Bill Text: NY A08886 | 2017-2018 | General Assembly | Amended

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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: (Engrossed - Dead) 2018-05-14 - REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT [A08886 Detail]

Download: New_York-2017-A08886-Amended.html

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                STATE OF NEW YORK
        ________________________________________________________________________
                                         8886--A
                   IN ASSEMBLY
                                     January 5, 2018
                                       ___________
        Introduced  by  M.  of  A.  O'DONNELL  --  read once and referred to the
          Committee on Housing -- 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 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
    23  to  the  prerequisites for major capital improvement rent increases. Any
    24  repair or replacement intended to maintain an existing service shall not
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD13894-02-8
        A. 8886--A                          2
     1  be eligible for a major capital improvement rent increase.  No  applica-
     2  tion  for  a  major capital improvement rent increase may be approved if
     3  there exist any outstanding hazardous violations  at  the  time  of  the
     4  consideration of such application, as determined pursuant to regulations
     5  of  the division of housing and community renewal or any agency adminis-
     6  tering and enforcing a building code in the jurisdiction  in  which  the
     7  property  is located, unless it is determined by the division of housing
     8  and community renewal that such work is essential to the alleviation  of
     9  the  violations  and  such approval is consistent with the provisions of
    10  this section. Except in the case of emergency or good cause,  the  owner
    11  of  the  property  shall  file,  not  less  than  thirty days before the
    12  commencement of the improvement, with the division of housing and commu-
    13  nity renewal a statement containing information outlining the  scope  of
    14  work, expected date of completion for such work and an affidavit setting
    15  forth  the following information: (a) every owner of record and owner of
    16  a substantial interest in the property or entity owning the property  or
    17  sponsoring  the  improvement;  and  (b)  a  statement  that none of such
    18  persons had, within the five years prior to the improvement, been  found
    19  to  have  harassed or unlawfully evicted tenants by judgment or determi-
    20  nation of a court or agency under the penal law, any state or local  law
    21  regulating  rents  or  any  state or local law relating to harassment of
    22  tenants or unlawful eviction. Upon receipt of  the  scope  of  work  and
    23  affidavit  provided  for  herein,  the division of housing and community
    24  renewal shall provide the tenants in occupancy in  such  buildings  with
    25  such  information.  The division of housing and community renewal shall,
    26  in addition, implement procedures including, but not limited to, elicit-
    27  ing tenant comments to determine whether major capital improvement reha-
    28  bilitation work has been  satisfactorily  completed.  No  major  capital
    29  improvement  rent increase shall become effective until any defective or
    30  deficient rehabilitation work has been cured. The increase permitted for
    31  such capital improvement shall be collected as a  monthly  surcharge  to
    32  the  maximum  rent. It shall be separately designated and billed as such
    33  and shall not be compounded by any other adjustment to the maximum rent.
    34  The surcharge allocable to each apartment shall be an  amount  equal  to
    35  the  cost  of  the  improvement  divided  by eighty-four, divided by the
    36  number of rooms in the building, and then multiplied by  the  number  of
    37  rooms  in  such  apartment; provided that the surcharge allocable to any
    38  apartment in any one year may not exceed an amount equal to six  percent
    39  of  the  monthly  rent  collected by the owner for such apartment as set
    40  forth in the schedule of gross rents. Any excess above said six  percent
    41  shall  be  carried  forward  and  collected in future years as a further
    42  surcharge not to exceed an additional six percent in any one year period
    43  until the total surcharge equals the amount it would have  been  if  the
    44  aforementioned six percent limitation did not apply; or
    45    §  2.  Subparagraph  (k)  of  paragraph  1 of subdivision g of section
    46  26-405 of the administrative code of the city of New York, as amended by
    47  chapter 749 of the laws of 1990, is amended to read as follows:
    48    (k) The landlord has incurred, since January first,  nineteen  hundred
    49  seventy,  in connection with and in addition to a concurrent major capi-
    50  tal improvement pursuant to subparagraph (g) of  this  paragraph,  other
    51  expenditures  to  improve, restore or preserve the quality of the struc-
    52  ture. An adjustment under this subparagraph shall  be  granted  only  if
    53  such  improvements  represent  an  expenditure equal to at least ten per
    54  centum of the total operating and maintenance expenses for the preceding
    55  year. An adjustment under this subparagraph shall be in addition to  any
    56  adjustment  granted  for  the  concurrent  major capital improvement and
        A. 8886--A                          3
     1  shall be [in an amount sufficient to amortize the cost of  the  improve-
     2  ments  pursuant  to  this  subparagraph over a seven-year period] imple-
     3  mented in the same manner as such major capital improvement as a further
     4  surcharge to the maximum rent.
