Assembly Actions -
Lowercase Senate Actions - UPPERCASE |
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Mar 23, 2016 |
print number 4423a |
Mar 23, 2016 |
amend and recommit to housing, construction and community development |
Jan 06, 2016 |
referred to housing, construction and community development |
Mar 19, 2015 |
referred to housing, construction and community development |
Senate Bill S4423
2015-2016 Legislative Session
In relation to approval of major capital improvement rent increases and extending the length of time over which major capital improvement expenses may be recovered
download bill text pdfSponsored By
(D, WF) 28th Senate District
Archive: Last Bill Status - In Senate Committee Housing, Construction And Community Development Committee
- Introduced
-
- In Committee Assembly
- In Committee Senate
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- On Floor Calendar Assembly
- On Floor Calendar Senate
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- Passed Assembly
- Passed Senate
- Delivered to Governor
- Signed By Governor
Actions
Bill Amendments
co-Sponsors
(D, WF) 47th Senate District
2015-S4423 - Details
- See Assembly Version of this Bill:
- A6054
- Current Committee:
- Senate Housing, Construction And Community Development
- Law Section:
- New York City Administrative Code
- Laws Affected:
- Amd §§26-405 & 26-511, NYC Ad Cd; amd §6, Emerg Ten Prot Act of 1974; amd §4, Emerg Hous Rent Cont L
- Versions Introduced in 2017-2018 Legislative Session:
-
S4312, A1980
2015-S4423 - Sponsor Memo
BILL NUMBER:S4423 TITLE OF BILL: An act to amend the administrative code of the city of New York, the emergency tenant protection act of nineteen seventy-four and the emergency housing rent control law in relation to approval of major capital improvement rent increases and in relation to extending the length of time over which major capital improvement expenses may be recovered PURPOSE: This bill establishes a regulatory framework for the approval of rent increases to rent regulated property as a result of major capital improvements (MCIs). Currently, the expenses for MCIs are recovered over seven years. This bill codifies the MCI as a surcharge to the legal regulated rent which is separately designated and billed as such, and mandates that the surcharge for authorized MCIs ceases after the cost of the improvement is recouped. Finally, this bill prevents landlords from receiving a financial windfall by charging MCIs to tenants, if an MCI is funded by the New York State Energy and Development Authority (NYSERDA). SUMMARY OF PROVISIONS: This legislation establishes criteria for the approval of rent increases to rent regulated property resulting from major capital
improvements (MCIs), and guards against potential abuses. Section 1 of the bill amends 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 3 chapter 749 of the laws of 1990, to permit for the individual adjustment of maximum rents in the case of an MCI where the State Homes and Community Renewal Commissioner first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by the division of housing and community renewal (DHCR) unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with this section. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the five years prior to the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No MCI rent increase shall become effective until any defective or deficient rehabilitation work has been cured. The increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that shall not be compounded by any other adjustments. 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. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. The collection of surcharges for MCIs shall cease when the owner has recouped the costs attributable to the MCI. Section 2 of the bill amends 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. Where a landlord has incurred other expenditures of 10% or greater in connection with and in addition to a concurrent adjustment for an MCI, additional adjustments shall be implemented in the same manner as such MCI, as a further surcharge to the maximum rent. Section 3 of the bill amends paragraph 6 of subdivision c of section 26-511 of the administrative code of the city of New York, as amended by chapter 116 of the laws of 1997. This section removes an existing requirement that the cost for completed building-wide MCIs be "amortized over a seven-year period", insofar as the interpretation of that term has departed from its ordinary meaning, misconstruing the intent of the statute. Section 4 of the bill amends subdivision c of section 26-511 of the administrative code of the city of New York, by adding three new paragraphs 6-b, 6-c and 6-d. These paragraphs provide criteria for approving MCI applications, as follows: Paragraph 6-b provides that the Commissioner must first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by the division of housing and community renewal (DHCR) unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with these provisions. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the five years prior to applying for the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No major capital improvement rent increase shall become effective until any defective or deficient rehabilitation work has been cured. Paragraph 6-c provides that the increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that 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. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. Paragraph 6-d ensures that the collection of surcharges for MCIs, as provided for in paragraphs 6-b and 6-c of this subdivision, shall cease when the owner has recouped the costs attributable to the MCI. Section 5 of the bill amends paragraph 3 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974 (known as the Emergency Tenant Protection Act of 1974), as amended by chapter 749 of the laws of 1990, to permit an MCI where the State Homes and Community Renewal Commissioner first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by DHCR unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with this section. