Bill Text: NY A02356 | 2019-2020 | General Assembly | Introduced

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Bill Title: Approves major capital improvement rent increases and extends the length of time over which major capital improvement expenses may be recovered.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced - Dead) 2020-01-08 - referred to housing [A02356 Detail]

Download: New_York-2019-A02356-Introduced.html

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                STATE OF NEW YORK
        ________________________________________________________________________
                                          2356
                               2019-2020 Regular Sessions
                   IN ASSEMBLY
                                    January 22, 2019
                                       ___________
        Introduced  by  M.  of  A. O'DONNELL, MOSLEY, SEAWRIGHT -- read once and
          referred to the Committee on Housing
        AN ACT to amend the administrative code of the city  of  New  York,  the
          emergency tenant protection act of nineteen seventy-four and the emer-
          gency housing rent control law, in relation to approving major capital
          improvement rent increases and 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:
     1    Section 1. Subparagraph (g) of paragraph 1 of subdivision g of section
     2  26-405 of the administrative code of the city of New York, as amended by
     3  section 31 of part A of chapter 20 of the laws of 2015,  is  amended  to
     4  read as follows:
     5    (g) (i) Collection of surcharges to the maximum rent authorized pursu-
     6  ant  to  item  (ii)  of this subparagraph shall cease when the owner has
     7  recovered the cost of the major capital improvement;
     8    (ii) There has been since July  first,  nineteen  hundred  seventy,  a
     9  major  capital  improvement [required for the operation, preservation or
    10  maintenance of the structure. An adjustment under this subparagraph  (g)
    11  for any order of the commissioner issued after the effective date of the
    12  rent  act  of 2015 shall be in an amount sufficient to amortize the cost
    13  of the improvements pursuant to this subparagraph (g) over an eight-year
    14  period for buildings with thirty-five or fewer  units  or  a  nine  year
    15  period  for  buildings  with more than thiry-five units,]; provided that
    16  the commissioner first finds that such improvements are deemed deprecia-
    17  ble under the internal revenue code and such improvements  are  required
    18  for  the  operation or preservation of the structure.  However, no major
    19  capital improvement rent increase will be approved by  the  division  of
    20  housing  and  community renewal unless the work performed is an enhance-
    21  ment or upgrade to a housing accommodation or service therein; or is  an
    22  addition  to such housing accommodation and otherwise eligible according
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD03017-01-9
        A. 2356                             2
     1  to the prerequisites for major capital improvement rent  increases.  Any
     2  repair or replacement intended to maintain an existing service shall not
     3  be  eligible  for a major capital improvement rent increase. No applica-
     4  tion  for  a  major capital improvement rent increase may be approved if
     5  there exist any outstanding hazardous violations  at  the  time  of  the
     6  consideration of such application, as determined pursuant to regulations
     7  of  the division of housing and community renewal or any agency adminis-
     8  tering and enforcing a building code in the jurisdiction  in  which  the
     9  property  is located, unless it is determined by the division of housing
    10  and community renewal that such work is essential to the alleviation  of
    11  the  violations  and  such approval is consistent with the provisions of
    12  this section. Except in the case of emergency or good cause,  the  owner
    13  of  the  property  shall  file,  not  less  than  thirty days before the
    14  commencement of the improvement, with the division of housing and commu-
    15  nity renewal a statement containing information outlining the  scope  of
    16  work, expected date of completion for such work and an affidavit setting
    17  forth  the following information: (a) every owner of record and owner of
    18  a substantial interest in the property or entity owning the property  or
    19  sponsoring  the  improvement;  and  (b)  a  statement  that none of such
    20  persons had, within the five years prior to the improvement, been  found
    21  to  have  harassed or unlawfully evicted tenants by judgment or determi-
    22  nation of a court or agency under the penal law, any state or local  law
    23  regulating  rents  or  any  state or local law relating to harassment of
    24  tenants or unlawful eviction. Upon receipt of  the  scope  of  work  and
    25  affidavit  provided  for  herein,  the division of housing and community
    26  renewal shall provide the tenants in occupancy in  such  buildings  with
    27  such  information.  The division of housing and community renewal shall,
    28  in addition, implement procedures including, but not limited to, elicit-
    29  ing tenant comments to determine whether major capital improvement reha-
    30  bilitation work has been  satisfactorily  completed.  No  major  capital
    31  improvement  rent increase shall become effective until any defective or
    32  deficient rehabilitation work has been cured. The increase permitted for
    33  such capital improvement shall be collected as a  monthly  surcharge  to
    34  the  maximum  rent. It shall be separately designated and billed as such
    35  and shall not be compounded by any other adjustment to the maximum rent.
