S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   6971
 
                        2017-2018 Regular Sessions
 
                           I N  A S S E M B L Y
 
                              March 28, 2017
                                ___________
 
 Introduced  by  M.  of  A.  O'DONNELL  --  read once and referred to the
   Committee on Housing
 
 AN ACT to amend the administrative code of the city  of  New  York,  the
   emergency tenant protection act of 1974 and the emergency housing rent
   control  law,  in  relation  to building eligibility for major capital
   improvement rent surcharges

   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) There has been since July first, nineteen hundred seventy, a major
 capital improvement required for the operation, preservation or  mainte-
 nance  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] THIRTY-FIVE units[,];
 PROVIDED, HOWEVER, THAT NO ADJUSTMENT SHALL BE ALLOWED FOR ANY  BUILDING
 IN  WHICH MORE THAN FIFTY PERCENT OF THE HABITABLE UNITS ARE NOT SUBJECT
 TO RENT STABILIZATION OR RENT CONTROL, or
   § 2. Paragraph 6-a of subdivision c of section 26-511 of the  adminis-
 trative code of the city of New York, is amended to read as follows:
   (6-a)  provides  criteria  whereby  as  an alternative to the hardship
 application provided under paragraph six of this subdivision  owners  of
 buildings  acquired  by  the same owner or a related entity owned by the
 same principals three 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
              

 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD10653-02-7

 A. 6971                             2
 
 equal  to  at least five percent of such gross rent. For the purposes of
 this paragraph, operating expenses shall consist of the actual,  reason-
 able,  costs  of  fuel,  labor,  utilities,  taxes, other than income or
 corporate  franchise taxes, fees, permits, necessary contracted services
 and non-capital repairs, insurance, parts and supplies, management  fees
 and  other  administrative costs and mortgage interest. For the purposes
 of this paragraph, mortgage interest shall be deemed to mean interest on
 a bona fide mortgage including an allocable portion of  charges  related
 thereto.  Criteria  to be considered in determining a bona fide mortgage
 other than an institutional mortgage shall  include;  condition  of  the
 property,  location of the property, the existing mortgage market at the
 time the mortgage is placed, the term of the mortgage, the  amortization
 rate, the principal amount of the mortgage, security and other terms and
 conditions  of  the  mortgage. The commissioner shall set a rental value
 for any unit occupied by the owner or a person related to the  owner  or
 unoccupied  at  the  owner's  choice for more than one month at the last
 regulated rent plus the minimum number of guidelines increases or, if no
 such regulated rent existed or is known, the commissioner shall impute a
 rent consistent with other rents in the building. The amount of hardship
 increase shall be such as may be required to maintain the  annual  gross
 rent  income as provided by this paragraph. The division shall not grant
 a hardship application under this paragraph or  paragraph  six  of  this
 subdivision  for  (I)  a  period of three years subsequent to granting a
 hardship application under the provisions of this paragraph OR  (II)  TO
 THE  OWNER OF ANY BUILDING IN WHICH MORE THAN FIFTY PERCENT OF THE HABI-
 TABLE UNITS ARE NOT SUBJECT TO RENT STABILIZATION OR RENT CONTROL.   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 equi-
 ty 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 improvement, (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 proper-
 ty after purchase by the owner.
   § 3. 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:

 A. 6971                             3
 
   (3) there has been since January first, nineteen hundred  seventy-four
 a  major capital improvement required for the operation, preservation or
 maintenance of the structure AND MORE THAN HALF OF THE  HABITABLE  UNITS
 IN  THE  BUILDING ARE SUBJECT TO RENT STABILIZATION OR RENT CONTROL.  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, or
   § 4. Subparagraph 7 of the second undesignated subparagraph  of  para-
 graph  (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 32 of part A of chapter 20 of the laws of 2015,  is  amended  to
 read as follows:
   (7)  there has been since March first, nineteen hundred fifty, a major
 capital improvement required for the operation, preservation or  mainte-
 nance  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] THIRTY-FIVE units[,]; PROVIDED, HOWEVER, THAT  NO
 ADJUSTMENT  SHALL  BE  ALLOWED FOR ANY BUILDING IN WHICH MORE THAN FIFTY
 PERCENT OF THE HABITABLE UNITS ARE NOT SUBJECT TO RENT STABILIZATION  OR
 RENT CONTROL, or
   § 5. 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 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 PROVIDED, THAT MORE THAN HALF OF THE HABITABLE UNITS IN
 THE BUILDING ARE SUBJECT TO RENT STABILIZATION OR RENT CONTROL. For  the
 purposes  of  this  paragraph,  operating  expenses shall consist of the
 actual, reasonable, costs of fuel, labor, utilities, taxes,  other  than
 income or corporate franchise taxes, fees, permits, necessary contracted
 services and non-capital repairs, insurance, parts and supplies, manage-
 ment  fees and other administrative costs and mortgage interest. For the
 purposes of this paragraph, mortgage interest shall be  deemed  to  mean
 interest  on  a  bona  fide  mortgage  including an allocable portion of
 charges related thereto.   Criteria to be considered  in  determining  a
 bona  fide  mortgage other than an institutional mortgage shall include;
 condition of the property, location of the property, the existing  mort-
 gage  market  at  the time the mortgage is placed, the term of the mort-
 gage, the amortization rate, the principal amount of the mortgage, secu-
 rity and other terms and conditions of the  mortgage.  The  commissioner
 shall  set a rental value for any unit occupied by the owner or a person
 related to the owner or unoccupied at the owner's choice for  more  than

 A. 6971                             4
 
 one  month  at the last regulated rent plus the minimum number of guide-
 lines 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 application under the
 provisions of this paragraph. The collection of any increase in the rent
 for any housing accommodation  pursuant  to  this  paragraph  shall  not
 exceed  six  percent  in  any  year from the 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  estab-
 lished  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  improvement,
 (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.
   §  6.  This act shall take effect immediately; provided, however, that
 the amendments to section 26-405 of the city rent and rehabilitation law
 made by section one of this act shall remain in full  force  and  effect
 only  as  long  as  the  public  emergency  requiring the regulation and
 control of residential rents and evictions  continues,  as  provided  in
 subdivision  3  of section 1 of the local emergency housing rent control
 act; and provided, further, that the amendments  to  section  26-511  of
 chapter 4 of title 26 of the administrative code of the city of New York
 made  by  section  two of this act shall expire on the same date as such
 law expires and shall not affect the expiration of such law as  provided
 under section 26-520 of such law; and provided, further, that the amend-
 ments  to  section  6 of the emergency tenant protection act of nineteen
 seventy-four made by sections three and five of this act shall expire on
 the same date as such act expires and shall not affect the expiration of
 such act as provided in section 17 of chapter 576 of the laws  of  1974;
 and provided, further, that the amendments to section 4 of the emergency
 housing  rent  control law made by section 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 in subdivision 2 of section 1 of chapter 274  of
 the laws of 1946.