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the five years prior to the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No MCI increase shall become effective until any defective or deficient rehabilitation work has been cured. The increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that shall not be compounded by any annual rent adjustment authorized by the Rent Guidelines Board (RGB). 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. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. The collection of surcharges for MCIs shall cease when the owner has recouped the costs attributable to the MCI. Section 6 of the bill amends the second undesignated paragraph of paragraph (a) of subdivision 4 of section 4 of chapter 274 of the laws of 1946 (known as the Emergency Housing Rent Control Law), as amended by section 25 of part B of chapter 97 of the laws of 2011, to permit an MCI where the State Homes and Community Renewal Commissioner first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by DHCR unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with this section. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners hav e been found to have harassed or unlawfully evicted tenants in the five years prior to the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No MCI increase shall become effective until any defective or deficient rehabilitation work has been cured. The increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that 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, divided by the number of rooms in the building, and then multiplied by the number of rooms in such apartment. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. The collection of surcharges for MCIs shall cease when the owner has recouped the costs attributable to the MCI. Section 7 of the bill amends paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974 and a new paragraph 6 is added, while Section 8 of the bill amends paragraph 1 of subdivision g of section 26-405 of the administrative code of the city of New York by adding a new subparagraph (p), to prohibit adjustments for any MCIs or for any other expenditures to improve, restore or preserve the quality of a structure if such MCI is a project funded by the New York State Energy Research and Development Authority (NYSERDA). Section 9 of the bill sets forth the effective date. JUSTIFICATION: In 1989, the Court of Appeals held that building owners could increase rent levels in perpetuity based on major capital improvements (MCIs) to their buildings, with the result that tenants are forced to pay for these improvements long after costs have been fully recovered, and even after they have outlived their useful life. Ansonia Residents Assn v. DHCR, 75 N.Y.2d 206, 551 N.Y.S.2d 871 (1989). This is because the MCI "amortization period", which ordinarily refers to the spreading out and paying off of capital expenses in regular installments over a specific period of time, can instead serve as a tactic for boosting rent levels forever. Unfortunately, many landlords utilize MCI charges as an unscrupulous means to raise the rent of their units above the legal maximum rent, unfairly burdening their tenants, circumventing the rent regulations, and edging their apartments out of rent regulation. To guard against this, this legislation requires applicants to submit a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the prior five years. Moreover, according to an audit issued by the Comptroller of the City of New York, "allegations made in a series of recent judicial proceedings suggest that there is a perception of fraudulent activity associated with MCI and IAI rent increases." The Growing Gap: New York City's Housing Affordability Challenge, Office of the New York City Comptroller 22, April 2014, comptroller.nyc.gov/wp-content/uploads/documents/Growing Gap.pdf. Although some MCI charges are legitimate, many landlords are granted MCI charges for work that is simply routine maintenance, and not an actual improvement. This is not the intent of the MCI program, which grew out of 1970s-era concerns that landlords needed to be incentivized to invest in their buildings. Under the current MCI program, landlords may be incentivized to do the opposite. Though this may lead to larger cost down the road, landlords may prefer this course of action because regular maintenance cannot be covered by an MCI, but a major overhaul necessitated by deferred repairs can be covered. This legislation clarifies that MCIs will only be approved if the work performed is an enhancement, upgrade, or addition, while repairs or replacements intended to maintain existing services are ineligible. Also, MCI applications will not be approved where outstanding hazardous violations exist, unless DHCR finds that such work is essential to the alleviation of the violations. This bill also delineates a better process of consultation between DHCR, the landlord-applicant, and the existing tenants. According to media reports, until the creation of the Tenant Protection Unit (TPU) in 2012, the oversight process was "exclusively complaint-driven, meaning the onus fell on tenants to prove an owner's application was incorrect, misleading, or even fraudulent. Jillian Jones, Tenants Rip Program Tying Rent Hikes to landlord Investments, City Limits, Dec. 19, 2014, http://citylimits.org/2014/12/19/tenants-rip-program- tving-rent-hikesto-landlordinvestments/. This legislation requires that applicants submit specific information about the scope of the work to be done and information about the owners of the property. DHCR will then provide occupying tenants with this information and will elicit tenant feedback to determine whether the work has been completed. No MCIs will be made effective until deficient work has been cured. In addition, MCIs such as window replacements or heating-system improvements create energy savings that further increase