    36  The surcharge allocable to each apartment shall be an  amount  equal  to
    37  the  cost  of  the  improvement  divided  by eighty-four, divided by the
    38  number of rooms in the building, and then multiplied by  the  number  of
    39  rooms  in  such  apartment; provided that the surcharge allocable to any
    40  apartment in any one year may not exceed an amount equal to six  percent
    41  of  the  monthly  rent  collected by the owner for such apartment as set
    42  forth in the schedule of gross rents. Any excess above said six  percent
    43  shall  be  carried  forward  and  collected in future years as a further
    44  surcharge not to exceed an additional six percent in any one year period
    45  until the total surcharge equals the amount it would have  been  if  the
    46  aforementioned six percent limitation did not apply; or
    47    §  2.  Subparagraph  (k)  of  paragraph  1 of subdivision g of section
    48  26-405 of the administrative code of the city of New York, as amended by
    49  chapter 749 of the laws of 1990, is amended to read as follows:
    50    (k) The landlord has incurred, since January first,  nineteen  hundred
    51  seventy,  in connection with and in addition to a concurrent major capi-
    52  tal improvement pursuant to subparagraph (g) of  this  paragraph,  other
    53  expenditures  to  improve, restore or preserve the quality of the struc-
    54  ture. An adjustment under this subparagraph shall  be  granted  only  if
    55  such  improvements  represent  an  expenditure equal to at least ten per
    56  centum of the total operating and maintenance expenses for the preceding
        A. 2356                             3
     1  year. An adjustment under this subparagraph shall be in addition to  any
     2  adjustment  granted  for  the  concurrent  major capital improvement and
     3  shall be [in an amount sufficient to amortize the cost of  the  improve-
     4  ments  pursuant  to  this  subparagraph over a seven-year period] imple-
     5  mented in the same manner as such major capital improvement as a further
     6  surcharge to the maximum rent.
     7    § 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
     8  tive code of the city of New York, as amended by section 29 of part A of
     9  chapter 20 of the laws of 2015, is amended to read as follows:
    10    (6) provides criteria whereby the commissioner may act  upon  applica-
    11  tions  by  owners  for  increases  in  excess  of the level of fair rent
    12  increase established under this law provided, however, that such  crite-
    13  ria  shall  provide  [(a)  as] in regard to hardship applications, for a
    14  finding that the level of fair rent increase is not sufficient to enable
    15  the owner to maintain approximately the same average annual  net  income
    16  (which shall be computed without regard to debt service, financing costs
    17  or  management  fees)  for the three year period ending on or within six
    18  months of the date of  an  application  pursuant  to  such  criteria  as
    19  compared with annual net income, which prevailed on the average over the
    20  period nineteen hundred sixty-eight through nineteen hundred seventy, or
    21  for  the  first  three  years of operation if the building was completed
    22  since nineteen hundred sixty-eight or for the first three  fiscal  years
    23  after  a  transfer  of  title  to a new owner provided the new owner can
    24  establish to the  satisfaction  of  the  commissioner  that  he  or  she
    25  acquired  title  to  the building as a result of a bona fide sale of the
    26  entire building and that the new owner is  unable  to  obtain  requisite
    27  records  for the fiscal years nineteen hundred sixty-eight through nine-
    28  teen hundred seventy despite diligent efforts to obtain same from prede-
    29  cessors in title and further provided that the  new  owner  can  provide
    30  financial  data covering a minimum of six years under his or her contin-
    31  uous and uninterrupted operation of the building to meet the three  year
    32  to  three  year comparative test periods herein provided[; and (b) as to
    33  completed building-wide major capital improvements, for a  finding  that
    34  such improvements are deemed depreciable under the Internal Revenue Code
    35  and  that  the  cost  is to be amortized over an eight-year period for a
    36  building with thirty-five or fewer housing accommodations,  or  a  nine-
    37  year  period  for a building with more than thirty-five housing accommo-
    38  dations, for any determination issued by the  division  of  housing  and
    39  community  renewal  after  the  effective  date of the rent act of 2015,
    40  based upon cash purchase price exclusive of interest or  service  charg-
    41  es].    Notwithstanding  anything  to  the contrary contained herein, no
    42  hardship increase granted pursuant to this paragraph shall,  when  added
    43  to the annual gross rents, as determined by the commissioner, exceed the
