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

                                  1928

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                            January 14, 2009
                               ___________

Introduced  by M. of A. O'DONNELL, V. LOPEZ, SILVER, GLICK, ORTIZ, GOTT-
  FRIED, KAVANAGH, ROSENTHAL, FARRELL, PERRY,  PHEFFER,  SPANO,  POWELL,
  TITUS,  COLTON -- Multi-Sponsored by -- M. of A. ALFANO, BARRON, BING,
  BRENNAN, BRODSKY, CASTRO, CLARK, COOK, CYMBROWITZ,  DINOWITZ,  HOOPER,
  JACOBS, KELLNER, LENTOL, McENENY, MILLMAN, SCARBOROUGH, WRIGHT -- read
  once and referred to the Committee on Housing

AN  ACT  to  amend  the administrative code of the city of New York, the
  emergency tenant protection act of nineteen seventy-four and the emer-
  gency rent control law, in relation to extending the  length  of  time
  over which major capital improvement expenses may be recovered

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

  Section 1. Subparagraph (g) of paragraph 1 of subdivision g of section
26-405 of the administrative code of the city of New York, as amended by
chapter 749 of the laws of 1990,  is amended to read as follows:
  (g) (I) COLLECTION OF SURCHARGES TO THE MAXIMUM RENT AUTHORIZED PURSU-
ANT TO ITEM (II) OF THIS SUBPARAGRAPH SHALL CEASE  WHEN  THE  OWNER  HAS
RECOVERED THE COST OF THE MAJOR CAPITAL IMPROVEMENT;
  (II)  There  has  been  since  July first, nineteen hundred seventy, a
major capital improvement [required for the operation,  preservation  or
maintenance  of the structure. An adjustment under this subparagraph (g)
shall be in an amount sufficient to amortize the cost  of  the  improve-
ments  pursuant  to  this  subparagraph  (g)  over a seven-year period];
PROVIDED THAT THE COMMISSIONER FINDS THAT SUCH IMPROVEMENTS  ARE  DEEMED
DEPRECIABLE  UNDER  THE  INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE
REQUIRED FOR THE OPERATION, PRESERVATION OR MAINTENANCE  OF  THE  STRUC-
TURE.  THE  INCREASE  PERMITTED  FOR  SUCH  CAPITAL IMPROVEMENT SHALL BE
COLLECTED AS A MONTHLY SURCHARGE TO THE MAXIMUM RENT. IT SHALL BE  SEPA-
RATELY  DESIGNATED AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY
OTHER ADJUSTMENT TO THE MAXIMUM RENT. THE SURCHARGE  ALLOCABLE  TO  EACH
APARTMENT  SHALL  BE  AN  AMOUNT  EQUAL  TO  THE COST OF THE IMPROVEMENT

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
A                                                          LBD00023-01-9
              

