Bill Text: NY S01406 | 2023-2024 | General Assembly | Introduced
Bill Title: Eliminates rent increase for major capital improvements.
Spectrum: Partisan Bill (Democrat 18-0)
Status: (Introduced) 2024-01-03 - REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT [S01406 Detail]
Download: New_York-2023-S01406-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 1406 2023-2024 Regular Sessions IN SENATE January 11, 2023 ___________ Introduced by Sens. GIANARIS, BAILEY, BRESLIN, BRISPORT, CLEARE, GOUNARDES, HOYLMAN-SIGAL, JACKSON, LIU, MYRIE, PARKER, RAMOS, RIVERA, SALAZAR, SANDERS, SEPULVEDA, SERRANO, STAVISKY -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development AN ACT eliminating rent increases based on major capital improvements; to amend chapter 274 of the laws of 1946, constituting the emergency housing rent control law, the emergency tenant protection act of nine- teen seventy-four and the administrative code of the city of New York, in relation to eliminating rent increases to pay for major capital improvements The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Legislative findings and declaration of emergency. The 2 legislature hereby finds and declares that the serious public emergency 3 which led to the enactment of the existing laws regulating residential 4 rents and evictions continues to exist. The legislature further finds 5 that a majority of households currently occupying housing accommodations 6 subject to rent laws are rent-burdened; that permanent increases in 7 rents are no longer necessary to incentivize rental property owners to 8 make, or to compensate landlords for, necessary major capital improve- 9 ments; that publicly funded tax incentives and other subsidies are 10 available to rental property owners to support major capital improve- 11 ments; that value from major capital improvements accrues to rental 12 property owners through increased property values and sale prices; that, 13 due to market conditions in localities subject to rent laws, rental 14 property owners are already able to realize a reasonable return on their 15 investments in major capital improvements through increased property 16 values and sale prices alone; and that provisions for hardship increases 17 under existing rent laws already ensure that rental property owners are 18 able to operate rent regulated housing without incurring undue losses. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD05277-01-3S. 1406 2 1 The legislature further declares and finds that a substantial number of 2 the rent increases previously granted for major capital improvements 3 were tainted by inflated costs, particularly in the last seven years; 4 that the provision of rent increases for major capital improvements in 5 existing rent laws has resulted in exactions of unjust, unreasonable and 6 oppressive rents, as well as profiteering, speculation and other disrup- 7 tive practices tending to produce tenant dislocation and threats to the 8 public health, safety and general welfare; that such results were 9 contrary to the intent and purpose of the existing rent laws; that it is 10 therefore necessary to amend the rent laws to remove any provision of a 11 rent increase based upon major capital improvements; and that it is 12 additionally necessary to repeal rent increases based upon major capital 13 improvements that became effective within the previous seven years. 14 § 2. (a) The division of housing and community renewal, the "divi- 15 sion", shall administer the elimination of rent increases based upon 16 major capital improvements pursuant to this act. The division shall no 17 longer grant rent increases on the basis of major capital improvements 18 at buildings subject to rent regulation or rent stabilization pursuant 19 to the emergency rent control law, the emergency tenant protection act 20 and/or the administrative code of the city of New York. All pending 21 applications for rent increases based upon major capital improvements 22 shall be denied, and the division shall issue orders disposing of pend- 23 ing applications as necessary. 24 (b) Any rent increase based upon major capital improvements previously 25 ordered by the division, pursuant to the emergency rent control law, the 26 emergency tenant protection act and/or the administrative code of the 27 city of New York, with an effective date within the seven years prior to 28 the effective date of this act shall be repealed effective immediately 29 unless the division finds a basis for limiting the repeal pursuant to 30 subdivision (d) of this section. For all affected housing accommo- 31 dations, the division shall determine what the present legal rent would 32 be for each such accommodation if the division had not ordered any rent 33 increases based upon major capital improvements during the repeal peri- 34 od, and this amount shall be the proposed new legal rent. 35 (c) Within 180 days of the effective date of this act, the division of 36 housing and community renewal shall determine the proposed new legal 37 rents for all affected housing accommodations pursuant to subdivision 38 (b) of this section and