    44  sum of, (i) the annual operating expenses, (ii) an allowance for manage-
    45  ment  services  as  determined  by the commissioner, (iii) actual annual
    46  mortgage debt service (interest and amortization) on its indebtedness to
    47  a lending institution,  an  insurance  company,  a  retirement  fund  or
    48  welfare  fund  which is operated under the supervision of the banking or
    49  insurance laws of the state of New York or the United States,  and  (iv)
    50  eight  and  one-half percent of that portion of the fair market value of
    51  the property which exceeds the unpaid principal amount of  the  mortgage
    52  indebtedness  referred  to in subparagraph (iii) of this paragraph. Fair
    53  market value for the purposes of this paragraph shall be six  times  the
    54  annual gross rent. The collection of any increase in the stabilized rent
    55  for  any  apartment  pursuant  to  this  paragraph  shall not exceed six
    56  percent in any year from the effective date of the  order  granting  the
        A. 2356                             4
     1  increase  over  the  rent set forth in the schedule of gross rents, with
     2  collectability of any dollar excess above said sum to be spread  forward
     3  in similar increments and added to the stabilized rent as established or
     4  set in future years;
     5    § 4. Subdivision c of section 26-511 of the administrative code of the
     6  city  of New York is amended by adding three new paragraphs 6-b, 6-c and
     7  6-d to read as follows:
     8    (6-b) provides criteria whereby the commissioner may act upon applica-
     9  tion by owners for increases  in  excess  of  the  level  of  fair  rent
    10  increase  established under this law provided, however, that such crite-
    11  ria shall provide that:
    12    (i) as to completed building-wide major capital  improvements,  first,
    13  that  a  finding that such improvements are deemed depreciable under the
    14  internal revenue code and such improvements are required for the  opera-
    15  tion or preservation of the structure;
    16    (ii)  however,  no  major  capital  improvement  rent increase will be
    17  approved by the division of housing and  community  renewal  unless  the
    18  work  performed  is an enhancement or upgrade to a housing accommodation
    19  or service therein; or is an addition to such housing accommodation  and
    20  otherwise  eligible  according  to  the  prerequisites for major capital
    21  improvement rent increases. Any repair or replacement intended to  main-
    22  tain  an  existing  service  shall  not  be eligible for a major capital
    23  improvement rent increase;
    24    (iii) no application for a major capital improvement rent increase may
    25  be approved if there exist any outstanding hazardous violations  at  the
    26  time of the consideration of such application, as determined pursuant to
    27  regulations  of  the  division  of  housing and community renewal or any
    28  agency administering and enforcing a building code in  the  jurisdiction
    29  in  which  the property is located, unless it is determined by the divi-
    30  sion of housing and community renewal that such work is essential to the
    31  alleviation of the violations and such approval is consistent  with  the
    32  provisions  of  this  section.  Except  in the case of emergency or good
    33  cause, the owner of the property shall file, not less than  thirty  days
    34  before the commencement of the improvement, with the division of housing
    35  and  community  renewal a statement containing information outlining the
    36  scope of work, expected date of completion for such work and an  affida-
    37  vit setting forth the following information:
    38    (A)  every  owner of record and owner of a substantial interest in the
    39  property or entity owning the property or  sponsoring  the  improvement;
    40  and
    41    (B)  a  statement that none of such persons had, within the five years
    42  prior to the improvement, been found  to  have  harassed  or  unlawfully
    43  evicted  tenants by judgment or determination of a court or agency under
    44  the penal law, any state or local law regulating rents or any  state  or
    45  local law relating to harassment of tenants or unlawful eviction.
    46    Upon  receipt  of the scope of work and affidavit provided for herein,
    47  the division of housing and community renewal shall provide the  tenants
    48  in  occupancy  in  such buildings with such information. The division of
    49  housing and community renewal shall, in addition,  implement  procedures
    50  including,  but  not  limited to, eliciting tenant comments to determine
    51  whether major capital improvement rehabilitation work has been satisfac-
    52  torily completed. No  major  capital  improvement  rent  increase  shall
    53  become  effective  until  any defective or deficient rehabilitation work
    54  has been cured.