A. 1928                             2

DIVIDED BY  EIGHTY-FOUR, DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING,
AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN SUCH  APARTMENT;  PROVIDED
THAT  THE  SURCHARGE  ALLOCABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT
EXCEED  AN  AMOUNT EQUAL TO SIX PERCENT OF THE MONTHLY RENT COLLECTED BY
THE OWNER FOR SUCH APARTMENT AS SET  FORTH  IN  THE  SCHEDULE  OF  GROSS
RENTS.    ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE CARRIED FORWARD AND
COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT TO EXCEED AN  ADDI-
TIONAL  SIX  PERCENT  IN  ANY  ONE YEAR PERIOD UNTIL THE TOTAL SURCHARGE
EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMENTIONED  SIX  PERCENT
LIMITATION DID NOT APPLY; or
  S  2.  Subparagraph  (k)  of  paragraph  1 of subdivision g of section
26-405 of the administrative code of the city of New York, as amended by
chapter 749 of the laws of 1990,  is amended to read as follows:
  (k) The landlord has incurred, since January first,  nineteen  hundred
seventy,  in connection with and in addition to a concurrent major capi-
tal improvement pursuant to subparagraph (g) of  this  paragraph,  other
expenditures  to  improve, restore or preserve the quality of the struc-
ture. An adjustment under this subparagraph shall  be  granted  only  if
such  improvements  represent  an  expenditure equal to at least ten per
centum of the total operating and maintenance expenses for the preceding
year. An adjustment under this subparagraph shall be in addition to  any
adjustment  granted  for  the  concurrent  major capital improvement and
shall be [in an amount sufficient to amortize the cost of  the  improve-
ments  pursuant  to  this subparagraph over a seven-year  period] IMPLE-
MENTED IN THE SAME MANNER AS SUCH MAJOR CAPITAL IMPROVEMENT AS A FURTHER
SURCHARGE TO THE MAXIMUM RENT.
  S 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
tive code of the city of New York, as amended by chapter 116 of the laws
of 1997,  is amended to read as follows:
  (6) provides criteria whereby the commissioner may act  upon  applica-
tions  by  owners  for  increases  in  excess  of the level of fair rent
increase established under this law provided, however, that such  crite-
ria  shall provide [(a)] as to hardship applications, for a finding that
the level of fair rent increase is not sufficient to enable the owner to
maintain approximately the same average annual net income  (which  shall
be  computed  without regard to debt service, financing costs or manage-
ment fees) for the three year period ending on or within six  months  of
the  date  of  an application pursuant to such criteria as compared with
annual net income, which prevailed on the average over the period  nine-
teen  hundred  sixty-eight  through nineteen hundred seventy, or for the
first three years of operation if the building was completed since nine-
teen hundred sixty-eight or for the first three  fiscal  years  after  a
transfer of title to a new owner provided the new owner can establish to
the  satisfaction  of  the commissioner that he or she acquired title to
the building as a result of a bona fide sale of the entire building  and
that  the new owner is unable to obtain requisite records for the fiscal
years nineteen hundred  sixty-eight  through  nineteen  hundred  seventy
despite  diligent  efforts to obtain same from predecessors in title and
further provided that the new owner can provide financial data  covering
a  minimum  of  six  years under his or her continuous and uninterrupted
operation of the building to meet the three year to three  year  compar-
ative  test  periods herein provided[; and (b) as to completed building-
wide major capital improvements, for a finding  that  such  improvements
are deemed depreciable under the Internal Revenue Code and that the cost
is  to  be  amortized over a seven-year period, based upon cash purchase
price exclusive  of  interest  or  service  charges].    Notwithstanding

