senate Bill S513

2013-2014 Legislative Session

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

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Archive: Last Bill Status - In Committee


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 08, 2014 referred to housing, construction and community development
Jan 09, 2013 referred to housing, construction and community development

S513 - Bill Details

See Assembly Version of this Bill:
A2181
Current Committee:
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 Previous Legislative Sessions:
2011-2012: S1298, A2881
2009-2010: S7079, A8668

S513 - Bill Texts

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

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BILL NUMBER:S513

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
26-511 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.

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

                                   513

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced by Sen. ESPAILLAT -- 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

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD01927-01-3

S. 513                              2

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 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

S. 513                              3

costs and mortgage interest. For the purposes of this  paragraph,  mort-
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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