    55    (6-c) the increase permitted for such  capital  improvement  shall  be
    56  collected  as  a monthly surcharge to the legal regulated rent. It shall
        A. 2356                             5
     1  be separately designated and billed as such and shall not be  compounded
     2  by  any  annual  adjustment of the level of fair rent provided for under
     3  subdivision b of section 26-510 of this law. The surcharge allocable  to
     4  each  apartment  shall be an amount equal to the cost of the improvement
     5  divided by eighty-four divided by the number of rooms in  the  building,
     6  and  then  multiplied by the number of rooms in such apartment; provided
     7  that the surcharge allocable to any apartment, in any one year  may  not
     8  exceed  an  amount equal to six percent of the monthly rent collected by
     9  the owner for such apartment as set  forth  in  the  schedule  of  gross
    10  rents.  Any  excess  above said six percent shall be carried forward and
    11  collected in future years as a further surcharge not to exceed an  addi-
    12  tional  six  percent  in  any  one year period until the total surcharge
    13  equals the amount it would have been if the aforementioned  six  percent
    14  limitation did not apply.
    15    (6-d)  collection  of  surcharges  in excess of the level of fair rent
    16  authorized pursuant to paragraph six-b and  six-c  of  this  subdivision
    17  shall  cease  when the owner has recovered the cost of the major capital
    18  improvement.
    19    § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
    20  576 of the laws of 1974, constituting the  emergency  tenant  protection
    21  act  of  nineteen  seventy-four,  as  amended by section 30 of part A of
    22  chapter 20 of the laws of 2015, is amended to read as follows:
    23    (3) (i) collection of surcharges in addition to  the  legal  regulated
    24  rent  authorized  pursuant  to subparagraph (ii) of this paragraph shall
    25  cease when the owner  has  recovered  the  cost  of  the  major  capital
    26  improvement;
    27    (ii) there has been since January first, nineteen hundred seventy-four
    28  a major capital improvement [required for the operation, preservation or
    29  maintenance  of  the structure. An adjustment under this paragraph shall
    30  be in an amount sufficient to amortize  the  cost  of  the  improvements
    31  pursuant to this paragraph over an eight-year period for a building with
    32  thirty-five or fewer housing accommodations, or a nine-year period for a
    33  building  with  more  than  thirty-five  housing accommodations, for any
    34  determination issued by the division of housing  and  community  renewal
    35  after  the  effective  date of the rent act of 2015,]; provided that the
    36  commissioner first finds that such improvements are  deemed  depreciable
    37  under  the  internal revenue code and such improvements are required for
    38  the operation or preservation of the structure. However, no major  capi-
    39  tal  improvement rent increase will be approved by the division of hous-
    40  ing and community renewal unless the work performed is an enhancement or
    41  upgrade to a housing accommodation or service therein; or is an addition
    42  to such housing accommodation and otherwise eligible  according  to  the
    43  prerequisites  for  major capital improvement rent increases. Any repair
    44  or replacement intended to maintain an existing  service  shall  not  be
    45  eligible  for  a major capital improvement rent increase. No application
    46  for a major capital improvement rent increase may be approved  if  there
    47  exist  any outstanding hazardous violations at the time of the consider-
    48  ation of such application, as determined pursuant to regulations of  the
    49  division  of  housing  and community renewal or any agency administering
    50  and enforcing a building code in the jurisdiction in which the  property
    51  is  located,  unless  it  is  determined  by the division of housing and
    52  community renewal that such work is essential to the alleviation of  the
    53  violations  and  such approval is consistent with the provisions of this
    54  section. Except in the case of emergency or good cause, the owner of the
    55  property shall file, not less than thirty days before  the  commencement
    56  of the improvement, with the division of housing and community renewal a
        A. 2356                             6
     1  statement  containing  information outlining the scope of work, expected
     2  date of completion for such work and  an  affidavit  setting  forth  the
     3  following information: (a) every owner of record and owner of a substan-
     4  tial  interest in the property or entity owning the property or sponsor-
     5  ing the improvement; and (b) a statement that none of such persons  had,
     6  within  the  five  years  prior  to  the improvement, been found to have
     7  harassed or unlawfully evicted tenants by judgment or determination of a
     8  court or agency under the penal law, any state or local  law  regulating
     9  rents  or  any  state  or local law relating to harassment of tenants or
    10  unlawful eviction. Upon receipt of  the  scope  of  work  and  affidavit
    11  provided for herein, the division of housing and community renewal shall
    12  provide  the  tenants  in occupancy in such buildings with such informa-
    13  tion. The division of housing and community renewal shall, in  addition,
    14  implement  procedures  including,  but  not limited to, eliciting tenant
    15  comments to determine whether major capital  improvement  rehabilitation
    16  work  has  been  satisfactorily  completed. No major capital improvement
    17  rent increase shall become effective until any  defective  or  deficient
    18  rehabilitation  work  has  been  cured.  The increase permitted for such