A. 1928                             3

anything  to the contrary contained herein, no hardship increase granted
pursuant to this paragraph shall, when added to the annual gross  rents,
as  determined  by  the  commissioner, exceed the sum of, (i) the annual
operating  expenses, (ii) an allowance for management services as deter-
mined by the commissioner, (iii) actual  annual  mortgage  debt  service
(interest  and  amortization)  on its indebtedness to a lending institu-
tion, an insurance company, a retirement fund or welfare fund  which  is
operated  under  the supervision of the banking or insurance laws of the
state of New York or the United States,  and  (iv)  eight  and  one-half
percent  of  that portion of the fair market value of the property which
exceeds  the  unpaid  principal  amount  of  the  mortgage  indebtedness
referred  to  in subparagraph (iii) of this paragraph. Fair market value
for the purposes of this paragraph shall be six times the  annual  gross
rent.  The  collection  of  any  increase in the stabilized rent for any
apartment 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 incre-
ments and added to the stabilized rent as established or set  in  future
years;
  S 4. Subdivision c of section 26-511 of the administrative code of the
city  of New York is amended by adding two new paragraphs 6-b and 6-c to
read as follows:
  (6-B) PROVIDES CRITERIA WHEREBY THE COMMISSIONER MAY ACT UPON APPLICA-
TION BY OWNERS FOR INCREASES  IN  EXCESS  OF  THE  LEVEL  OF  FAIR  RENT
INCREASE  ESTABLISHED UNDER THIS LAW PROVIDED, HOWEVER, THAT SUCH CRITE-
RIA SHALL PROVIDE AS TO COMPLETED BUILDING-WIDE MAJOR  CAPITAL  IMPROVE-
MENTS, FOR A FINDING THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER
THE  INTERNAL  REVENUE  CODE  AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE
OPERATION, PRESERVATION OR MAINTENANCE OF THE  STRUCTURE.  THE  INCREASE
PERMITTED  FOR  SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY
SURCHARGE TO THE LEGAL REGULATED RENT. IT SHALL BE SEPARATELY DESIGNATED
AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY ANNUAL  ADJUSTMENT
OF  THE  LEVEL  OF FAIR RENT PROVIDED FOR UNDER SUBDIVISION B OF SECTION
26-510 OF THIS LAW.  THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL  BE
AN  AMOUNT  EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR,
DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN  MULTIPLIED  BY
THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLO-
CABLE  TO  ANY APARTMENT, IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL
TO SIX PERCENT OF THE MONTHLY RENT  COLLECTED  BY  THE  OWNER  FOR  SUCH
APARTMENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS.  ANY EXCESS ABOVE
SAID  SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS
AS A FURTHER SURCHARGE NOT TO EXCEED AN ADDITIONAL SIX  PERCENT  IN  ANY
ONE  YEAR  PERIOD  UNTIL  THE TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD
HAVE BEEN IF THE AFOREMENTIONED SIX PERCENT LIMITATION DID NOT APPLY.
  (6-C) COLLECTION OF SURCHARGES IN EXCESS OF THE  LEVEL  OF  FAIR  RENT
AUTHORIZED  PURSUANT  TO PARAGRAPH SIX-B OF THIS SUBDIVISION SHALL CEASE
WHEN THE OWNER HAS RECOVERED THE COST OF THE MAJOR CAPITAL IMPROVEMENT.
  S 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
576 of the laws of 1974, constituting the  emergency  tenant  protection
act  of  nineteen seventy-four, as amended by chapter 749 of the laws of
1990, is amended to read as follows:
  (3) (I) COLLECTION OF SURCHARGES IN ADDITION TO  THE  LEGAL  REGULATED
RENT  AUTHORIZED  PURSUANT  TO SUBPARAGRAPH (II) OF THIS PARAGRAPH SHALL
CEASE WHEN THE OWNER  HAS  RECOVERED  THE  COST  OF  THE  MAJOR  CAPITAL
IMPROVEMENT;