shall also provide written notification to all 39 current owners and tenants of affected accommodations as to the amount 40 of the proposed new legal rents, the basis for the department's determi- 41 nation, and the time for each affected party to submit additional infor- 42 mation that the division shall consider before issuing a final order 43 determining the new legal rents, which shall not be less than 45 days. 44 Unless an owner of an affected building has submitted a timely applica- 45 tion to the division for a limitation pursuant to subdivision (d) of 46 this section, the division shall issue a final order determining the new 47 legal rents for affected housing accommodations within 365 days of the 48 effective date of this act. 49 (d) (1) Within 90 days of receiving written notice of proposed new 50 legal rents from the division pursuant to subdivision (c) of this 51 section, a building owner may apply to the commissioner of housing and 52 community renewal for an order limiting the amount of the repeal of rent 53 increases under this act based upon a finding by the commissioner of 54 housing and community renewal that the proposed new legal rents are not 55 sufficient to enable the owner to maintain an annual gross rent income 56 for such building which exceeds the annual operating expenses of suchS. 1406 3 1 building by a sum equal to at least five percent of such gross rent. In 2 buildings for which the commissioner of housing and community renewal 3 finds that the proposed new legal rents are not sufficient to enable the 4 owner to maintain an annual gross rent income for such building which 5 exceeds the annual operating expenses of such building by a sum equal to 6 at least five percent of such gross rent, the repeal amount of rent 7 increases based upon major capital improvements shall be limited to an 8 amount such that the annual operating expenses of the building do not 9 exceed ninety-five percent of the new proposed annual gross rent income 10 for such building. 11 (2) For the purposes of this subdivision, operating expenses shall 12 consist of the actual, reasonable, costs of fuel, labor, utilities, 13 taxes, other than income or corporate franchise taxes, fees, permits, 14 necessary contracted services and noncapital repairs, insurance, parts 15 and supplies, management fees and other administrative costs and mort- 16 gage interest. For the purposes of this subdivision, mortgage interest 17 shall be deemed to mean interest on a bona fide mortgage including an 18 allocable portion of charges related thereto. Criteria to be considered 19 in determining a bona fide mortgage other than an institutional mortgage 20 shall include: condition of the property, location of the property, the 21 existing mortgage market at the time the mortgage is placed, the term of 22 the mortgage, the amortization rate, the principal amount of the mort- 23 gage, security and other terms and conditions of the mortgage. For the 24 purposes of this subdivision, gross annual rent income for a building 25 shall include a rental value set by the commissioner of housing and 26 community renewal for any unit occupied by the owner or a person related 27 to the owner or unoccupied at the owner's choice for more than one month 28 at the last regulated rent plus the minimum number of guidelines 29 increases or, if no such regulated rent existed or is known, the commis- 30 sioner shall impute a rent consistent with other proposed new legal 31 rents in the building. 32 (e) The division shall require that owners refund any increase in a 33 tenant's security deposit amount collected in excess of a new legal rent 34 established under this act within thirty days of the department's issu- 35 ance of an order determining new legal rents. Such excess security 36 deposit amount may be refunded in the form of a rent credit applied 37 toward the affected tenant's next monthly rent payment, and affected 38 tenants are entitled to self-deduct the refund amount from future rent 39 payments. 40 (f) The new legal rent shall be the legal rent beginning on the date 41 rent is required to be paid next succeeding the issuance of a final 42 order determining new legal rents under this act. 43 (g) Any lease agreement executed after the issuance of a final order 44 determining new legal rents under this act shall be deemed to incorpo- 45 rate the rent amounts and effective dates set forth in such order. 46 (h) Any tenant residing in an affected housing accommodation may 47 assert their entitlement to the repeal of prior rent under subdivision 48 (b) of this section, as a defense or counterclaim in any legal proceed- 49 ing predicated upon a landlord's claim of default in the payment of rent 50 pursuant to an agreement. Any court with jurisdiction over a landlord's 51 claim as to a tenant's default in the payment of rent shall also adjudi- 52 cate and have primary jurisdiction over the tenant's assertion of a 53 defense or counterclaim under this provision if the department has not 54 yet issued an order determining the new legal rent. A court order made 55 under this subdivision shall not in any way be deemed to impair a build-S. 1406 4 1 ing owner's right or time to apply for a limitation under subdivision 2 (d) of this section. 