    19  capital improvement shall be collected as a  monthly  surcharge  to  the
    20  legal  regulated  rent.  It shall be separately designated and billed as
    21  such and shall not be compounded by any annual rent  adjustment  author-
    22  ized  by the rent guidelines board under this act. The surcharge alloca-
    23  ble to each apartment shall be an  amount  equal  to  the  cost  of  the
    24  improvement  divided  by  eighty-four, divided by the number of rooms in
    25  the building, and then multiplied by the number of rooms in such  apart-
    26  ment;  provided that the surcharge allocable to any apartment in any one
    27  year may not exceed an amount equal to six percent of the  monthly  rent
    28  collected  by  the owner for such apartment as set forth in the schedule
    29  of gross rents. Any excess above  said  six  percent  shall  be  carried
    30  forward  and  collected  in  future  years as a further surcharge not to
    31  exceed an additional six percent in any one year period until the  total
    32  surcharge equals the amount it would have been if the aforementioned six
    33  percent limitation did not apply, or
    34    § 6. The second undesignated paragraph of paragraph (a) of subdivision
    35  4  of  section  4  of  chapter 274 of the laws of 1946, constituting the
    36  emergency housing rent control law, as amended by section 25 of  part  B
    37  of  chapter 97 of the laws of 2011, subparagraph 7 as amended by section
    38  32 of part A of chapter 20 of the laws of 2015, is amended  to  read  as
    39  follows:
    40    No application for adjustment of maximum rent based upon a sales price
    41  valuation  shall  be filed by the landlord under this subparagraph prior
    42  to six months from the date of such sale of the property.  In  addition,
    43  no  adjustment  ordered  by  the  commission based upon such sales price
    44  valuation shall be effective prior to one year from  the  date  of  such
    45  sale.  Where,  however,  the assessed valuation of the land exceeds four
    46  times the assessed valuation of the buildings  thereon,  the  commission
    47  may determine a valuation of the property equal to five times the equal-
    48  ized  assessed  valuation  of  the  buildings,  for the purposes of this
    49  subparagraph. The commission may make a determination that the valuation
    50  of the property is an amount  different  from  such  equalized  assessed
    51  valuation  where  there  is  a  request for a reduction in such assessed
    52  valuation currently pending; or where there has been a reduction in  the
    53  assessed valuation for the year next preceding the effective date of the
    54  current  assessed  valuation  in effect at the time of the filing of the
    55  application. Net annual return shall be the amount by which  the  earned
    56  income  exceeds  the operating expenses of the property, excluding mort-
        A. 2356                             7
     1  gage interest and amortization, and excluding  allowances  for  obsoles-
     2  cence  and  reserves, but including an allowance for depreciation of two
     3  per centum of the value of the buildings exclusive of the land,  or  the
     4  amount  shown  for  depreciation of the buildings in the latest required
     5  federal income tax return, whichever is lower; provided,  however,  that
     6  (1)  no  allowance  for  depreciation of the buildings shall be included
     7  where the buildings have been fully depreciated for federal  income  tax
     8  purposes  or  on the books of the owner; or (2) the landlord who owns no
     9  more than four rental units within the state has not been fully  compen-
    10  sated  by  increases  in  rental income sufficient to offset unavoidable
    11  increases in property taxes, fuel, utilities, insurance and repairs  and
    12  maintenance, excluding mortgage interest and amortization, and excluding
    13  allowances  for  depreciation,  obsolescence  and  reserves,  which have
    14  occurred since the federal date determining the maximum rent or the date
    15  the property was acquired by the present owner, whichever is  later;  or
    16  (3) the landlord operates a hotel or rooming house or owns a cooperative
    17  apartment  and  has  not  been  fully compensated by increases in rental
    18  income from the controlled housing accommodations sufficient  to  offset
    19  unavoidable increases in property taxes and other costs as are allocable
    20  to  such controlled housing accommodations, including costs of operation
    21  of such hotel or rooming house,  but  excluding  mortgage  interest  and
    22  amortization,  and  excluding  allowances for depreciation, obsolescence
    23  and reserves, which have occurred since the federal date determining the
    24  maximum rent or the date the landlord commenced  the  operation  of  the
    25  property, whichever is later; or (4) the landlord and tenant voluntarily
    26  enter into a valid written lease in good faith with respect to any hous-
    27  ing  accommodation,  which lease provides for an increase in the maximum
    28  rent not in excess of fifteen per centum and for a term of not less than
    29  two years, except that where such lease  provides  for  an  increase  in
    30  excess  of  fifteen  per  centum,  the  increase  shall be automatically
    31  reduced to fifteen per centum; or (5) the landlord and tenant by  mutual
    32  voluntary  written agreement agree to a substantial increase or decrease
    33  in dwelling space or a change in the services, furniture, furnishings or
    34  equipment provided in the housing accommodations; provided that an owner
    35  shall be entitled to a rent increase where there has been a  substantial
    36  modification  or  increase  of  dwelling  space  or  an  increase in the
    37  services, or installation of new equipment or improvements or new furni-
    38  ture or furnishings provided in or to a tenant's housing  accommodation.