     5    § 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
     6  tive code of the city of New York, as amended by section 29 of part A of
     7  chapter 20 of the laws of 2015, is amended to read as follows:
     8    (6)  provides  criteria whereby the commissioner may act upon applica-
     9  tions 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 [(a) as] in regard to  hardship  applications,  for  a
    12  finding that the level of fair rent increase is not sufficient to enable
    13  the  owner  to maintain approximately the same average annual net income
    14  (which shall be computed without regard to debt service, financing costs
    15  or management fees) for the three year period ending on  or  within  six
    16  months  of  the  date  of  an  application  pursuant to such criteria as
    17  compared with annual net income, which prevailed on the average over the
    18  period nineteen hundred sixty-eight through nineteen hundred seventy, or
    19  for the first three years of operation if  the  building  was  completed
    20  since  nineteen  hundred sixty-eight or for the first three fiscal years
    21  after a transfer of title to a new owner  provided  the  new  owner  can
    22  establish  to  the  satisfaction  of  the  commissioner  that  he or she
    23  acquired title to the building as a result of a bona fide  sale  of  the
    24  entire  building  and  that  the new owner is unable to obtain requisite
    25  records for the fiscal years nineteen hundred sixty-eight through  nine-
    26  teen hundred seventy despite diligent efforts to obtain same from prede-
    27  cessors  in  title  and  further provided that the new owner can provide
    28  financial data covering a minimum of six years under his or her  contin-
    29  uous  and uninterrupted operation of the building to meet the three year
    30  to three year comparative test periods herein provided[; and (b)  as  to
    31  completed  building-wide  major capital improvements, for a finding that
    32  such improvements are deemed depreciable under the Internal Revenue Code
    33  and that the cost is to be amortized over an  eight-year  period  for  a
    34  building  with  thirty-five  or fewer housing accommodations, or a nine-
    35  year period for a building with more than thirty-five  housing  accommo-
    36  dations,  for  any  determination  issued by the division of housing and
    37  community renewal after the effective date of  the  rent  act  of  2015,
    38  based  upon  cash purchase price exclusive of interest or service charg-
    39  es].   Notwithstanding anything to the  contrary  contained  herein,  no
    40  hardship  increase  granted pursuant to this paragraph shall, when added
    41  to the annual gross rents, as determined by the commissioner, exceed the
    42  sum of, (i) the annual operating expenses, (ii) an allowance for manage-
    43  ment services as determined by the  commissioner,  (iii)  actual  annual
    44  mortgage debt service (interest and amortization) on its indebtedness to
    45  a  lending  institution,  an  insurance  company,  a  retirement fund or
    46  welfare fund which is operated under the supervision of the  banking  or
    47  insurance  laws  of the state of New York or the United States, and (iv)
    48  eight and one-half percent of that portion of the fair market  value  of
    49  the  property  which exceeds the unpaid principal amount of the mortgage
    50  indebtedness referred to in subparagraph (iii) of this  paragraph.  Fair
    51  market  value  for the purposes of this paragraph shall be six times the
    52  annual gross rent. The collection of any increase in the stabilized rent
    53  for any apartment pursuant  to  this  paragraph  shall  not  exceed  six
    54  percent  in  any  year from the effective date of the order granting the
    55  increase over the rent set forth in the schedule of  gross  rents,  with
    56  collectability  of any dollar excess above said sum to be spread forward
        A. 8886--A                          4
     1  in similar increments and added to the stabilized rent as established or
     2  set in future years;
     3    § 4. Subdivision c of section 26-511 of the administrative code of the
     4  city  of New York is amended by adding three new paragraphs 6-b, 6-c and
     5  6-d to read as follows:
     6    (6-b) provides criteria whereby the commissioner may act upon applica-
     7  tion by owners for increases  in  excess  of  the  level  of  fair  rent
     8  increase  established under this law provided, however, that such crite-
     9  ria shall provide that:
    10    (i) as to completed building-wide major capital  improvements,  first,