3 (i) All final orders issued by the department pursuant to subdivisions 4 (b), (c), and (d) of this section shall be subject to appeal pursuant to 5 existing procedures for administrative review before the division. 6 § 3. Paragraph 2 of subdivision 3-a, subparagraphs 7, 8, 9 and 10 of 7 the second undesignated paragraph of paragraph (a) of subdivision 4 of 8 section 4 of chapter 274 of the laws of 1946, constituting the emergency 9 housing rent control law, paragraph 2 of subdivision 3-a of section 4 10 and subparagraph 8 of the second undesignated paragraph of paragraph (a) 11 of subdivision 4 of section 4 as amended by section 8 of part K of chap- 12 ter 36 of the laws of 2019, subparagraphs 9 and 10 of the second undes- 13 ignated paragraph of paragraph (a) of subdivision 4 of section 4 as 14 amended by section 25 of part B of chapter 97 of the laws of 2011, 15 subparagraph 7 of the second undesignated paragraph of paragraph (a) of 16 subdivision 4 of section 4 as separately amended by section 25 of part Q 17 of chapter 39 of the laws of 2019 and section 14 of part K of chapter 36 18 of the laws of 2019, are amended to read as follows: 19 (2) the amount of increases in maximum rent authorized by order 20 because of increases in dwelling space, services, furniture, furnishings 21 or equipment [and the amount of the temporary increase authorized by22order because of a major capital improvement]. 23 (7) [there has been since March first, nineteen hundred fifty, a major24capital improvement essential for the preservation, energy efficiency,25functionality, or infrastructure of the entire building, improvement of26the structure including heating, windows, plumbing and roofing, but27shall not be for operational costs or unnecessary cosmetic improvements;28which for any order of the commissioner issued after the effective date29of the chapter of the laws of two thousand nineteen that amended this30paragraph the cost of such improvement shall be amortized over a twelve-31year period for buildings with thirty-five or fewer units or a twelve32and one-half year period for buildings with more than thirty-five units,33and shall be removed from the legal regulated rent thirty years from the34date the increase became effective inclusive of any increases granted by35the applicable rent guidelines board. Temporary major capital improve-36ment increases shall be collectible prospectively on the first day of37the first month beginning sixty days from the date of mailing notice of38approval to the tenant. Such notice shall disclose the total monthly39increase in rent and the first month in which the tenant would be40required to pay the temporary increase. An approval for a temporary41major capital improvement increase shall not include retroactive42payments. The collection of any increase shall not exceed two percent in43any year from the effective date of the order granting the increase over44the rent set forth in the schedule of gross rents, with collectability45of any dollar excess above said sum to be spread forward in similar46increments and added to the rent as established or set in future years.47Upon vacancy, the landlord may add any remaining balance of the tempo-48rary major capital improvement increase to the legal regulated rent.49Notwithstanding any other provision of the law, for any renewal lease50commencing on or after June 14, 2019, the collection of any rent51increases due to any major capital improvements approved on or after52June 16, 2012 and before June 16, 2019 shall not exceed two percent in53any year for any tenant in occupancy on the date the major capital54improvement was approved; provided, however, where an application for a55temporary major capital improvement increase has been filed, a tenant56shall have sixty days from the date of mailing of a notice of a proceed-S. 1406 5 1ing in which to answer or reply. The state division of housing and2community renewal shall provide any responding tenant with the reasons3for the division's approval or denial of such application; or (8)] there 4 has been since March first, nineteen hundred fifty, in structures 5 containing more than four housing accommodations, other improvements 6 made with the express informed consent of the tenants in occupancy of at 7 least seventy-five per centum of the housing accommodations, provided, 8 however, that no adjustment granted hereunder shall exceed two per 9 centum unless the tenants have agreed to a higher percentage of 10 increase, as herein provided; [(9)] or (8) there has been, since March 11 first, nineteen hundred fifty, a subletting without written consent from 12 the landlord or an increase in the number of adult occupants who are not 13 members of the immediate family of the tenant, and the landlord has not 14 been compensated therefor by adjustment of the maximum rent by lease or 15 order of the commission or pursuant to the federal act; or [(10)] (9) 16 the presence of unique or peculiar circumstances materially affecting 17 the maximum rent has resulted in a maximum rent which is substantially 18 lower than the rents generally prevailing in the same area for substan- 19 tially similar housing accommodations. 