    39  The  permanent  increase  in  the  maximum rent for the affected housing
    40  accommodation shall be one-fortieth, in the  case  of  a  building  with
    41  thirty-five  or  fewer  housing  accommodations, or one-sixtieth, in the
    42  case of a building with more  than  thirty-five  housing  accommodations
    43  where  such  permanent increase takes effect on or after September twen-
    44  ty-fourth, two thousand eleven, of the total cost incurred by the  land-
    45  lord  in  providing  such  modification  or  increase in dwelling space,
    46  services, furniture, furnishings or equipment,  including  the  cost  of
    47  installation,  but  excluding  finance  charges provided further that an
    48  owner who is entitled to a rent increase pursuant to this  clause  shall
    49  not  be  entitled to a further rent increase based upon the installation
    50  of similar equipment, or new furniture or furnishings within the  useful
    51  life  of  such new equipment, or new furniture or furnishings. The owner
    52  shall give written notice to  the  commission  of  any  such  adjustment
    53  pursuant to this clause; or (6) there has been, since March first, nine-
    54  teen  hundred  fifty,  an  increase  in  the rental value of the housing
    55  accommodations as a result of a substantial rehabilitation of the build-
    56  ing or housing accommodation therein which materially adds to the  value
        A. 2356                             8
     1  of  the  property  or  appreciably prolongs its life, excluding ordinary
     2  repairs,  maintenance  and  replacements;  or  (7)  (i)  collection   of
     3  surcharges  to the maximum rent authorized pursuant to item (ii) of this
     4  clause  shall  cease  when the owner has recovered the cost of the major
     5  capital improvement; (ii) there has been  since  March  first,  nineteen
     6  hundred  fifty, a major capital improvement [required for the operation,
     7  preservation or maintenance of the structure; which for any order of the
     8  commissioner issued after the effective date of the rent act of 2015 the
     9  cost of such improvement shall be amortized over  an  eight-year  period
    10  for  buildings with thirty-five or fewer units or a nine year period for
    11  buildings with more  than  thiry-five  units,  or];  provided  that  the
    12  commissioner  first  finds that such improvements are deemed depreciable
    13  under the internal revenue code and such improvements are  required  for
    14  the  operation or preservation of the structure. However, no major capi-
    15  tal improvement rent increase will be approved by the division of  hous-
    16  ing and community renewal unless the work performed is an enhancement or
    17  upgrade to a housing accommodation or service therein; or is an addition
    18  to  such  housing  accommodation and otherwise eligible according to the
    19  prerequisites for major capital improvement rent increases.  Any  repair
    20  or  replacement  intended  to  maintain an existing service shall not be
    21  eligible for a major capital improvement rent increase.  No  application
    22  for  a  major capital improvement rent increase may be approved if there
    23  exist any outstanding hazardous violations at the time of the  consider-
    24  ation  of such application, as determined pursuant to regulations of the
    25  division of housing and community renewal or  any  agency  administering
    26  and  enforcing a building code in the jurisdiction in which the property
    27  is located, unless it is determined  by  the  division  of  housing  and
    28  community  renewal that such work is essential to the alleviation of the
    29  violations and such approval is consistent with the provisions  of  this
    30  section. Except in the case of emergency or good cause, the owner of the
    31  property  shall  file, not less than thirty days before the commencement
    32  of the improvement, with the division of housing and community renewal a
    33  statement containing information outlining the scope of  work,  expected
    34  date  of  completion  for  such  work and an affidavit setting forth the
    35  following information: (a) every owner of record and owner of a substan-
    36  tial interest in the property or entity owning the property or  sponsor-
    37  ing  the improvement; and (b) a statement that none of such persons had,
    38  within the five years prior to  the  improvement,  been  found  to  have
    39  harassed or unlawfully evicted tenants by judgment or determination of a
    40  court  or  agency under the penal law, any state or local law regulating
    41  rents or any state or local law relating to  harassment  of  tenants  or
    42  unlawful  eviction.  Upon  receipt  of  the  scope of work and affidavit
    43  provided for herein, the division of housing and community renewal shall
    44  provide the tenants in occupancy in such buildings  with  such  informa-
    45  tion.  The division of housing and community renewal shall, in addition,