    11  that  a  finding that such improvements are deemed depreciable under the
    12  internal revenue code and such improvements are required for the  opera-
    13  tion or preservation of the structure;
    14    (ii)  however,  no  major  capital  improvement  rent increase will be
    15  approved by the division of housing and  community  renewal  unless  the
    16  work  performed  is an enhancement or upgrade to a housing accommodation
    17  or service therein; or is an addition to such housing accommodation  and
    18  otherwise  eligible  according  to  the  prerequisites for major capital
    19  improvement rent increases. Any repair or replacement intended to  main-
    20  tain  an  existing  service  shall  not  be eligible for a major capital
    21  improvement rent increase;
    22    (iii) no application for a major capital improvement rent increase may
    23  be approved if there exist any outstanding hazardous violations  at  the
    24  time of the consideration of such application, as determined pursuant to
    25  regulations  of  the  division  of  housing and community renewal or any
    26  agency administering and enforcing a building code in  the  jurisdiction
    27  in  which  the property is located, unless it is determined by the divi-
    28  sion of housing and community renewal that such work is essential to the
    29  alleviation of the violations and such approval is consistent  with  the
    30  provisions  of  this  section.  Except  in the case of emergency or good
    31  cause, the owner of the property shall file, not less than  thirty  days
    32  before the commencement of the improvement, with the division of housing
    33  and  community  renewal a statement containing information outlining the
    34  scope of work, expected date of completion for such work and an  affida-
    35  vit setting forth the following information:
    36    (A)  every  owner of record and owner of a substantial interest in the
    37  property or entity owning the property or  sponsoring  the  improvement;
    38  and
    39    (B)  a  statement that none of such persons had, within the five years
    40  prior to the improvement, been found  to  have  harassed  or  unlawfully
    41  evicted  tenants by judgment or determination of a court or agency under
    42  the penal law, any state or local law regulating rents or any  state  or
    43  local law relating to harassment of tenants or unlawful eviction.
    44    Upon  receipt  of the scope of work and affidavit provided for herein,
    45  the division of housing and community renewal shall provide the  tenants
    46  in  occupancy  in  such buildings with such information. The division of
    47  housing and community renewal shall, in addition,  implement  procedures
    48  including,  but  not  limited to, eliciting tenant comments to determine
    49  whether major capital improvement rehabilitation work has been satisfac-
    50  torily completed. No  major  capital  improvement  rent  increase  shall
    51  become  effective  until  any defective or deficient rehabilitation work
    52  has been cured.
    53    (6-c) the increase permitted for such  capital  improvement  shall  be
    54  collected  as  a monthly surcharge to the legal regulated rent. It shall
    55  be separately designated and billed as such and shall not be  compounded
    56  by  any  annual  adjustment of the level of fair rent provided for under
        A. 8886--A                          5
     1  subdivision b of section 26-510 of this law. The surcharge allocable  to
     2  each  apartment  shall be an amount equal to the cost of the improvement
     3  divided by eighty-four divided by the number of rooms in  the  building,
     4  and  then  multiplied by the number of rooms in such apartment; provided
     5  that the surcharge allocable to any apartment, in any one year  may  not
     6  exceed  an  amount equal to six percent of the monthly rent collected by
     7  the owner for such apartment as set  forth  in  the  schedule  of  gross
     8  rents.  Any  excess  above said six percent shall be carried forward and
     9  collected in future years as a further surcharge not to exceed an  addi-
    10  tional  six  percent  in  any  one year period until the total surcharge
    11  equals the amount it would have been if the aforementioned  six  percent
    12  limitation did not apply.
    13    (6-d)  collection  of  surcharges  in excess of the level of fair rent
    14  authorized pursuant to paragraph six-b and  six-c  of  this  subdivision
    15  shall  cease  when the owner has recovered the cost of the major capital
    16  improvement.