the profitability of MCIs. Apart from MCI surcharges approved by DHCR, the NYSERDA Multifamily Performance Program offers landlords incentives to invest in energy-efficient building upgrades, including implementing environmentally friendly measures to address specific energy and operational needs of buildings. In many cases, landlords have filed applications with both DHCR and NYSERDA for the imposition of MCI charges for capital work that fall within NYSERDA's jurisdiction for receiving funds. This practice of double-dipping, wherein a landlord takes advantage of two different incentive programs for the same work, violates the intent of these provisions and, if permitted, results in a windfall to landlords. This bill clarifies that such double-dipping is not permitted. For the foregoing reasons, the lack of statutory criteria to guide the division of Housing and Community Renewal (DHCR) in its MCI application determinations is a major source of the problem. In response, this bill seeks to balance the conflicting concerns of maintaining affordable housing while ensuring that adequate incentives exist for investment in MCIs, in order to preserve and improve our affordable housing stock. To do so, this legislation provides such criteria to prevent abuse.and includes safeguards LEGISLATIVE HISTORY: This legislation consolidates A2061A (Kavanagh) / S3173A(Krueger)of 2014 and A5373 (O'Donnell) /S1493 (Krueger) of 2014: 2014: A02061A- On the Floor; S3173A - Housing 2013: A02061A - On the Floor; S3173A -Housing 2012: A06132A - Housing; S436A - Rules 2011: A06132- Housing; S436A - Housing 2010: A06814- Housing; S5220 - Housing 2009: A06814- Housing; S5220 - Housing 2008: S3404 -Housing 2007: S3404 -Housing 2006: S1461 -Housing 2005: S1461 -Housing 2004: A4250 -Housing; S317 - Housing 2003: A4250 -Housing; S317 - Housing 2002: A7115 -Housing; S717B - Housing 2001: A7115 -Housing; S717B - Housing 2014: A5373 -Passed Assembly; S1493 -Housing 2013: A5373 -Passed Assembly; S1493 -Housing 2012: A2459A- Passed Assembly; S523A -Housing 2011: A2459A- Housing;S523A - Housing 2010: A1928 -Passed Assembly; S745A -Housing 2009: A1928 -Passed Assembly; S745A -Housing 2008: A6510 -Passed Assembly. 2007: A6510 -Passed Assembly. 2006: A9994 -On the Floor. 2005: A5840 -On the Floor. 2004: A2718 -Passed Assembly; S5025 -Housing 2003: A2718 -Passed Assembly; S5025 -Housing 2002: A2641A- Passed Assembly; S730B -Housing 2001: A2641A- Passed Assembly; S730B -Housing FISCAL IMPACT ON THE STATE: None. EFFECTIVE DATE: This act shall take effect immediately; provided that the amendments to section 26-405 of the city rent and rehabilitation law made by sections one, two and eight 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; provided that the amendment 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 4 26-520 of such law, as from time to time amended; provided that the amendments to section 6 of the emergency tenant protection act of nineteen seventy-four made by sections five and seven 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 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.
2015-S4423 - Bill Text download pdf
S T A T E O F N E W Y O R K ________________________________________________________________________ 4423 2015-2016 Regular Sessions I N S E N A T E March 19, 2015 ___________ Introduced by Sen. KRUEGER -- 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, the emergency tenant protection act of nineteen seventy-four and the emer- gency housing rent control law in relation to approval of major capi- tal improvement rent increases and 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 FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEV- ER, NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD09355-01-5
S. 4423 2 INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSU- ANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDIC- TION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDA- VIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSORING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASS- MENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICIT- ING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHA- BILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. 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, 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 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- S. 4423 3 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] IN REGARD 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 management 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 nineteen hundred sixty-eight through nineteen hundred seventy, or for the first three years of operation if the building was completed since nineteen 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 nine- teen hundred seventy despite diligent efforts to obtain same from prede- cessors in title and further provided that the new owner can provide financial data covering a minimum of six years under his or her contin- uous and uninterrupted operation of the building to meet the three year to three year comparative 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 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 determined by the commissioner, (iii) actual annual mortgage debt service (interest and amortization) on its indebtedness to a lend- ing institution, 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 three new paragraphs 6-b, 6-c and 6-d to read as follows: S. 4423 4 (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 THAT: (I) AS TO COMPLETED BUILDING-WIDE MAJOR CAPITAL IMPROVEMENTS, FIRST, THAT A FINDING THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERA- TION OR PRESERVATION OF THE STRUCTURE; (II) HOWEVER, NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAIN- TAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE; (III) NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVI- SION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDA- VIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSORING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFAC- TORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. (6-C) 