said improve-
ment,  (iii) any repayment of the principal of any mortgage or loan used
to finance the purchase of the property or any capital  improvement  for
which  the owner has not collected a surcharge, and (iv) any increase in
the equalized assessed value of the property which  occurred  subsequent
to the first valuation of the property after purchase by the owner.
  S 2. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
576  of the laws of 1974 enacting the emergency tenant protection act of
nineteen seventy-four, as amended by chapter 102 of the laws of 1984, is
amended to read as follows:
  (5) as an alternative to the hardship application provided under para-
graph four of this subdivision, owners of buildings acquired by the same
owner or a related entity owned by the same principals [three] SIX years
prior to the date of application may apply to the division for increases
in excess of the level of  applicable  guideline  increases  established
under  this  law based on a finding by the commissioner that such guide-
line increases are not sufficient to enable the  owner  to  maintain  an
annual  gross  rent  income  for  such building which exceeds the annual
operating expenses of such building by a sum  equal  to  at  least  five
percent  of such gross rent. For the purposes of this paragraph, operat-
ing expenses shall consist of the actual,  reasonable,  costs  of  fuel,
labor, utilities, taxes, other than income or corporate franchise taxes,
fees,  permits,  necessary  contracted services and non-capital repairs,
insurance, parts and supplies, management fees and other  administrative
costs  and  mortgage interest. For the purposes of this paragraph, mort-

S. 1298                             3

gage interest shall be deemed to mean interest on a bona  fide  mortgage
including  an allocable portion of charges related thereto.  Criteria to
be considered in determining a bona fide mortgage other than an institu-
tional  mortgage  shall  include; condition of the property, location of
the property, the existing mortgage market at the time the  mortgage  is
placed,  the  term of the mortgage, the amortization rate, the principal
amount of the mortgage, security and other terms and conditions  of  the
mortgage.  The  commissioner shall set a rental value for any unit occu-
pied by the owner or a person related to the owner or unoccupied at  the
owner's  choice  for more than one month at the last regulated rent plus
the minimum number of guidelines increases or, if no such regulated rent
existed or is known, the commissioner shall  impute  a  rent  consistent
with  other rents in the building. The amount of hardship increase shall
be such as may be required to maintain the annual gross rent  income  as
provided  by  this  paragraph.  The  division shall not grant a hardship
application under this paragraph or paragraph four of  this  subdivision
for  a  period of three years subsequent to granting a hardship applica-
tion under the provisions of  this  paragraph.  The  collection  of  any
increase  in  the  rent  for  any housing accommodation pursuant to this
paragraph shall not exceed six percent in any year  from  the  effective
date  of  the order granting the increase over the rent set forth in the
schedule of gross rents, with collectability of any dollar excess  above
said  sum  to  be  spread forward in similar increments and added to the
rent as established or set in future  years.  No  application  shall  be
approved unless the owner's equity in such building exceeds five percent
of: (i) the arms length purchase price of the property; (ii) the cost of
any  capital  improvements  for  which  the  owner  has  not collected a
surcharge; (iii) any repayment of principal of any mortgage or loan used
to finance the purchase of the property or any capital improvements  for
which  the owner has not collected a surcharge; and (iv) any increase in
the equalized assessed value of the property which  occurred  subsequent
to  the first valuation of the property after purchase by the owner. For
the purposes of this paragraph, owner's equity shall mean the sum of (i)
the purchase price of the property less the principal of any mortgage or
loan used to finance the purchase of the property, (ii) the cost of  any
capital  improvement  for  which the owner has not collected a surcharge
less the principal of any mortgage or loan used to finance said improve-
ment, (iii) any repayment of the principal of any mortgage or loan  used
to  finance  the purchase of the property or any capital improvement for
which the owner has not collected a surcharge, and (iv) any increase  in
the  equalized  assessed value of the property which occurred subsequent
to the first valuation of the property after purchase by the owner.
  S 3. This act shall take effect immediately; provided that the  amend-
ments  to  section 26-511 of chapter 4 of title 26 of the administrative
code of the city of New York made by  section  one  of  this  act  shall
expire  on  the  same  date as such law expires and shall not affect the
expiration of such law as provided under section 26-520 of such law; and
provided that the amendments  to  section  6  of  the  emergency  tenant
protection  act of nineteen seventy-four made by section two of this act
shall expire on the same date as such act expires and shall  not  affect
the  expiration  of such act as provided in section 17 of chapter 576 of
the laws of 1974.

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