    17    § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
    18  576 of the laws of 1974, constituting the  emergency  tenant  protection
    19  act  of  nineteen  seventy-four,  as  amended by section 30 of part A of
    20  chapter 20 of the laws of 2015, is amended to read as follows:
    21    (3) (i) collection of surcharges in addition to  the  legal  regulated
    22  rent  authorized  pursuant  to subparagraph (ii) of this paragraph shall
    23  cease when the owner  has  recovered  the  cost  of  the  major  capital
    24  improvement;
    25    (ii) there has been since January first, nineteen hundred seventy-four
    26  a major capital improvement [required for the operation, preservation or
    27  maintenance  of  the structure. An adjustment under this paragraph shall
    28  be in an amount sufficient to amortize  the  cost  of  the  improvements
    29  pursuant to this paragraph over an eight-year period for a building with
    30  thirty-five or fewer housing accommodations, or a nine-year period for a
    31  building  with  more  than  thirty-five  housing accommodations, for any
    32  determination issued by the division of housing  and  community  renewal
    33  after  the  effective  date of the rent act of 2015,]; provided that the
    34  commissioner first finds that such improvements are  deemed  depreciable
    35  under  the  internal revenue code and such improvements are required for
    36  the operation or preservation of the structure. However, no major  capi-
    37  tal  improvement rent increase will be approved by the division of hous-
    38  ing and community renewal unless the work performed is an enhancement or
    39  upgrade to a housing accommodation or service therein; or is an addition
    40  to such housing accommodation and otherwise eligible  according  to  the
    41  prerequisites  for  major capital improvement rent increases. Any repair
    42  or replacement intended to maintain an existing  service  shall  not  be
    43  eligible  for  a major capital improvement rent increase. No application
    44  for a major capital improvement rent increase may be approved  if  there
    45  exist  any outstanding hazardous violations at the time of the consider-
    46  ation of such application, as determined pursuant to regulations of  the
    47  division  of  housing  and community renewal or any agency administering
    48  and enforcing a building code in the jurisdiction in which the  property
    49  is  located,  unless  it  is  determined  by the division of housing and
    50  community renewal that such work is essential to the alleviation of  the
    51  violations  and  such approval is consistent with the provisions of this
    52  section. Except in the case of emergency or good cause, the owner of the
    53  property shall file, not less than thirty days before  the  commencement
    54  of the improvement, with the division of housing and community renewal a
    55  statement  containing  information outlining the scope of work, expected
    56  date of completion for such work and  an  affidavit  setting  forth  the
        A. 8886--A                          6
     1  following information: (a) every owner of record and owner of a substan-
     2  tial  interest in the property or entity owning the property or sponsor-
     3  ing the improvement; and (b) a statement that none of such persons  had,
     4  within  the  five  years  prior  to  the improvement, been found to have
     5  harassed or unlawfully evicted tenants by judgment or determination of a
     6  court or agency under the penal law, any state or local  law  regulating
     7  rents  or  any  state  or local law relating to harassment of tenants or
     8  unlawful eviction. Upon receipt of  the  scope  of  work  and  affidavit
     9  provided for herein, the division of housing and community renewal shall
    10  provide  the  tenants  in occupancy in such buildings with such informa-
    11  tion. The division of housing and community renewal shall, in  addition,
    12  implement  procedures  including,  but  not limited to, eliciting tenant
    13  comments to determine whether major capital  improvement  rehabilitation
    14  work  has  been  satisfactorily  completed. No major capital improvement
    15  rent increase shall become effective until any  defective  or  deficient
    16  rehabilitation  work  has  been  cured.  The increase permitted for such
    17  capital improvement shall be collected as a  monthly  surcharge  to  the
    18  legal  regulated  rent.  It shall be separately designated and billed as
    19  such and shall not be compounded by any annual rent  adjustment  author-
    20  ized  by the rent guidelines board under this act. The surcharge alloca-
    21  ble to each apartment shall be an  amount  equal  to  the  cost  of  the
    22  improvement  divided  by  eighty-four, divided by the number of rooms in
    23  the building, and then multiplied by the number of rooms in such  apart-
    24  ment;  provided that the surcharge allocable to any apartment in any one
    25  year may not exceed an amount equal to six percent of the  monthly  rent
    26  collected  by  the owner for such apartment as set forth in the schedule