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 ALLOCABLE TO ANY APARTMENT, IN ANY ONE YEAR MAY NOT S. 4423 5 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. (6-D) COLLECTION OF SURCHARGES IN EXCESS OF THE LEVEL OF FAIR RENT AUTHORIZED PURSUANT TO PARAGRAPH SIX-B AND SIX-C 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; (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 FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEVER, NO MAJOR CAPI- TAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUS- ING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDER- ATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN- TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR- ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL S. 4423 6 PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA- TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. 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 AUTHOR- IZED BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE SURCHARGE ALLOCA- BLE 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 APART- MENT; 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 AFOREMENTIONED 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 housing rent control law, as amended by section 25 of part B of chapter 97 of the laws of 2011, 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 valuation 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 property, excluding mort- gage interest and amortization, and excluding allowances for obsoles- cence 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 buildings 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 compen- sated by increases in rental income sufficient to offset unavoidable increases in property taxes, fuel, utilities, insurance and repairs and maintenance, excluding mortgage interest and amortization, and excluding allowances for depreciation, obsolescence and reserves, which have S. 4423 7 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 excluding 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 hous- ing 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 landlord 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 furni- ture or furnishings provided in or to a tenant's housing accommodation. The permanent increase in the maximum rent for the affected housing accommodation shall be one-fortieth, in the case of a building with thirty-five or fewer housing accommodations, or one-sixtieth, in the case of a building with more than thirty-five housing accommodations where such permanent increase takes effect on or after September twen- ty-fourth, two thousand eleven, of the total cost incurred by the land- lord 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 furniture 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, nine- teen hundred fifty, an increase in the rental value of the housing accommodations as a result of a substantial rehabilitation of the build- ing 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 COMMIS- SIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEVER, NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION S. 4423 8 TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDER- ATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN- TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR- ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA- TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. 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, 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 (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, however, 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 sublet- ting without written consent from the landlord or an increase in the number of adult occupants who are not members of the immediate family of S. 4423 9 the tenant, and the landlord has not been compensated 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 accommo- dations. S 7. 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 of nineteen seventy-four, as amended by chapter 102 of the laws of 1984, is amended and a new paragraph 6 is added 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 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, reasonable, costs of fuel, labor, utili- ties, taxes, other than income or corporate franchise taxes, fees, permits, necessary contracted services and non-capital repairs, insur- ance, 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 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 S. 4423 10 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[.]; OR (6) NOTWITHSTANDING PARAGRAPH THREE OF THIS SUBDIVISION THERE SHALL BE NO ADJUSTMENT FOR ANY MAJOR CAPITAL IMPROVEMENT FUNDED IN ANY PART FROM MONEYS PROVIDED BY THE NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY. S 8. Paragraph 1 of subdivision g of section 26-405 of the administra- tive code of the city of New York is amended by adding a new subpara- graph (p) to read as follows: (P) NOTWITHSTANDING SUBPARAGRAPH (G) OR (K) OF THIS PARAGRAPH, THERE SHALL BE NO ADJUSTMENT FOR ANY MAJOR CAPITAL IMPROVEMENT OR FOR ANY OTHER EXPENDITURES TO IMPROVE, RESTORE OR PRESERVE THE QUALITY OF A STRUCTURE IF SUCH MAJOR CAPITAL IMPROVEMENT OR SUCH OTHER EXPENDITURE IS FUNDED IN ANY PART FROM MONEYS PROVIDED BY THE NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY. S 9. 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, two and eight 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; provided that the amendment to section 26-511 of the rent stabili- zation 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; provided that the amendments to section 6 of the emergency tenant protection act of nine- teen seventy-four made by sections five and seven 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 provided that the amend- ment 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.