    46  implement procedures including, but not  limited  to,  eliciting  tenant
    47  comments  to  determine whether major capital improvement rehabilitation
    48  work has been satisfactorily completed.  No  major  capital  improvement
    49  rent  increase  shall  become effective until any defective or deficient
    50  rehabilitation work has been cured.  The  increase  permitted  for  such
    51  capital  improvement  shall  be  collected as a monthly surcharge to the
    52  maximum rent. It shall be separately designated and billed as  such  and
    53  shall not be compounded by any other adjustment to the maximum rent. The
    54  surcharge  allocable  to  each apartment shall be an amount equal to the
    55  cost of the improvement divided by eighty-four, divided by the number of
    56  rooms in the building, and then multiplied by the  number  of  rooms  in
        A. 2356                             9
     1  such  apartment;  provided that the surcharge allocable to any apartment
     2  in any one year may not exceed an amount equal to  six  percent  of  the
     3  monthly  rent  collected by the owner for such apartment as set forth in
     4  the schedule of gross rents.  Any excess above said six percent shall be
     5  carried forward and collected in future years as a further surcharge not
     6  to  exceed  an  additional  six percent in any one year period until the
     7  total surcharge equals the amount it would have been  if  the  aforemen-
     8  tioned six percent limitation did not apply; or (8) there has been since
     9  March  first, nineteen hundred fifty, in structures containing more than
    10  four housing accommodations, other improvements made  with  the  express
    11  consent  of the tenants in occupancy of at least seventy-five per centum
    12  of the housing accommodations, provided,  however,  that  no  adjustment
    13  granted  hereunder  shall  exceed  fifteen per centum unless the tenants
    14  have agreed to a higher percentage of increase, as herein  provided;  or
    15  (9) there has been, since March first, nineteen hundred fifty, a sublet-
    16  ting  without  written  consent  from the landlord or an increase in the
    17  number of adult occupants who are not members of the immediate family of
    18  the tenant, and the  landlord  has  not  been  compensated  therefor  by
    19  adjustment  of  the  maximum rent by lease or order of the commission or
    20  pursuant to the federal act; or (10) the presence of unique or  peculiar
    21  circumstances  materially  affecting  the maximum rent has resulted in a
    22  maximum rent which is  substantially  lower  than  the  rents  generally
    23  prevailing  in  the same area for substantially similar housing accommo-
    24  dations.
    25    § 7. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
    26  576 of the laws of 1974, constituting the  emergency  tenant  protection
    27  act  of  nineteen seventy-four, as amended by chapter 102 of the laws of
    28  1984, is amended and a new paragraph 6 is added to read as follows:
    29    (5) as an alternative to the hardship application provided under para-
    30  graph four of this subdivision, owners of buildings acquired by the same
    31  owner or a related entity owned by the same principals three years prior
    32  to the date of application may apply to the division  for  increases  in
    33  excess  of the level of applicable guideline increases established under
    34  this law based on a finding by  the  commissioner  that  such  guideline
    35  increases  are  not sufficient to enable the owner to maintain an annual
    36  gross rent income for such building which exceeds the  annual  operating
    37  expenses  of  such  building  by a sum equal to at least five percent of
    38  such gross rent.  For the purposes of this paragraph, operating expenses
    39  shall consist of the actual, reasonable, costs of  fuel,  labor,  utili-
    40  ties,  taxes,  other  than  income  or  corporate franchise taxes, fees,
    41  permits, necessary contracted services and non-capital  repairs,  insur-
    42  ance, parts and supplies, management fees and other administrative costs
    43  and  mortgage  interest.  For  the  purposes of this paragraph, mortgage
    44  interest shall be deemed to  mean  interest  on  a  bona  fide  mortgage
    45  including  an  allocable portion of charges related thereto. Criteria to
    46  be considered in determining a bona fide mortgage other than an institu-
    47  tional mortgage shall include[;]: condition of the property, location of
    48  the property, the existing mortgage market at the time the  mortgage  is
    49  placed,  the  term of the mortgage, the amortization rate, the principal
    50  amount of the mortgage, security and other terms and conditions  of  the
    51  mortgage.  The  commissioner shall set a rental value for any unit occu-
    52  pied by the owner or a person related to the owner or unoccupied at  the
    53  owner's  choice  for more than one month at the last regulated rent plus
    54  the minimum number of guidelines increases or, if no such regulated rent