    27  of gross rents. Any excess above  said  six  percent  shall  be  carried
    28  forward  and  collected  in  future  years as a further surcharge not to
    29  exceed an additional six percent in any one year period until the  total
    30  surcharge equals the amount it would have been if the aforementioned six
    31  percent limitation did not apply, or
    32    § 6. The second undesignated paragraph of paragraph (a) of subdivision
    33  4  of  section  4  of  chapter 274 of the laws of 1946, constituting the
    34  emergency housing rent control law, as amended by section 25 of  part  B
    35  of  chapter 97 of the laws of 2011, subparagraph 7 as amended by section
    36  32 of part A of chapter 20 of the laws of 2015, is amended  to  read  as
    37  follows:
    38    No application for adjustment of maximum rent based upon a sales price
    39  valuation  shall  be filed by the landlord under this subparagraph prior
    40  to six months from the date of such sale of the property.  In  addition,
    41  no  adjustment  ordered  by  the  commission based upon such sales price
    42  valuation shall be effective prior to one year from  the  date  of  such
    43  sale.  Where,  however,  the assessed valuation of the land exceeds four
    44  times the assessed valuation of the buildings  thereon,  the  commission
    45  may determine a valuation of the property equal to five times the equal-
    46  ized  assessed  valuation  of  the  buildings,  for the purposes of this
    47  subparagraph. The commission may make a determination that the valuation
    48  of the property is an amount  different  from  such  equalized  assessed
    49  valuation  where  there  is  a  request for a reduction in such assessed
    50  valuation currently pending; or where there has been a reduction in  the
    51  assessed valuation for the year next preceding the effective date of the
    52  current  assessed  valuation  in effect at the time of the filing of the
    53  application. Net annual return shall be the amount by which  the  earned
    54  income  exceeds  the operating expenses of the property, excluding mort-
    55  gage interest and amortization, and excluding  allowances  for  obsoles-
    56  cence  and  reserves, but including an allowance for depreciation of two
        A. 8886--A                          7
     1  per centum of the value of the buildings exclusive of the land,  or  the
     2  amount  shown  for  depreciation of the buildings in the latest required
     3  federal income tax return, whichever is lower; provided,  however,  that
     4  (1)  no  allowance  for  depreciation of the buildings shall be included
     5  where the buildings have been fully depreciated for federal  income  tax
     6  purposes  or  on the books of the owner; or (2) the landlord who owns no
     7  more than four rental units within the state has not been fully  compen-
     8  sated  by  increases  in  rental income sufficient to offset unavoidable
     9  increases in property taxes, fuel, utilities, insurance and repairs  and
    10  maintenance, excluding mortgage interest and amortization, and excluding
    11  allowances  for  depreciation,  obsolescence  and  reserves,  which have
    12  occurred since the federal date determining the maximum rent or the date
    13  the property was acquired by the present owner, whichever is  later;  or
    14  (3) the landlord operates a hotel or rooming house or owns a cooperative
    15  apartment  and  has  not  been  fully compensated by increases in rental
    16  income from the controlled housing accommodations sufficient  to  offset
    17  unavoidable increases in property taxes and other costs as are allocable
    18  to  such controlled housing accommodations, including costs of operation
    19  of such hotel or rooming house,  but  excluding  mortgage  interest  and
    20  amortization,  and  excluding  allowances for depreciation, obsolescence
    21  and reserves, which have occurred since the federal date determining the
    22  maximum rent or the date the landlord commenced  the  operation  of  the
    23  property, whichever is later; or (4) the landlord and tenant voluntarily
    24  enter into a valid written lease in good faith with respect to any hous-
    25  ing  accommodation,  which lease provides for an increase in the maximum
    26  rent not in excess of fifteen per centum and for a term of not less than
    27  two years, except that where such lease  provides  for  an  increase  in
    28  excess  of  fifteen  per  centum,  the  increase  shall be automatically
    29  reduced to fifteen per centum; or (5) the landlord and tenant by  mutual
    30  voluntary  written agreement agree to a substantial increase or decrease
    31  in dwelling space or a change in the services, furniture, furnishings or
    32  equipment provided in the housing accommodations; provided that an owner
    33  shall be entitled to a rent increase where there has been a  substantial
    34  modification  or  increase  of  dwelling  space  or  an  increase in the
    35  services, or installation of new equipment or improvements or new furni-
    36  ture or furnishings provided in or to a tenant's housing  accommodation.