20 § 4. Paragraphs 3, 4, and 5 of subdivision d of section 6 of section 4 21 of chapter 576 of the laws of 1974, constituting the emergency tenant 22 protection act of nineteen seventy-four, paragraph 3 of subdivision d as 23 amended by section 26 of part Q of chapter 39 of the laws of 2019, para- 24 graph 4 of subdivision d as amended by chapter 403 of the laws of 1983, 25 paragraph 5 of subdivision d as amended by chapter 102 of the laws of 26 1984, are amended to read as follows: 27 (3) [there has been since January first, nineteen hundred seventy-four28a major capital improvement essential for the preservation, energy effi-29ciency, functionality, or infrastructure of the entire building,30improvement of the structure including heating, windows, plumbing and31roofing, but shall not be for operation costs or unnecessary cosmetic32improvements. An adjustment under this paragraph shall be in an amount33sufficient to amortize the cost of the improvements pursuant to this34paragraph over a twelve-year period for a building with thirty-five or35fewer housing accommodations, or a twelve and one-half period for a36building with more than thirty-five housing accommodations and shall be37removed from the legal regulated rent thirty years from the date the38increase became effective inclusive of any increases granted by the39applicable rent guidelines board, for any determination issued by the40division of housing and community renewal after the effective date of41the chapter of the laws of two thousand nineteen that amended this para-42graph. Temporary major capital improvement increases shall be collecta-43ble prospectively on the first day of the first month beginning sixty44days from the date of mailing notice of approval to the tenant. Such45notice shall disclose the total monthly increase in rent and the first46month in which the tenant would be required to pay the temporary47increase. An approval for a temporary major capital improvement increase48shall not include retroactive payments. The collection of any increase49shall not exceed two percent in any year from the effective date of the50order granting the increase over the rent set forth in the schedule of51gross rents, with collectability of any dollar excess above said sum to52be spread forward in similar increments and added to the rent as estab-53lished or set in future years. Upon vacancy, the landlord may add any54remaining balance of the temporary major capital improvement increase to55the legal regulated rent. Notwithstanding any other provision of the56law, the collection of any rent increases for any renewal lease commenc-S. 1406 6 1ing on or after June 14, 2019, due to any major capital improvements2approved on or after June 16, 2012 and before June 16, 2019 shall not3exceed two percent in any year for any tenant in occupancy on the date4the major capital improvement was approved, or5(4)] an owner by application to the state division of housing and 6 community renewal for increases in the rents in excess of the rent 7 adjustment authorized by the rent guidelines board under this act estab- 8 lishes a hardship, and the state division finds that the rate of rent 9 adjustment is not sufficient to enable the owner to maintain approxi- 10 mately the same ratio between operating expenses, including taxes and 11 labor costs but excluding debt service, financing costs, and management 12 fees, and gross rents which prevailed on the average over the immediate 13 preceding five year period, or for the entire life of the building if 14 less than five years, or 15 [(5)] (4) as an alternative to the hardship application provided under 16 paragraph [four] three of this subdivision, owners of buildings acquired 17 by the same owner or a related entity owned by the same principals three 18 years prior to the date of application may apply to the division for 19 increases in excess of the level of applicable guideline increases 20 established under this law based on a finding by the commissioner that 21 such guideline increases are not sufficient to enable the owner to main- 22 tain an annual gross rent income for such building which exceeds the 23 annual operating expenses of such building by a sum equal to at least 24 five percent of such gross rent. For the purposes of this paragraph, 25 operating expenses shall consist of the actual, reasonable, costs of 26 fuel, labor, utilities, taxes, other than income or corporate franchise 27 taxes, fees, permits, necessary contracted services and non-capital 28 repairs, insurance, parts and supplies, management fees and other admin- 29 istrative costs and mortgage interest. For the purposes of this para- 30 graph, mortgage interest shall be deemed to mean interest on a bona fide 31 mortgage including an allocable portion of charges related thereto. 