co-Sponsors
(D) Senate District
(D, WF) 47th Senate District
2015-S4423A (ACTIVE) - Details
- See Assembly Version of this Bill:
- A6054
- Current Committee:
- Senate Housing, Construction And Community Development
- Law Section:
- New York City Administrative Code
- Laws Affected:
- Amd §§26-405 & 26-511, NYC Ad Cd; amd §6, Emerg Ten Prot Act of 1974; amd §4, Emerg Hous Rent Cont L
- Versions Introduced in 2017-2018 Legislative Session:
-
S4312, A1980
2015-S4423A (ACTIVE) - Sponsor Memo
BILL NUMBER: S4423A TITLE OF BILL : An act to amend the administrative code of the city of New York, the emergency tenant protection act of nineteen seventy-four and the emergency housing rent control law in relation to approval of major capital improvement rent increases and in relation to extending the length of time over which major capital improvement expenses may be recovered PURPOSE : This bill establishes a regulatory framework for the approval of rent increases to rent regulated property as a result of major capital improvements (MCIs). Currently, the expenses for MCIs are recovered over seven years. This bill codifies the MCI as a surcharge to the legal regulated rent which is separately designated and billed as such, and mandates that the surcharge for authorized MCIs ceases after the cost of the improvement is recouped. Finally, this bill prevents landlords from receiving a financial windfall by charging MCIs to tenants, if an MCI is funded by the New York State Energy and Development Authority (NYSERDA). SUMMARY OF PROVISIONS : This legislation establishes criteria for the approval of rent increases to rent regulated property resulting from major capital
improvements (MCIs), and guards against potential abuses. Section 1 of the bill amends 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 section 31 chapter 20 of the laws of 2015, to permit for the individual adjustment of maximum rents in the case of an MCI where the State Homes and Community Renewal Commissioner first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by the division of housing and community renewal (DHCR) unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with this section. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the five years prior to the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No MCI rent increase shall become effective until any defective or deficient rehabilitation work has been cured. The increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that shall not be compounded by any other adjustments. 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. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. The collection of surcharges for MCIs shall cease when the owner has recouped the costs attributable to the MCI. Section 2 of the bill amends 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. Where a landlord has incurred other expenditures of 10% or greater in connection with and in addition to a concurrent adjustment for an MCI, additional adjustments shall be implemented in the same manner as such MCI, as a further surcharge to the maximum rent. Section 3 of the bill amends paragraph 6 of subdivision c of section 26-511 of the administrative code of the city of New York, as amended by Section 29 of part A of the laws of 2015. This section removes an existing requirement that the cost for completed building-wide MCIs be "amortized over a seven-year period", insofar as the interpretation of that term has departed from its ordinary meaning, misconstruing the intent of the statute. Section 4 of the bill amends subdivision c of section 26-511 of the administrative code of the city of New York, by adding three new paragraphs 6-b, 6-c and 6-d. These paragraphs provide criteria for approving MCI applications, as follows: Paragraph 6-b provides that the Commissioner must first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by the division of housing and community renewal (DHCR) unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with these provisions. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the five years prior to applying for the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No major capital improvement rent increase shall become effective until any defective or deficient rehabilitation work has been cured. Paragraph 6-c provides that the increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that 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. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. Paragraph 6-d ensures that the collection of surcharges for MCIs, as provided for in paragraphs 6-b and 6-c of this subdivision, shall cease when the owner has recouped the costs attributable to the MCI. Section 5 of the bill amends paragraph 3 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974 (known as the Emergency Tenant Protection Act of 1974), as amended by section 30 of part A of Chapter 20 of the Laws of 2015 to permit an MCI where the State Homes and Community Renewal Commissioner first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by DHCR unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstand- ing hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alle- viation of the violations and such approval is consistent with this section. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the five years prior to the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to deter- mine whether the work has been satisfactorily completed. No MCI increase shall become effective until any defective or deficient rehabilitation work has been cured. The increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that shall not be compounded by any annual rent adjustment authorized by the Rent Guidelines Board (RGB). 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. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. The collection of surcharges for MCIs shall cease when the owner has recouped the costs attributable to the MCI. Section 6 of the bill amends the second undesignated paragraph of paragraph (a) of subdivision 4 of section 4 of chapter 274 of the laws of 1946 (known as the Emergency Housing Rent Control Law), as amended by section 25 of part B of chapter 97 of the laws of 2011, to permit an MCI where the State Homes and Community Renewal Commissioner first finds that an improvement is depreciable under the Internal Revenue Code and is required for the operation or preservation of the structure. However, no MCI rent increases will be approved by DHCR unless the work performed is an enhancement or upgrade, or is an addition to such housing accommodation. Any repair or replacement intended to maintain an existing service is ineligible. If any outstanding hazardous violations exist, no MCI rent increase application will be approved unless DHCR determines that such work is essential to the alleviation of the violations and such approval is consistent with this section. Except in cases of emergency or good cause, the property owner will file an application and affidavit with DHCR containing specific information about the scope of the work to be done and information about the owners of the property, including a statement confirming that no owners hav e been found to have harassed or unlawfully evicted tenants in the five years prior to the MCI. DHCR will then provide the occupying tenants with such information and will elicit tenant comments to determine whether the work has been satisfactorily completed. No MCI increase shall become effective until any defective or deficient rehabilitation work has been cured. The increase permitted for MCIs shall be collected as a separately designated monthly surcharge to the maximum rent that 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, divided by the number of rooms in the building, and then multiplied by the number of rooms in such apartment. However, the surcharge to any apartment in any year may not exceed six percent of the monthly rent collected by the owner for such apartment. Any excess shall be carried forward and collected in future years. The collection of surcharges for MCIs shall cease when the owner has recouped the costs attributable to the MCI. Section 7of the bill amends paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the laws added.of 1974 and a new paragraph 6 is added. Section 8 of the bill amends paragraph 1 of subdivision g of section 26-405 of the administrative code of the city of New York by adding a new subparagraph (p), to prohibit adjustments for any MCIs or for any other expenditures to improve, restore or preserve the quality of a structure if such MCI is a project funded by the New York State Energy Research and Development Authority (NYSERDA) . Section 9 of the bill sets forth the effective date. JUSTIFICATION : In 1989, the Court of Appeals held that building owners could increase rent levels in perpetuity based on major capital improvements (MCIs) to their buildings, with the result that tenants are forced to pay for these improvements long after costs have been fully recovered, and even after they have outlived their useful life. Ansonia Residents Assn v. DHCR, 75 N.Y.2d 206, 551 N.Y.S.2d 871 (1989). This is because the MCI "amortization period", which ordinarily refers to the spreading out and paying off of capital expenses in regular installments over a specific period of time, can instead serve as a tactic for boosting rent levels forever. Unfortunately, many landlords utilize MCI charges as an unscrupulous means to raise the rent of their units above the legal maximum rent, unfairly burdening their tenants, circumventing the rent regulations, and edging their apartments out of rent regulation. To guard against this, this legislation requires applicants to submit a statement confirming that no owners have been found to have harassed or unlawfully evicted tenants in the prior five years. Moreover, according to an audit issued by the Comptroller of the City of New York, "allegations made in a series of recent judicial proceedings suggest that there is a perception of fraudulent activity associated with MCI and IAI rent increases." The Growing Gap: New York City's Housing Affordability Challenge, Office of the New York City Comptroller 22, April 2014, comptroller.nyc.gov/wp-content/uploads/documents/Growing Gap.pdf. Although some MCI charges are legitimate, many landlords are granted MCI charges for work that is simply routine maintenance, and not an actual improvement. This is not the intent of the MCI program, which grew out of 1970s-era concerns that landlords needed to be incentivized to invest in their buildings. Under the current MCI program, landlords may be incentivized to do the opposite. Though this may lead to larger cost down the road, landlords may prefer this course of action because regular maintenance cannot be covered by an MCI, but a major overhaul necessitated by deferred repairs can be covered. This legislation clarifies that MCIs will only be approved if the work performed is an enhancement, upgrade, or addition, while repairs or replacements intended to maintain existing services are ineligible. Also, MCI applications will not be approved where outstanding hazardous violations exist, unless DHCR finds that such work is essential to the alleviation of the violations. This bill also delineates a better process of consultation between DHCR, the landlord-applicant, and the existing tenants. According to media reports, until the creation of the Tenant Protection Unit (TPU) in 2012, the oversight process was "exclusively complaint-driven, meaning the onus fell on tenants to prove an owner's application was incorrect, misleading, or even fraudulent. Jillian Jones, Tenants Rip Program Tying Rent Hikes to landlord Investments, City Limits, Dec. 19, 2014, http://citylimits.org/2014/12/19/tenants-rip-program- tving-rent-hikesto-landlordinvestments/. This legislation requires that applicants submit specific information about the scope of the work to be done and information about the owners of the property. DHCR will then provide occupying tenants with this information and will elicit tenant feedback to determine whether the work has been completed. No MCIs will be made effective until deficient work has been cured. In addition, MCIs such as window replacements or heating-system improvements create energy savings that further increase the profitability of MCIs. Apart from MCI surcharges approved by DHCR, the NYSERDA Multifamily Performance Program offers landlords incentives to invest in energy-efficient building upgrades, including implementing environmentally friendly measures to address specific energy and operational needs of buildings. In many cases, landlords have filed applications with both DHCR and NYSERDA for the imposition of MCI charges for capital work that fall within NYSERDA's jurisdiction for receiving funds. This practice of double-dipping, wherein a landlord takes advantage of two different incentive programs for the same work, violates the intent of these provisions and, if permitted, results in a windfall to landlords. This bill clarifies that such double-dipping is not permitted. For the foregoing reasons, the lack of statutory criteria to guide the division of Housing and Community Renewal (DHCR) in its MCI application determinations is a major source of the problem. In response, this bill seeks to balance the conflicting concerns of maintaining affordable housing while ensuring that