    37  The  permanent  increase  in  the  maximum rent for the affected housing
    38  accommodation shall be one-fortieth, in the  case  of  a  building  with
    39  thirty-five  or  fewer  housing  accommodations, or one-sixtieth, in the
    40  case of a building with more  than  thirty-five  housing  accommodations
    41  where  such  permanent increase takes effect on or after September twen-
    42  ty-fourth, two thousand eleven, of the total cost incurred by the  land-
    43  lord  in  providing  such  modification  or  increase in dwelling space,
    44  services, furniture, furnishings or equipment,  including  the  cost  of
    45  installation,  but  excluding  finance  charges provided further that an
    46  owner who is entitled to a rent increase pursuant to this  clause  shall
    47  not  be  entitled to a further rent increase based upon the installation
    48  of similar equipment, or new furniture or furnishings within the  useful
    49  life  of  such new equipment, or new furniture or furnishings. The owner
    50  shall give written notice to  the  commission  of  any  such  adjustment
    51  pursuant to this clause; or (6) there has been, since March first, nine-
    52  teen  hundred  fifty,  an  increase  in  the rental value of the housing
    53  accommodations as a result of a substantial rehabilitation of the build-
    54  ing or housing accommodation therein which materially adds to the  value
    55  of  the  property  or  appreciably prolongs its life, excluding ordinary
    56  repairs,  maintenance  and  replacements;  or  (7)  (i)  collection   of
        A. 8886--A                          8
     1  surcharges  to the maximum rent authorized pursuant to item (ii) of this
     2  clause shall cease when the owner has recovered the cost  of  the  major
     3  capital  improvement;  (ii)  there  has been since March first, nineteen
     4  hundred  fifty, a major capital improvement [required for the operation,
     5  preservation or maintenance of the structure; which for any order of the
     6  commissioner issued after the effective date of the rent act of 2015 the
     7  cost of such improvement shall be amortized over  an  eight-year  period
     8  for  buildings with thirty-five or fewer units or a nine year period for
     9  buildings with more  than  thiry-five  units,  or];  provided  that  the
    10  commissioner  first  finds that such improvements are deemed depreciable
    11  under the internal revenue code and such improvements are  required  for
    12  the  operation or preservation of the structure. However, no major capi-
    13  tal improvement rent increase will be approved by the division of  hous-
    14  ing and community renewal unless the work performed is an enhancement or
    15  upgrade to a housing accommodation or service therein; or is an addition
    16  to  such  housing  accommodation and otherwise eligible according to the
    17  prerequisites for major capital improvement rent increases.  Any  repair
    18  or  replacement  intended  to  maintain an existing service shall not be
    19  eligible for a major capital improvement rent increase.  No  application
    20  for  a  major capital improvement rent increase may be approved if there
    21  exist any outstanding hazardous violations at the time of the  consider-
    22  ation  of such application, as determined pursuant to regulations of the
    23  division of housing and community renewal or  any  agency  administering
    24  and  enforcing a building code in the jurisdiction in which the property
    25  is located, unless it is determined  by  the  division  of  housing  and
    26  community  renewal that such work is essential to the alleviation of the
    27  violations and such approval is consistent with the provisions  of  this
    28  section. Except in the case of emergency or good cause, the owner of the
    29  property  shall  file, not less than thirty days before the commencement
    30  of the improvement, with the division of housing and community renewal a
    31  statement containing information outlining the scope of  work,  expected
    32  date  of  completion  for  such  work and an affidavit setting forth the
    33  following information: (a) every owner of record and owner of a substan-
    34  tial interest in the property or entity owning the property or  sponsor-
    35  ing  the improvement; and (b) a statement that none of such persons had,
    36  within the five years prior to  the  improvement,  been  found  to  have
    37  harassed or unlawfully evicted tenants by judgment or determination of a
    38  court  or  agency under the penal law, any state or local law regulating
    39  rents or any state or local law relating to  harassment  of  tenants  or
    40  unlawful  eviction.  Upon  receipt  of  the  scope of work and affidavit
    41  provided for herein, the division of housing and community renewal shall
    42  provide the tenants in occupancy in such buildings  with  such  informa-
    43  tion.  The division of housing and community renewal shall, in addition,