32 Criteria to be considered in determining a bona fide mortgage other than 33 an institutional mortgage shall include; condition of the property, 34 location of the property, the existing mortgage market at the time the 35 mortgage is placed, the term of the mortgage, the amortization rate, the 36 principal amount of the mortgage, security and other terms and condi- 37 tions of the mortgage. The commissioner shall set a rental value for any 38 unit occupied by the owner or a person related to the owner or unoccu- 39 pied at the owner's choice for more than one month at the last regulated 40 rent plus the minimum number of guidelines increases or, if no such 41 regulated rent existed or is known, the commissioner shall impute a rent 42 consistent with other rents in the building. The amount of hardship 43 increase shall be such as may be required to maintain the annual gross 44 rent income as provided by this paragraph. The division shall not grant 45 a hardship application under this paragraph or paragraph [four] three of 46 this subdivision for a period of three years subsequent to granting a 47 hardship application under the provisions of this paragraph. The 48 collection of any increase in the rent for any housing accommodation 49 pursuant to this paragraph shall not exceed six percent in any year from 50 the effective date of the order granting the increase over the rent set 51 forth in the schedule of gross rents, with collectability of any dollar 52 excess above said sum to be spread forward in similar increments and 53 added to the rent as established or set in future years. No application 54 shall be approved unless the owner's equity in such building exceeds 55 five percent of: (i) the arms length purchase price of the property; 56 (ii) the cost of any capital improvements for which the owner has notS. 1406 7 1 collected a surcharge; (iii) any repayment of principal of any mortgage 2 or loan used to finance the purchase of the property or any capital 3 improvements for which the owner has not collected a surcharge; and (iv) 4 any increase in the equalized assessed value of the property which 5 occurred subsequent to the first valuation of the property after 6 purchase by the owner. For the purposes of this paragraph, owner's equi- 7 ty shall mean the sum of (i) the purchase price of the property less the 8 principal of any mortgage or loan used to finance the purchase of the 9 property, (ii) the cost of any capital improvement for which the owner 10 has not collected a surcharge less the principal of any mortgage or loan 11 used to finance said improvement, (iii) any repayment of the principal 12 of any mortgage or loan used to finance the purchase of the property or 13 any capital improvement for which the owner has not collected a 14 surcharge, and (iv) any increase in the equalized assessed value of the 15 property which occurred subsequent to the first valuation of the proper- 16 ty after purchase by the owner. 17 § 5. Subparagraphs (g), (h), (i), (j), (k), (m) and (o) of paragraph 1 18 of subdivision g of section 26-405 of the administrative code of the 19 city of New York, subparagraph (g) as amended by section 27 of part Q of 20 chapter 39 of the laws of 2019, subparagraph (k) as amended by chapter 21 749 of the laws of 1990, are amended to read as follows: 22 (g) [There has been since July first, nineteen hundred seventy, a23major capital improvement essential for the preservation energy effi-24ciency, functionality, or infrastructure of the entire building,25improvement of the structure including heating, windows, plumbing and26roofing but shall not be for operational costs or unnecessary cosmetic27improvements. The temporary increase based upon a major capital improve-28ment under this subparagraph for any order of the commissioner issued29after the effective date of the chapter of the laws of two thousand30nineteen that amended this subparagraph shall be in an amount sufficient31to amortize the cost of the improvements pursuant to this subparagraph32(g) over a twelve-year period for buildings with thirty-five or fewer33units or a twelve and one-half year period for buildings with more than34thirty-five units, and shall be removed from the legal regulated rent35thirty years from the date the increase became effective inclusive of36any increases granted by the applicable rent guidelines board. Temporary37major capital improvement increases shall be collectible prospectively38on the first day of the first month beginning sixty days from the date39of mailing notice of approval to the tenant. Such notice shall disclose40the total monthly increase in rent and the first month in which the41tenant would be required to pay the temporary increase. An approval for42a temporary major capital improvement increase shall not include retro-43active payments. The collection of any increase shall not exceed two44percent in any year from the effective date of the order granting the45increase over the rent set forth in the schedule of gross rents, with46collectability of any dollar excess above said sum to be spread forward47in similar increments and added to the rent as established or set in48future years. Upon vacancy, the landlord may add any remaining balance49of the temporary major capital improvement increase to the legal regu-50lated