    55  existed or is known, the commissioner shall  impute  a  rent  consistent
    56  with  other rents in the building. The amount of hardship increase shall
        A. 2356                            10
     1  be such as may be required to maintain the annual gross rent  income  as
     2  provided  by  this  paragraph.  The  division shall not grant a hardship
     3  application under this paragraph or paragraph four of  this  subdivision
     4  for  a  period of three years subsequent to granting a hardship applica-
     5  tion under the provisions of  this  paragraph.  The  collection  of  any
     6  increase  in  the  rent  for  any housing accommodation pursuant to this
     7  paragraph shall not exceed six percent in any year  from  the  effective
     8  date  of  the order granting the increase over the rent set forth in the
     9  schedule of gross rents, with collectability of any dollar excess  above
    10  said  sum  to  be  spread forward in similar increments and added to the
    11  rent as established or set in future  years.  No  application  shall  be
    12  approved unless the owner's equity in such building exceeds five percent
    13  of: (i) the arms length purchase price of the property; (ii) the cost of
    14  any  capital  improvements  for  which  the  owner  has  not collected a
    15  surcharge; (iii) any repayment of principal of any mortgage or loan used
    16  to finance the purchase of the property or any capital improvements  for
    17  which  the owner has not collected a surcharge; and (iv) any increase in
    18  the equalized assessed value of the property which  occurred  subsequent
    19  to  the first valuation of the property after purchase by the owner. For
    20  the purposes of this paragraph, owner's equity shall mean the sum of (i)
    21  the purchase price of the property less the principal of any mortgage or
    22  loan used to finance the purchase of the property, (ii) the cost of  any
    23  capital  improvement  for  which the owner has not collected a surcharge
    24  less the principal of any mortgage or loan used to finance said improve-
    25  ment, (iii) any repayment of the principal of any mortgage or loan  used
    26  to  finance  the purchase of the property or any capital improvement for
    27  which the owner has not collected a surcharge, and (iv) any increase  in
    28  the  equalized  assessed value of the property which occurred subsequent
    29  to the first valuation of the property after purchase by  the  owner[.];
    30  or
    31    (6) notwithstanding paragraph three of this subdivision there shall be
    32  no  adjustment for any major capital improvement funded in any part from
    33  moneys provided by the New York state energy  research  and  development
    34  authority.
    35    § 8. Paragraph 1 of subdivision g of section 26-405 of the administra-
    36  tive  code  of  the city of New York is amended by adding a new subpara-
    37  graph (p) to read as follows:
    38    (p) Notwithstanding subparagraph (g) or (k) of this  paragraph,  there
    39  shall  be  no  adjustment  for  any major capital improvement or for any
    40  other expenditures to improve, restore or  preserve  the  quality  of  a
    41  structure if such major capital improvement or such other expenditure is
    42  funded  in  any  part  from moneys provided by the New York state energy
    43  research and development authority.
    44    § 9. This act shall take effect immediately; provided that the  amend-
    45  ments  to section 26-405 of the city rent and rehabilitation law made by
    46  sections one, two and eight of this act shall remain in full  force  and
    47  effect only so long as the public emergency requiring the regulation and
    48  control  of  residential  rents  and evictions continues, as provided in
    49  subdivision 3 of section 1 of the local emergency housing  rent  control
    50  act; provided that the amendments to section 26-511 of the rent stabili-
    51  zation  law  of  nineteen  hundred sixty-nine made by sections three and
    52  four of this act shall expire on the same date as such law  expires  and
    53  shall  not  affect  the expiration of such law as provided under section
    54  26-520 of such law, as from time to  time  amended;  provided  that  the
    55  amendments  to section 6 of the emergency tenant protection act of nine-
    56  teen seventy-four made by sections five and  seven  of  this  act  shall
        A. 2356                            11
     1  expire  on  the  same  date as such act expires and shall not affect the
     2  expiration of such act as provided in section 17 of chapter 576  of  the
     3  laws of 1974, as from time to time amended; and provided that the amend-
     4  ments  to  section  4  of the emergency housing rent control law made by
     5  section six of this act shall expire  on  the  same  date  as  such  law
     6  expires  and  shall not affect the expiration of such law as provided in
     7  subdivision 2 of section 1 of chapter 274 of the laws of 1946.