    44  implement procedures including, but not  limited  to,  eliciting  tenant
    45  comments  to  determine whether major capital improvement rehabilitation
    46  work has been satisfactorily completed.  No  major  capital  improvement
    47  rent  increase  shall  become effective until any defective or deficient
    48  rehabilitation work has been cured.  The  increase  permitted  for  such
    49  capital  improvement  shall  be  collected as a monthly surcharge to the
    50  maximum rent. It shall be separately designated and billed as  such  and
    51  shall not be compounded by any other adjustment to the maximum rent. The
    52  surcharge  allocable  to  each apartment shall be an amount equal to the
    53  cost of the improvement divided by eighty-four, divided by the number of
    54  rooms in the building, and then multiplied by the  number  of  rooms  in
    55  such  apartment;  provided that the surcharge allocable to any apartment
    56  in any one year may not exceed an amount equal to  six  percent  of  the
        A. 8886--A                          9
     1  monthly  rent  collected by the owner for such apartment as set forth in
     2  the schedule of gross rents.  Any excess above said six percent shall be
     3  carried forward and collected in future years as a further surcharge not
     4  to  exceed  an  additional  six percent in any one year period until the
     5  total surcharge equals the amount it would have been  if  the  aforemen-
     6  tioned six percent limitation did not apply; or (8) there has been since
     7  March  first, nineteen hundred fifty, in structures containing more than
     8  four housing accommodations, other improvements made  with  the  express
     9  consent  of the tenants in occupancy of at least seventy-five per centum
    10  of the housing accommodations, provided,  however,  that  no  adjustment
    11  granted  hereunder  shall  exceed  fifteen per centum unless the tenants
    12  have agreed to a higher percentage of increase, as herein  provided;  or
    13  (9) there has been, since March first, nineteen hundred fifty, a sublet-
    14  ting  without  written  consent  from the landlord or an increase in the
    15  number of adult occupants who are not members of the immediate family of
    16  the tenant, and the  landlord  has  not  been  compensated  therefor  by
    17  adjustment  of  the  maximum rent by lease or order of the commission or
    18  pursuant to the federal act; or (10) the presence of unique or  peculiar
    19  circumstances  materially  affecting  the maximum rent has resulted in a
    20  maximum rent which is  substantially  lower  than  the  rents  generally
    21  prevailing  in  the same area for substantially similar housing accommo-
    22  dations.
    23    § 7. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
    24  576 of the laws of 1974, constituting the  emergency  tenant  protection
    25  act  of  nineteen seventy-four, as amended by chapter 102 of the laws of
    26  1984, is amended and a new paragraph 6 is added to read as follows:
    27    (5) as an alternative to the hardship application provided under para-
    28  graph four of this subdivision, owners of buildings acquired by the same
    29  owner or a related entity owned by the same principals three years prior
    30  to the date of application may apply to the division  for  increases  in
    31  excess  of the level of applicable guideline increases established under
    32  this law based on a finding by  the  commissioner  that  such  guideline
    33  increases  are  not sufficient to enable the owner to maintain an annual
    34  gross rent income for such building which exceeds the  annual  operating
    35  expenses  of  such  building  by a sum equal to at least five percent of
    36  such gross rent.  For the purposes of this paragraph, operating expenses
    37  shall consist of the actual, reasonable, costs of  fuel,  labor,  utili-
    38  ties,  taxes,  other  than  income  or  corporate franchise taxes, fees,
    39  permits, necessary contracted services and non-capital  repairs,  insur-
    40  ance, parts and supplies, management fees and other administrative costs
    41  and  mortgage  interest.  For  the  purposes of this paragraph, mortgage
    42  interest shall be deemed to  mean  interest  on  a  bona  fide  mortgage
    43  including  an  allocable portion of charges related thereto. Criteria to
    44  be considered in determining a bona fide mortgage other than an institu-
    45  tional mortgage shall include[;]: condition of the property, location of
    46  the property, the existing mortgage market at the time the  mortgage  is
    47  placed,  the  term of the mortgage, the amortization rate, the principal
    48  amount of the mortgage, security and other terms and conditions  of  the
    49  mortgage.  The  commissioner shall set a rental value for any unit occu-
    50  pied by the owner or a person related to the owner or unoccupied at  the
    51  owner's  choice  for more than one month at the last regulated rent plus
    52  the minimum number of guidelines increases or, if no such regulated rent
