NY State Senate Bill 2019-S3382

Senate Bill S3382

2019-2020 Legislative Session

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

download bill text pdf

Archive: Last Bill Status - In Senate Committee Housing, Construction And Community Development Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2020	referred to housing, construction and community development
Feb 06, 2019	referred to housing, construction and community development

2019-S3382 (ACTIVE) - Details

Current Committee:: Senate Housing, Construction And Community Development
Law Section:: New York City Administrative Code
Laws Affected:: Amd §26-511, NYC Ad Cd; amd §6, Emerg Ten Prot Act of 1974
Versions Introduced in Other Legislative Sessions:: 2009-2010: S3134
2011-2012: S3645
2013-2014: S1850
2015-2016: S513
2017-2018: S1107, S7125
2021-2022: S2840, S5863

2019-S3382 (ACTIVE) - Summary

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

2019-S3382 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S3382

SPONSOR: KAVANAGH
 
TITLE OF BILL:

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

 
PURPOSE:

To extend from three years to six years the duration of ownership
required for a landlord to be eligible for an alternative hardship rent
adjustment.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 of the bill amends paragraph 6-a of subdivision c of section
26-511 of the administrative code of the city of New York to revise the
number of ownership years required to apply for an alternative hardship
rent adjustment through the New York State Division of Housing and

Community Renewal (DHCR) from three years to six years.

Section 2 of the bill amends paragraph 5 of subdivision d of section 6
of section 4 of chapter 576 of the laws of 1974, as amended by chapter
102 of the laws of 1984, constituting the emergency tenant protection
act, to revise the number of ownership years required to apply for an
alternative hardship rent adjustment through DHCR from three years to
six years for building owners outside a city of one million or more.

Section 3 of the bill sets forth the effective date.

 
JUSTIFICATION:

Both subdivision c of section 26-511 of the administrative code of New
York City and paragraph 5 of subdivision d of section 6 of section 4 of
chapter 576 of the emergency tenant protection act are designed to
provide a means by which building owners can apply to the DHCR commis-
sioner for rent increases greater than the increases approved by the
relevant rent guidelines board. In order to be granted the hardship
exemption, DHCR must find that the set rent increases will be insuffi-
cient for the owner to accrue a profit of at least five percent after
annual operating expenses. Currently, building owners must have acquired
the property at least three years prior to filing an application for the
alternative hardship exemption. This bill would adjust the years of
ownership required for the landlord to receive an alternative hardship
exemption to be in line with the requirements for receiving a compar-
ative hardship exemption. Comparative hardship exemptions are determined
by comparing the annual net income of the past three years with that of
either the three years prior, under the same ownership, or 1968 to 1970.
Many applicants are therefore required to have owned a property for
three base years plus three years of comparison, making the standard
time of ownership required for many building owners six years. This bill
would align the duration of ownership required for both exemptions at
six years.

Beyond creating a more consistent framework for these exemptions, this
bill would discourage potential building purchasers from overleveraging
their assets with the intent of seeking a hardship exemption, since the
prospect of hardship relief will be contingent on an initial six-year
ownership period.

Lastly, the bill would provide DHCR with a more reasonable amount of
data from which to determine the owner's capacity to make a sufficient
profit relative to the profit anticipated when the property was first
purchased.

 
FISCAL IMPACT ON THE STATE:

None.

 
FISCAL IMPACT ON LOCALITIES:

None.

 
IMPACT ON REGULATION OF BUSINESSES AND INDIVIDUALS:

Landlords seeking an alternative hardship exemption would not be able to
apply for one until six years after purchasing the building for which
such exemption is being sought.

 
IMPACT ON FINES, IMPRISONMENT, FORFEITURE OF RIGHTS, OR OTHER PENAL
SANCTIONS:

None.

 
PRIOR LEGISLATIVE HISTORY:

2018: S7125 - REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOP-
MENT
2017: A1297 - advanced to third reading cal. 375
2016: A5566 - REPORTED AND COMMITTED TO FINANCE/ referred to correction
2015: A5566 - housing

 
EFFECTIVE DATE:
This act shall take effect immediately; provided 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 one of this act shall expire on the
same date as such law expires and shall not affect the expiration of
such law as provided under section 26-520 of such law; and provided that
the amendments to section 6 of the emergency tenant protection act of
nineteen seventy-four made by section two of this act shall expire on
the same date as such act expires and shall not affect the expiration of
such act as provided in section 17 of chapter 576 of the laws of 1974.

2019-S3382 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   3382
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                             February 6, 2019
                                ___________
 
 Introduced  by Sen. KAVANAGH -- read twice and ordered printed, and when
   printed to be committed to the Committee on Housing, Construction  and
   Community Development
 
 AN  ACT to amend the administrative code of the city of New York and the
   emergency tenant protection act of nineteen seventy-four, in  relation
   to hardship applications