A. 1928                             4

  (II) there has been since January first, nineteen hundred seventy-four
a major capital improvement [required for the operation, preservation or
maintenance  of the structure.  An adjustment under this paragraph shall
be in an amount sufficient to amortize  the  cost  of  the  improvements
pursuant  to this paragraph over a seven-year period]; PROVIDED THAT THE
COMMISSIONER FINDS THAT SUCH IMPROVEMENTS ARE DEEMED  DEPRECIABLE  UNDER
THE  INTERNAL  REVENUE  CODE  AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE
OPERATION, PRESERVATION OR MAINTENANCE OF THE STRUCTURE.   THE  INCREASE
PERMITTED  FOR  SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY
SURCHARGE TO THE LEGAL REGULATED RENT. IT SHALL BE SEPARATELY DESIGNATED
AND BILLED AS SUCH AND SHALL  NOT  BE  COMPOUNDED  BY  ANY  ANNUAL  RENT
ADJUSTMENT  AUTHORIZED  BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE
SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE AN AMOUNT  EQUAL  TO  THE
COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF
ROOMS  IN  THE  BUILDING,  AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN
SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLOCABLE TO  ANY  APARTMENT
IN  ANY  ONE  YEAR  MAY NOT EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE
MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APARTMENT AS SET  FORTH  IN
THE SCHEDULE OF GROSS RENTS.  ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE
CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT
TO  EXCEED  AN  ADDITIONAL  SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE
TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN  IF  THE  AFOREMEN-
TIONED SIX PERCENT LIMITATION DID NOT APPLY, or
  S 6. The second undesignated paragraph of paragraph (a) of subdivision
4  of  section  4  of  chapter 274 of the laws of 1946, constituting the
emergency rent control law, as amended by chapter  21  of  the  laws  of
1962, clause 5 as amended by chapter 253 of the laws of 1993, is amended
to read as follows:
  No application for adjustment of maximum rent based upon a sales price
valuation  shall  be filed by the landlord under this subparagraph prior
to six months from the date of such sale of the property.  In  addition,
no  adjustment  ordered  by  the  commission based upon such sales price
valuation shall be effective prior to one year from  the  date  of  such
sale.    Where, however, the assessed valuation of the land exceeds four
times the assessed valuation of the buildings  thereon,  the  commission
may determine a valuation of the property equal to five times the equal-
ized  assessed  valuation  of  the  buildings,  for the purposes of this
subparagraph.  The commission may make a determination  that  the  valu-
ation  of  the  property  is  an  amount  different  from such equalized
assessed valuation where there is a request  for  a  reduction  in  such
assessed  valuation  currently  pending;  or  where  there  has  been  a
reduction in the assessed valuation for  the  year  next  preceding  the
effective  date  of the current assessed valuation in effect at the time
of the filing of the application.  Net annual return shall be the amount
by which the earned income exceeds the operating expenses of the proper-
ty, excluding mortgage interest and amortization, and  excluding  allow-
ances  for  obsolescence  and  reserves,  but including an allowance for
depreciation of two per centum of the value of the  buildings  exclusive
of  the  land,  or the amount shown for depreciation of the buildings in
the latest required federal  income  tax  return,  whichever  is  lower;
provided,  however, that (1) no allowance for depreciation of the build-
ings shall be included where the buildings have been  fully  depreciated
for federal income tax purposes or on the books of the owner; or (2) the
landlord  who  owns  no more than four rental units within the state has
not been fully compensated by increases in rental income  sufficient  to
offset  unavoidable increases in property taxes, fuel, utilities, insur-

A. 1928                             5

ance and repairs and maintenance, excluding mortgage interest and  amor-
tization,  and  excluding  allowances for depreciation, obsolescence and
reserves, which have occurred since the  federal  date  determining  the
maximum rent or the date the property was acquired by the present owner,
whichever  is  later;  or (3)   the landlord operates a hotel or rooming
house or owns a cooperative apartment and has not been fully compensated
by increases in rental income from the controlled housing accommodations
sufficient to offset unavoidable increases in property taxes  and  other
costs  as  are  allocable  to  such  controlled  housing accommodations,
including costs of operation of such hotel or rooming house, but exclud-
ing mortgage interest and amortization,  and  excluding  allowances  for
depreciation,  obsolescence  and reserves, which have occurred since the
federal date determining the maximum  rent  or  the  date  the  landlord
commenced the operation of the property, whichever is later; or (4)  the
landlord and tenant voluntarily enter into a valid written lease in good
faith  with  respect  to any housing accommodation, which lease provides
for an increase in the maximum rent not in excess of fifteen per  centum
and  for a term of not less than two years, except that where such lease
provides for an increase in excess of fifteen per centum,  the  increase
shall  be  automatically reduced to fifteen per centum; or (5) the land-
lord and tenant  by  mutual  voluntary  written  agreement  agree  to  a
substantial  increase  or  decrease in dwelling space or a change in the
services, furniture, furnishings or equipment provided  in  the  housing
accommodations;  provided  that  an  owner  shall  be entitled to a rent
increase where there has been a substantial modification or increase  of
dwelling  space  or  an increase in the services, or installation of new
equipment or improvements or new furniture or furnishings provided in or
to a tenant's housing accommodation. The permanent increase in the maxi-
mum rent for the affected housing accommodation shall be one-fortieth of
the total cost incurred by the landlord in providing  such  modification
or  increase  in  dwelling  space,  services,  furniture, furnishings or
equipment, including the cost of  installation,  but  excluding  finance
charges  provided  further  that  an  owner  who  is  entitled to a rent
increase pursuant to this clause shall not be entitled to a further rent
increase based upon the installation of similar equipment, or new furni-
ture or furnishings within the useful life of such new equipment, or new
furniture or furnishings. The owner shall give  written  notice  to  the
commission of any such adjustment pursuant to this clause; or (6)  there
has  been, since March first, nineteen hundred fifty, an increase in the
rental value of the housing accommodations as a result of a  substantial
rehabilitation  of  the  building or housing accommodation therein which
materially adds to the value of the property or appreciably prolongs its
life, excluding ordinary repairs, maintenance and replacements;  or  (7)
(I)  COLLECTION OF SURCHARGES TO THE MAXIMUM RENT AUTHORIZED PURSUANT TO
ITEM (II) OF THIS CLAUSE SHALL CEASE WHEN THE OWNER  HAS  RECOVERED  THE
COST  OF  THE MAJOR CAPITAL IMPROVEMENT; (II) there has been since March
first, nineteen hundred fifty, a major capital improvement [required for
the operation, preservation or maintenance of the  structure];  PROVIDED
THAT  THE COMMISSIONER FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIA-
BLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS  ARE  REQUIRED
FOR  THE  OPERATION,  PRESERVATION  OR MAINTENANCE OF THE STRUCTURE. THE
INCREASE PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS  A
MONTHLY SURCHARGE TO THE MAXIMUM RENT. IT SHALL BE SEPARATELY DESIGNATED
AND  BILLED  AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY OTHER ADJUSTMENT
TO THE MAXIMUM RENT. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL  BE
AN  AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY  EIGHTY-FOUR,