adequate incentives exist for investment in MCIs, in order to preserve and improve our affordable housing stock. To do so, this legislation provides such criteria to prevent abuse.and includes safeguards LEGISLATIVE HISTORY : This legislation consolidates A2061A (Kavanagh) / S3173A(Krueger)of 2014 and A5373 (O'Donnell) /S1493 (Krueger) of 2014: 2014: A02061A- On the Floor; S3173A - Housing 2013: A02061A - On the Floor; S3173A -Housing 2012: A06132A - Housing; S436A - Rules 2011: A06132- Housing; S436A - Housing 2010: A06814- Housing; S5220 - Housing 2009: A06814- Housing; S5220 - Housing 2008: S3404 -Housing 2007: S3404 -Housing 2006: S1461 -Housing 2005: S1461 -Housing 2004: A4250 -Housing; S317 - Housing 2003: A4250 -Housing; S317 - Housing 2002: A7115 -Housing; S717B - Housing 2001: A7115 -Housing; S717B - Housing 2014: A5373 -Passed Assembly; S1493 -Housing 2013: A5373 -Passed Assembly; S1493 -Housing 2012: A2459A- Passed Assembly; S523A -Housing 2011: A2459A- Housing;S523A - Housing 2010: A1928 -Passed Assembly; S745A -Housing 2009: A1928 -Passed Assembly; S745A -Housing 2008: A6510 -Passed Assembly. 2007: A6510 -Passed Assembly. 2006: A9994 -On the Floor. 2005: A5840 -On the Floor. 2004: A2718 -Passed Assembly; S5025 -Housing 2003: A2718 -Passed Assembly; S5025 -Housing 2002: A2641A- Passed Assembly; S730B -Housing 2001: A2641A- Passed Assembly; S730B -Housing FISCAL IMPACT ON THE STATE : None. EFFECTIVE DATE : This act shall take effect immediately; provided that the amendments to section 26-405 of the city rent and rehabilitation law made by sections one, two and eight 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; provided that the amendment 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 4 26-520 of such law, as from time to time amended; provided that the amendments to section 6 of the emergency tenant protection act of nineteen seventy-four made by sections five and seven 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 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 la w 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.
2015-S4423A (ACTIVE) - Bill Text download pdf
S T A T E O F N E W Y O R K ________________________________________________________________________ 4423--A 2015-2016 Regular Sessions I N S E N A T E March 19, 2015 ___________ Introduced by Sens. KRUEGER, HOYLMAN -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development -- recommitted to the Committee on Housing, Construction and Community Development in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee 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 housing rent control law in relation to approval of major capi- tal improvement rent increases and 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 section 31 of part A of chapter 20 of the laws of 2015, 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) for any order of the commissioner issued after the effective date of the rent act of 2015 shall be in an amount sufficient to amortize the cost of the improvements pursuant to this subparagraph (g) over an eight-year period for buildings with thirty-five or fewer units or a nine year period for buildings with more than thiry-five units,]; PROVIDED THAT THE COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIA- BLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEVER, NO MAJOR EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD09355-02-6
S. 4423--A 2 CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCE- MENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICA- TION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINIS- TERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMU- NITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSORING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMI- NATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICIT- ING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHA- BILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. 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, 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 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 S. 4423--A 3 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 section 29 of part A of chapter 20 of the laws of 2015, 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] IN REGARD 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 management 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 nineteen hundred sixty-eight through nineteen hundred seventy, or for the first three years of operation if the building was completed since nineteen 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 nine- teen hundred seventy despite diligent efforts to obtain same from prede- cessors in title and further provided that the new owner can provide financial data covering a minimum of six years under his or her contin- uous and uninterrupted operation of the building to meet the three year to three year comparative 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 an eight-year period for a building with thirty-five or fewer housing accommodations, or a nine- year period for a building with more than thirty-five housing accommo- dations, for any determination issued by the division of housing and community renewal after the effective date of the rent act of 2015, based upon cash purchase price exclusive of interest or service charg- es]. Notwithstanding 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 manage- ment services as determined by the commissioner, (iii) actual annual mortgage debt service (interest and amortization) on its indebtedness to a lending institution, 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 S. 4423--A 4 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 increments 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 three new paragraphs 6-b, 6-c and 6-d 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 THAT: (I) AS TO COMPLETED BUILDING-WIDE MAJOR CAPITAL IMPROVEMENTS, FIRST, THAT A FINDING THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERA- TION OR PRESERVATION OF THE STRUCTURE; (II) HOWEVER, NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAIN- TAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE; (III) NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVI- SION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDA- VIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSORING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFAC- TORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL S. 4423--A 5 BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. (6-C) 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 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. (6-D) COLLECTION