    53  existed or is known, the commissioner shall  impute  a  rent  consistent
    54  with  other rents in the building. The amount of hardship increase shall
    55  be such as may be required to maintain the annual gross rent  income  as
    56  provided  by  this  paragraph.  The  division shall not grant a hardship
        A. 8886--A                         10
     1  application under this paragraph or paragraph four of  this  subdivision
     2  for  a  period of three years subsequent to granting a hardship applica-
     3  tion under the provisions of  this  paragraph.  The  collection  of  any
     4  increase  in  the  rent  for  any housing accommodation pursuant to this
     5  paragraph shall not exceed six percent in any year  from  the  effective
     6  date  of  the order granting the increase over the rent set forth in the
     7  schedule of gross rents, with collectability of any dollar excess  above
     8  said  sum  to  be  spread forward in similar increments and added to the
     9  rent as established or set in future  years.  No  application  shall  be
    10  approved unless the owner's equity in such building exceeds five percent
    11  of: (i) the arms length purchase price of the property; (ii) the cost of
    12  any  capital  improvements  for  which  the  owner  has  not collected a
    13  surcharge; (iii) any repayment of principal of any mortgage or loan used
    14  to finance the purchase of the property or any capital improvements  for
    15  which  the owner has not collected a surcharge; and (iv) any increase in
    16  the equalized assessed value of the property which  occurred  subsequent
    17  to  the first valuation of the property after purchase by the owner. For
    18  the purposes of this paragraph, owner's equity shall mean the sum of (i)
    19  the purchase price of the property less the principal of any mortgage or
    20  loan used to finance the purchase of the property, (ii) the cost of  any
    21  capital  improvement  for  which the owner has not collected a surcharge
    22  less the principal of any mortgage or loan used to finance said improve-
    23  ment, (iii) any repayment of the principal of any mortgage or loan  used
    24  to  finance  the purchase of the property or any capital improvement for
    25  which the owner has not collected a surcharge, and (iv) any increase  in
    26  the  equalized  assessed value of the property which occurred subsequent
    27  to the first valuation of the property after purchase by  the  owner[.];
    28  or
    29    (6) notwithstanding paragraph three of this subdivision there shall be
    30  no  adjustment for any major capital improvement funded in any part from
    31  moneys provided by the New York state energy  research  and  development
    32  authority.
    33    § 8. Paragraph 1 of subdivision g of section 26-405 of the administra-
    34  tive  code  of  the city of New York is amended by adding a new subpara-
    35  graph (p) to read as follows:
    36    (p) Notwithstanding subparagraph (g) or (k) of this  paragraph,  there
    37  shall  be  no  adjustment  for  any major capital improvement or for any
    38  other expenditures to improve, restore or  preserve  the  quality  of  a
    39  structure if such major capital improvement or such other expenditure is
    40  funded  in  any  part  from moneys provided by the New York state energy
    41  research and development authority.
    42    § 9. This act shall take effect immediately; provided that the  amend-
    43  ments  to section 26-405 of the city rent and rehabilitation law made by
    44  sections one, two and eight of this act shall remain in full  force  and
    45  effect only so long as the public emergency requiring the regulation and
    46  control  of  residential  rents  and evictions continues, as provided in
    47  subdivision 3 of section 1 of the local emergency housing  rent  control
    48  act; provided that the amendments to section 26-511 of the rent stabili-
    49  zation  law  of  nineteen  hundred sixty-nine made by sections three and
    50  four of this act shall expire on the same date as such law  expires  and
    51  shall  not  affect  the expiration of such law as provided under section
    52  26-520 of such law, as from time to  time  amended;  provided  that  the
    53  amendments  to section 6 of the emergency tenant protection act of nine-
    54  teen seventy-four made by sections five and  seven  of  this  act  shall
    55  expire  on  the  same  date as such act expires and shall not affect the
    56  expiration of such act as provided in section 17 of chapter 576  of  the
        A. 8886--A                         11
     1  laws of 1974, as from time to time amended; and provided that the amend-
     2  ments  to  section  4  of the emergency housing rent control law made by
     3  section six of this act shall expire  on  the  same  date  as  such  law
     4  expires  and  shall not affect the expiration of such law as provided in
     5  subdivision 2 of section 1 of chapter 274 of the laws of 1946.