A. 1928                             6

DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN  MULTIPLIED  BY
THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLO-
CABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO
SIX  PERCENT  OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APART-
MENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS.  ANY EXCESS ABOVE SAID
SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS  A
FURTHER  SURCHARGE  NOT  TO  EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE
YEAR PERIOD UNTIL THE TOTAL SURCHARGE EQUALS THE AMOUNT  IT  WOULD  HAVE
BEEN  IF THE AFOREMENTIONED SIX PERCENT LIMITATION DID NOT APPLY; or (8)
there has been since March first, nineteen hundred fifty, in  structures
containing  more  than  four  housing accommodations, other improvements
made with the express consent of the tenants in occupancy  of  at  least
seventy-five per  centum of the housing accommodations, provided, howev-
er, that no adjustment granted hereunder shall exceed fifteen per centum
unless  the  tenants  have agreed to a higher percentage of increase, as
herein provided; or (9)   there has been, since  March  first,  nineteen
hundred fifty, a subletting without written consent from the landlord or
an  increase in the number of adult occupants who are not members of the
immediate family of the tenant, and the landlord has  not  been  compen-
sated  therefor  by  adjustment of the maximum rent by lease or order of
the commission or pursuant to the federal act; or (10)  the presence  of
unique  or  peculiar circumstances materially affecting the maximum rent
has resulted in a maximum rent which is  substantially  lower  than  the
rents  generally  prevailing  in the same area for substantially similar
housing accommodations.
  S 7. This act shall take effect immediately; provided that the  amend-
ments  to section 26-405 of the city rent and rehabilitation law made by
sections one and two of this act shall remain in full force  and  effect
only  so  long  as  the  public  emergency  requiring the regulation and
control of residential rents and evictions  continues,  as  provided  in
subdivision  3  of section 1 of the local emergency housing rent control
act; and provided further that the amendments to section 26-511  of  the
rent  stabilization  law of nineteen hundred sixty-nine made by sections
three and four 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, as from  time  to  time  amended;  and
provided further that the amendment to section 6 of the emergency tenant
protection act of nineteen seventy-four made by section five 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,  as from time to time amended; and further provided
that the amendment to section 4 of the emergency  housing  rent  control
law  made  by  section  six of this act shall expire on the same date as
such law expires and shall not affect the  expiration  of  such  law  as
provided  in  subdivision  2  of section 1 of chapter 274 of the laws of
1946.