rent. Notwithstanding any other provision of the law, for any51renewal lease commencing on or after June 14, 2019, the collection of52any rent increases due to any major capital improvements approved on or53after June 16, 2012 and before June 16, 2019 shall not exceed two54percent in any year for any tenant in occupancy on the date the major55capital improvement was approved, orS. 1406 8 1(h) There have been since March first, nineteen hundred fifty-nine, in2structures containing more than four housing accommodations, other3improvements made with the express consent of the tenants in occupancy4of at least seventy-five per centum of the housing accommodations;5provided, however, that whenever the city rent agency has determined6that the improvements proposed were part of a plan designed for overall7improvement of the structure or increases in services, it may authorize8increases in maximum rents for all housing accommodations affected upon9the express consent of the tenants in occupancy of at least fifty-one10per centum of the housing accommodations, and provided further that no11adjustment granted hereunder shall exceed fifteen per centum unless the12tenants have agreed to a higher percentage of increase, as herein13provided; or14(i)] There has been, since March first, nineteen hundred fifty-nine, a 15 subletting without written consent from the landlord or an increase in 16 the number of adult occupants who are not members of the immediate fami- 17 ly of the tenant, and the landlord has not been compensated therefor by 18 adjustment of the maximum rent by lease or order of the city rent agency 19 or pursuant to the state rent act or the federal act; or 20 [(j)] (h) The presence of unique or peculiar circumstances materially 21 affecting the maximum rent has resulted in a maximum rent which is 22 substantially lower than the rents generally prevailing in the same area 23 for substantially similar housing accommodations. 24 [(k) The landlord has incurred, since January first, nineteen hundred25seventy, in connection with and in addition to a concurrent major capi-26tal improvement pursuant to subparagraph (g) of this paragraph, other27expenditures to improve, restore or preserve the quality of the struc-28ture. An adjustment under this subparagraph shall be granted only if29such improvements represent an expenditure equal to at least ten per30centum of the total operating and maintenance expenses for the preceding31year. An adjustment under this subparagraph shall be in addition to any32adjustment granted for the concurrent major capital improvement and33shall be in an amount sufficient to amortize the cost of the improve-34ments pursuant to this subparagraph over a seven-year period.] 35 [(m)] (i) Where the rehabilitation or improvement of sub-standard or 36 deteriorated housing accommodations has been financed under a govern- 37 mental program providing assistance through loans, loan insurance or tax 38 abatement or has been undertaken under another rehabilitation program 39 not so financed but approved by the commissioner. 40 [(o)] (j) (1) There has been an increase in heating and heating fuel 41 expenditures in a property resulting from a city-wide rise in heating 42 fuel costs such that the verifiable expenditures for heating or heating 43 fuel in a property for nineteen hundred seventy-four exceeds the verifi- 44 able expenditures for such heating or heating fuel during nineteen 45 hundred seventy-three. 46 (2) To obtain a rental adjustment pursuant to this subparagraph [(o)], 47 the landlord must certify that he or she is presently maintaining all 48 essential services required to be furnished with respect to the housing 49 accommodations covered by such certification, and that he or she will 50 continue to so maintain such essential services for the period of any 51 such adjustment. 52 (3) To obtain a rental adjustment pursuant to this subparagraph [(o)], 53 the landlord must certify on information and belief that he or she will 54 not be earning an amount in excess of the statutory return specified in 55 subparagraph (a) of this paragraph [one of subdivision g of this56section] after collection of such rental adjustment, with respect to theS. 1406 9 1 building or buildings serviced by a single heating plant; and where the 2 building, or buildings serviced by a single heating plant, contains 3 forty-nine or fewer housing accommodations, the landlord must certify 4 that the amount expended directly for heating or heating fuel in nine- 5 teen hundred seventy-four equalled or exceeded ten per cent of the total 6 rental income which was derived from the property during nineteen 7 hundred seventy-four; and, where the building, or buildings serviced by 8 a single heating plant, contains fifty or more housing accommodations 9 the landlord must certify that the amount expended directly for heating 10 or heating fuel in nineteen hundred seventy-four equalled or exceeded 11 seven and one-half percentum of the total rental income which was 12 derived from the property during nineteen hundred seventy-four. 13 (4) The total rental adjustments for a property to be allocated or 14 deemed allocated pursuant to this subparagraph [(o)] shall not exceed 15 one-half of the gross amount by which the total verifiable expenditures 16 for heating or heating fuel for nineteen hundred seventy-four exceeds 17 the total verifiable expenditures for such heating or heating fuel for 18 nineteen hundred seventy-three. 