OF SURCHARGES IN EXCESS OF THE LEVEL OF FAIR RENT AUTHORIZED PURSUANT TO PARAGRAPH SIX-B AND SIX-C 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 section 30 of part A of chapter 20 of the laws of 2015, 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; (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 an eight-year period for a building with thirty-five or fewer housing accommodations, or a nine-year period for a building with more than thirty-five housing accommodations, for any determination issued by the division of housing and community renewal after the effective date of the rent act of 2015,]; PROVIDED THAT THE COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEVER, NO MAJOR CAPI- TAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUS- ING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDER- ATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE S. 4423--A 6 VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN- TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR- ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA- TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. 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 AUTHOR- IZED BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE SURCHARGE ALLOCA- BLE 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 APART- MENT; 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 AFOREMENTIONED 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 housing rent control law, as amended by section 25 of part B of chapter 97 of the laws of 2011, subparagraph 7 as amended by section 32 of part A of chapter 20 of the laws of 2015, 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 valuation 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 S. 4423--A 7 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 property, excluding mort- gage interest and amortization, and excluding allowances for obsoles- cence 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 buildings 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 compen- sated by increases in rental income sufficient to offset unavoidable increases in property taxes, fuel, utilities, insurance and repairs and maintenance, excluding 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 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 excluding 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 hous- ing 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 landlord 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 furni- ture or furnishings provided in or to a tenant's housing accommodation. The permanent increase in the maximum rent for the affected housing accommodation shall be one-fortieth, in the case of a building with thirty-five or fewer housing accommodations, or one-sixtieth, in the case of a building with more than thirty-five housing accommodations where such permanent increase takes effect on or after September twen- ty-fourth, two thousand eleven, of the total cost incurred by the land- lord 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 furniture 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 S. 4423--A 8 pursuant to this clause; or (6) there has been, since March first, nine- teen hundred fifty, an increase in the rental value of the housing accommodations as a result of a substantial rehabilitation of the build- ing 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; which for any order of the commissioner issued after the effective date of the rent act of 2015 the cost of such improvement shall be amortized over an eight-year period for buildings with thirty-five or fewer units or a nine year period for buildings with more than thiry-five units, or]; PROVIDED THAT THE COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEVER, NO MAJOR CAPI- TAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUS- ING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDER- ATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN- TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR- ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA- TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. 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 S. 4423--A 9 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, 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 (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, however, 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 sublet- ting 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 compensated 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 accommo- dations. S 7. 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 of nineteen seventy-four, as amended by chapter 102 of the laws of 1984, is amended and a new paragraph 6 is added 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 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, reasonable, costs of fuel, labor, utili- ties, taxes, other than income or corporate franchise taxes, fees, permits, necessary contracted services and non-capital repairs, insur- ance, 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 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 S. 4423--A 10 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[.]; OR (6) NOTWITHSTANDING PARAGRAPH THREE OF THIS SUBDIVISION THERE SHALL BE NO ADJUSTMENT FOR ANY MAJOR CAPITAL IMPROVEMENT FUNDED IN ANY PART FROM MONEYS PROVIDED BY THE NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY. S 8. Paragraph 1 of subdivision g of section 26-405 of the administra- tive code of the city of New York is amended by adding a new subpara- graph (p) to read as follows: (P) NOTWITHSTANDING SUBPARAGRAPH (G) OR (K) OF THIS PARAGRAPH, THERE SHALL BE NO ADJUSTMENT FOR ANY MAJOR CAPITAL IMPROVEMENT OR FOR ANY OTHER EXPENDITURES TO IMPROVE, RESTORE OR PRESERVE THE QUALITY OF A STRUCTURE IF SUCH MAJOR CAPITAL IMPROVEMENT OR SUCH OTHER EXPENDITURE IS FUNDED IN ANY PART FROM MONEYS PROVIDED BY THE NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY. S 9. 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, two and eight 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; provided that the amendments to section 26-511 of the rent stabili- zation 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 S. 4423--A 11 shall not affect the expiration of such law as provided under section 26-520 of such law, as from time to time amended; provided that the amendments to section 6 of the emergency tenant protection act of nine- teen seventy-four made by sections five and seven 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 provided that the amend- ments 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.
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