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

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

                                                            LBD02477-01-9

 S. 3382                             2
 
 time  the mortgage is placed, the term of the mortgage, the amortization
 rate, the principal amount of the mortgage, security and other terms and
 conditions of the mortgage. The commissioner shall set  a  rental  value
 for  any  unit occupied by the owner or a person related to the owner or
 unoccupied at the owner's choice for more than one  month  at  the  last
 regulated rent plus the minimum number of guidelines increases or, if no
 such regulated rent existed or is known, the commissioner shall impute a
 rent consistent with other rents in the building. The amount of hardship
 increase  shall  be such as may be required to maintain the annual gross
 rent income as provided by this paragraph. The division shall not  grant
 a  hardship  application  under  this paragraph or paragraph six of this
 subdivision for a period of three years subsequent to granting  a  hard-
 ship  application under the provisions of this paragraph. The collection
 of any increase in the rent for any housing  accommodation  pursuant  to
 this  paragraph shall not exceed six percent in any year from the effec-
 tive date of the order granting the increase over the rent set forth  in
 the  schedule  of  gross rents, with collectability of any dollar excess
 above said sum to be spread forward in similar increments and  added  to
 the  rent as established or set in future years. No application shall be
 approved unless the owner's equity in such building exceeds five percent
 of: (i) the arms length purchase price of the property; (ii) the cost of
 any capital improvements  for  which  the  owner  has  not  collected  a
 surcharge; (iii) any repayment of principal of any mortgage or loan used
 to  finance the purchase of the property or any capital improvements for
 which the owner has not collected a surcharge and (iv) any  increase  in
 the  equalized  assessed value of the property which occurred subsequent
 to the first valuation of the property after purchase by the owner.  For
 the purposes of this paragraph, owner's equity shall mean the sum of (i)
 the purchase price of the property less the principal of any mortgage or
 loan  used to finance the purchase of the property, (ii) the cost of any
 capital improvement for which the owner has not  collected  a  surcharge
 less the principal of any mortgage or loan used to finance said improve-
 ment,  (iii) any repayment of the principal of any mortgage or loan used
 to finance the purchase of the property or any capital  improvement  for
 which  the owner has not collected a surcharge, and (iv) any increase in
 the equalized assessed value of the property which  occurred  subsequent
 to the first valuation of the property after purchase by the owner.
   § 2. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
 576  of the laws of 1974 enacting the emergency tenant protection act of
 nineteen seventy-four, as amended by chapter 102 of the laws of 1984, is
 amended to read as follows:
   (5) as an alternative to the hardship application provided under para-
 graph four of this subdivision, owners of buildings acquired by the same
 owner or a related entity owned by the same principals [three] SIX years
 prior to the date of application may apply to the division for increases
 in excess of the level of  applicable  guideline  increases  established
 under  this  law based on a finding by the commissioner that such guide-
 line increases are not sufficient to enable the  owner  to  maintain  an
 annual  gross  rent  income  for  such building which exceeds the annual
 operating expenses of such building by a sum  equal  to  at  least  five
 percent  of such gross rent. For the purposes of this paragraph, operat-
 ing expenses shall consist of the actual,  reasonable,  costs  of  fuel,
 labor, utilities, taxes, other than income or corporate franchise taxes,
 fees,  permits,  necessary  contracted services and non-capital repairs,
 insurance, parts and supplies, management fees and other  administrative
 costs  and  mortgage interest. For the purposes of this paragraph, mort-

 S. 3382                             3
 
 gage interest shall be deemed to mean interest on a bona  fide  mortgage
 including  an allocable portion of charges related thereto.  Criteria to
 be considered in determining a bona fide mortgage other than an institu-
 tional  mortgage  shall  include; condition of the property, location of
 the property, the existing mortgage market at the time the  mortgage  is
 placed,  the  term of the mortgage, the amortization rate, the principal
 amount of the mortgage, security and other terms and conditions  of  the
 mortgage.  The  commissioner shall set a rental value for any unit occu-
 pied by the owner or a person related to the owner or unoccupied at  the
 owner's  choice  for more than one month at the last regulated rent plus
 the minimum number of guidelines increases or, if no such regulated rent
 existed or is known, the commissioner shall  impute  a  rent  consistent
 with  other rents in the building. The amount of hardship increase shall
 be such as may be required to maintain the annual gross rent  income  as
 provided  by  this  paragraph.  The  division shall not grant a hardship
 application under this paragraph or paragraph four of  this  subdivision
 for  a  period of three years subsequent to granting a hardship applica-
 tion under the provisions of  this  paragraph.  The  collection  of  any
 increase  in  the  rent  for  any housing accommodation pursuant to this
 paragraph shall not exceed six percent in any year  from  the  effective
 date  of  the order granting the increase over the rent set forth in the
 schedule of gross rents, with collectability of any dollar excess  above
 said  sum  to  be  spread forward in similar increments and added to the
 rent as established or set in future  years.  No  application  shall  be
 approved unless the owner's equity in such building exceeds five percent
 of: (i) the arms length purchase price of the property; (ii) the cost of
 any  capital  improvements  for  which  the  owner  has  not collected a
 surcharge; (iii) any repayment of principal of any mortgage or loan used
 to finance the purchase of the property or any capital improvements  for
 which  the owner has not collected a surcharge; and (iv) any increase in
 the equalized assessed value of the property which  occurred  subsequent
 to  the first valuation of the property after purchase by the owner. For
 the purposes of this paragraph, owner's equity shall mean the sum of (i)
 the purchase price of the property less the principal of any mortgage or
 loan used to finance the purchase of the property, (ii) the cost of  any
 capital  improvement  for  which the owner has not collected a surcharge
 less the principal of any mortgage or loan used to finance said improve-
 ment, (iii) any repayment of the principal of any mortgage or loan  used
 to  finance  the purchase of the property or any capital improvement for
 which the owner has not collected a surcharge, and (iv) any increase  in
 the  equalized  assessed value of the property which occurred subsequent
 to the first valuation of the property after purchase by the owner.
   § 3. This act shall take effect immediately; provided that the  amend-
 ments  to  section 26-511 of chapter 4 of title 26 of the administrative
 code of the city of New York made by  section  one  of  this  act  shall
 expire  on  the  same  date as such law expires and shall not affect the
 expiration of such law as provided under section 26-520 of such law; and
 provided that the amendments  to  section  6  of  the  emergency  tenant
 protection  act of nineteen seventy-four made by section two of this act
 shall expire on the same date as such act expires and shall  not  affect
 the  expiration  of such act as provided in section 17 of chapter 576 of
 the laws of 1974.

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