19 (5) Such total rental adjustments shall be allocated or deemed allo- 20 cated pursuant to this subparagraph [(o)] to all housing accommodations 21 subject to this chapter, to all other housing accommodations, and to all 22 commercial, professional and similar facilities in or associated with 23 the property in a manner to be determined by the agency. In no event 24 shall any adjustment in maximum rent pursuant to this subparagraph [(o)] 25 for any housing accommodations subject to this chapter exceed a monthly 26 increase of two dollars per room, as defined by item eight below. In any 27 apartment containing five or more rooms, any increase shall not exceed 28 the total of nine dollars. 29 (6) Any adjustment pursuant to this subparagraph [(o)] shall be effec- 30 tive for all or part of the period July first, nineteen hundred seven- 31 ty-five through June thirtieth, nineteen hundred seventy-six. Any 32 adjustment pursuant to this subparagraph shall automatically expire no 33 later than June thirtieth, nineteen hundred seventy-six. 34 (7) The rental increases provided for herein shall be effective and 35 collectible upon the landlord's filing a report with the agency on forms 36 prescribed by the agency and upon giving such notice to the tenants as 37 the agency shall prescribe, subject to adjustments upon order of the 38 agency. 39 (8) In determining the amount of an adjustment allocation of an 40 adjustment pursuant to this subparagraph [(o)], only living rooms, 41 kitchens over fifty-nine square feet in area, dining rooms and bedrooms 42 shall be considered rooms; bathrooms, foyers, and kitchenettes shall not 43 be considered rooms. 44 § 6. Subdivision a of section 26-407 of the administrative code of the 45 city of New York is amended to read as follows: 46 a. Notwithstanding any provisions of this chapter, any labor cost 47 pass-along rent increase requested of, or received from, any tenant on 48 or after July first, nineteen hundred seventy-two[, pursuant to the49provisions of subparagraph (1) of paragraph one of subdivision g of50section 26-405 of this title,] shall not exceed the maximum rent adjust- 51 ment as provided under this chapter after the effective date of this 52 section. 53 § 7. Paragraph 6 of subdivision c of section 26-511 of the administra- 54 tive code of the city of New York as separately amended by section 12 of 55 part K of chapter 36 and section 28 of part Q of chapter 39 of the laws 56 of 2019, is amended to read as follows:S. 1406 10 1 (6) provides criteria whereby the commissioner may act upon applica- 2 tions by owners for increases in excess of the level of fair rent 3 increase established under this law provided, however, that such crite- 4 ria shall provide [(a)] as to hardship applications, for a finding that 5 the level of fair rent increase is not sufficient to enable the owner to 6 maintain approximately the same average annual net income (which shall 7 be computed without regard to debt service, financing costs or manage- 8 ment fees) for the three year period ending on or within six months of 9 the date of an application pursuant to such criteria as compared with 10 annual net income, which prevailed on the average over the period nine- 11 teen hundred sixty-eight through nineteen hundred seventy, or for the 12 first three years of operation if the building was completed since nine- 13 teen hundred sixty-eight or for the first three fiscal years after a 14 transfer of title to a new owner provided the new owner can establish to 15 the satisfaction of the commissioner that he or she acquired title to 16 the building as a result of a bona fide sale of the entire building and 17 that the new owner is unable to obtain requisite records for the fiscal 18 years nineteen hundred sixty-eight through nineteen hundred seventy 19 despite diligent efforts to obtain same from predecessors in title and 20 further provided that the new owner can provide financial data covering 21 a minimum of six years under his or her continuous and uninterrupted 22 operation of the building to meet the three year to three year compar- 23 ative test periods herein provided[; and (b) as to completed building-24wide major capital improvements, for a finding that such improvements25are deemed depreciable under the Internal Revenue Code and that the cost26is to be amortized over a twelve-year period for a building with thir-27ty-five or fewer housing accommodations, or a twelve and one-half-year28period for a building with more than thirty-five housing accommodations,29for any determination issued by the division of housing and community30renewal after the effective date of the the chapter of the laws of two31thousand nineteen that amended this paragraph and shall be removed from32the legal regulated rent thirty years from the date the increase became33effective inclusive of any increases granted by the applicable rent34guidelines board. Temporary major capital improvement increases shall be35collectible prospectively on the first day of the first month beginning36sixty days from the date of mailing notice of approval to the tenant.37Such notice shall disclose the total monthly increase in rent and the38first month in which the tenant would be required to pay the temporary39increase. An approval for a temporary major capital improvement increase40shall not include retroactive payments. The collection of any increase41shall not exceed two percent in any year from the effective date of the42order granting the increase over the rent set forth in the schedule of43gross rents, with collectability of any dollar excess above said sum to44be spread forward in similar increments and added to the rent as estab-45lished or set in future years. Upon vacancy, the landlord may add any46remaining balance of the temporary major capital improvement increase to47the legal regulated rent. Notwithstanding any other provision of the48law, for any renewal lease commencing on or after June 14, 2019, the49collection of any rent increases due to any major capital improvements50approved on or after June 16, 2012 and before June 16, 2019 shall not51exceed two percent in any year for any tenant in occupancy on the date52the major capital improvement was approved or based upon cash purchase53price exclusive of interest or service charges. Where an application for54a temporary major capital improvement increase has been filed, a tenant55shall have sixty days from the date of mailing of a notice of a proceed-56ing in which to answer or reply. The state division of housing andS. 1406 11 1community renewal shall provide any responding tenant with the reasons2for the division's approval or denial of such application.] Notwith- 3 standing anything to the contrary contained herein, no hardship increase 4 granted pursuant to this paragraph shall, when added to the annual gross 5 rents, as determined by the commissioner, exceed the sum of, (i) the 6 annual operating expenses, (ii) an allowance for management services as 7 determined by the commissioner, (iii) actual annual mortgage debt 8 service (interest and amortization) on its indebtedness to a lending 9 institution, an insurance company, a retirement fund or welfare fund 10 which is operated under the supervision of the banking or insurance laws 11 of the state of New York or the United States, and (iv) eight and one- 12 half percent of that portion of the fair market value of the property 13 which exceeds the unpaid principal amount of the mortgage indebtedness 14 referred to in subparagraph (iii) of this paragraph. Fair market value 15 for the purposes of this paragraph shall be six times the annual gross 16 rent. The collection of any increase in the stabilized rent for any 17 apartment pursuant to this paragraph shall not exceed six percent in any 18 year from the effective date of the order granting the increase over the 19 rent set forth in the schedule of gross rents, with collectability of 20 any dollar excess above said sum to be spread forward in similar incre- 21 ments and added to the stabilized rent as established or set in future 22 years; 23 § 8. If any clause, sentence, paragraph, subdivision, section or part 24 of this act shall be adjudged by any court of competent jurisdiction to 25 be invalid, such judgment shall not affect, impair, or invalidate the 26 remainder thereof, but shall be confined in its operation to the clause, 27 sentence, paragraph, subdivision, section or part thereof directly 28 involved in the controversy in which such judgment shall have been 29 rendered. It is hereby declared to be the intent of the legislature that 30 this act would have been enacted even if such invalid provisions had not 31 been included herein. It is further declared to be the intent of the 32 legislature that this act would have been enacted even if subdivisions 33 (b), (c), (d), (e), (f), (g), (h), and (i) of section two of this act 34 had not been included herein. 35 § 9. This act shall take effect immediately; provided: 36 (a) that the amendments to section 26-511 of chapter 4 of title 26 of 37 the administrative code of the city of New York made by section seven of 38 this act shall expire on the same date as such law expires and shall not 39 affect the expiration of such law as provided under section 26-520 of 40 such law; and 41 (b) that the amendments to sections 26-405 and 26-407 of the city rent 42 and rehabilitation law made by sections five and six of this act shall 43 remain in full force and effect only as long as the public emergency 44 requiring the regulation and control of residential rents and evictions 45 continues, as provided in subdivision 3 of section 1 of the local emer- 46 gency housing rent control act. 47 (c) Effective immediately, the addition, amendment and/or repeal of 48 any rule or regulation necessary for the implementation of this act on 49 its effective date are authorized to be made and completed on or before 50 such effective date.
