Bill Text: NY S01430 | 2023-2024 | 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 2-0)

Status: (Introduced) 2024-01-03 - REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT [S01430 Detail]

Download: New_York-2023-S01430-Introduced.html

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                STATE OF NEW YORK
        ________________________________________________________________________

                                          1430

                               2023-2024 Regular Sessions

                    IN SENATE

                                    January 11, 2023
                                       ___________

        Introduced by Sens. BAILEY, SEPULVEDA -- read twice and ordered printed,
          and  when  printed  to  be  committed  to  the  Committee  on Housing,
          Construction and Community Development

        AN ACT to amend the administrative code of the city  of  New  York,  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 27 of part Q of chapter 39 of the laws of 2019,  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 [essential for the preservation energy effi-
    10  ciency,  functionality,  or  infrastructure  of  the  entire   building,
    11  improvement  of  the  structure including heating, windows, plumbing and
    12  roofing but shall not be for operational costs or  unnecessary  cosmetic
    13  improvements. The temporary increase based upon a major capital improve-
    14  ment  under  this  subparagraph for any order of the commissioner issued
    15  after the effective date of the chapter of  the  laws  of  two  thousand
    16  nineteen that amended this subparagraph shall be in an amount sufficient
    17  to  amortize  the cost of the improvements pursuant to this subparagraph
    18  (g) over a twelve-year period for buildings with  thirty-five  or  fewer
    19  units  or a twelve and one-half year period for buildings with more than
    20  thirty-five units, and shall be removed from the  legal  regulated  rent
    21  thirty  years  from  the date the increase became effective inclusive of

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD04533-01-3
        S. 1430                             2

     1  any increases granted by the applicable rent guidelines board. Temporary
     2  major capital improvement increases shall be  collectible  prospectively
     3  on  the  first day of the first month beginning sixty days from the date
     4  of  mailing notice of approval to the tenant. Such notice shall disclose
     5  the total monthly increase in rent and the  first  month  in  which  the
     6  tenant  would be required to pay the temporary increase. An approval for
     7  a temporary major capital improvement increase shall not include  retro-
     8  active  payments.  The  collection  of any increase shall not exceed two
     9  percent in any year from the effective date of the  order  granting  the
    10  increase  over  the  rent set forth in the schedule of gross rents, with
    11  collectability of any dollar excess above said sum to be spread  forward
    12  in  similar  increments  and  added to the rent as established or set in
    13  future years.  Upon vacancy, the landlord may add any remaining  balance
    14  of  the  temporary major capital improvement increase to the legal regu-
    15  lated rent. Notwithstanding any other provision  of  the  law,  for  any
    16  renewal  lease  commencing  on or after June 14, 2019, the collection of
    17  any rent increases due to any major capital improvements approved on  or
    18  after  June  16,  2012  and  before  June  16, 2019 shall not exceed two
    19  percent in any year for any tenant in occupancy on the  date  the  major
    20  capital improvement was approved,]; provided that the commissioner first
    21  finds  that  such improvements are deemed depreciable under the internal
    22  revenue code and such improvements are required  for  the  operation  or
    23  preservation  of  the  structure.  However, no major capital improvement
    24  rent increase will be approved by the division of housing and  community
    25  renewal  unless  the  work  performed  is an enhancement or upgrade to a
    26  housing accommodation or service therein; or  is  an  addition  to  such
    27  housing  accommodation and otherwise eligible according to the prerequi-
    28  sites for major  capital  improvement  rent  increases.  Any  repair  or
    29  replacement intended to maintain an existing service shall not be eligi-
    30  ble  for a major capital improvement rent increase. No application for a
    31  major capital improvement rent increase may be approved if  there  exist
    32  any  outstanding   hazardous violations at the time of the consideration
    33  of such application, as determined pursuant to regulations of the  divi-
    34  sion  of  housing  and community renewal or any agency administering and
    35  enforcing a building code in the jurisdiction in which the  property  is
    36  located, unless it is determined by the division of housing and communi-
    37  ty  renewal  that  such  work  is  essential  to  the alleviation of the
    38  violations and such approval is consistent with the provisions  of  this
    39  section. Except in the case of emergency or good cause, the owner of the
    40  property  shall  file, not less than thirty days before the commencement
    41  of the improvement, with the division of housing and community   renewal
    42  a statement containing information outlining the scope of work, expected
    43  date  of  completion  for  such  work and an affidavit setting forth the
    44  following information: (a) every owner of record and owner of a substan-
    45  tial interest in the property or entity owning the property or  sponsor-
    46  ing  the  improvement;  and    (b) a statement that none of such persons
    47  had, within the five years prior to the improvement, been found to  have
    48  harassed or unlawfully evicted tenants by judgment or determination of a
    49  court  or  agency under the penal law, any state or local law regulating
    50  rents or any state or local law relating to  harassment  of  tenants  or
    51  unlawful  eviction.  Upon  receipt  of  the  scope of work and affidavit
    52  provided for herein, the division of housing and community renewal shall
    53  provide the tenants in occupancy in such buildings  with  such  informa-
    54  tion.  The division of housing and community renewal shall, in addition,
    55  implement procedures including, but not  limited  to,  eliciting  tenant
    56  comments  to  determine whether major capital improvement rehabilitation
        S. 1430                             3

     1  work has been satisfactorily completed.  No  major  capital  improvement
     2  rent  increase  shall  become effective until any defective or deficient
     3  rehabilitation work has been cured.  The  increase  permitted  for  such
     4  capital  improvement  shall  be  collected as a monthly surcharge to the
     5  maximum rent. It shall be separately designated and billed as  such  and
     6  shall not be compounded by any other adjustment to the maximum rent. The
     7  surcharge  allocable  to  each apartment shall be an amount equal to the
     8  cost of the improvement divided by eighty-four, divided by the number of
     9  rooms in the building, and then multiplied by the  number  of  rooms  in
    10  such  apartment;  provided that the surcharge allocable to any apartment
    11  in any one year may not exceed an amount equal to  six  percent  of  the
    12  monthly  rent  collected by the owner for such apartment as set forth in
    13  the schedule of gross rents. Any excess above said six percent shall  be
    14  carried forward and collected in future years as a further surcharge not
    15  to  exceed  an  additional  six percent in any one year period until the
    16  total surcharge equals the amount it would have been  if  the  aforemen-
    17  tioned six percent limitation did not apply; or
    18    §  2.  Subparagraph  (k)  of  paragraph  1 of subdivision g of section
    19  26-405 of the administrative code of the city of New York, as amended by
    20  chapter 749 of the laws of 1990, is amended to read as follows:
    21    (k) The landlord has incurred, since January first,  nineteen  hundred
    22  seventy,  in connection with and in addition to a concurrent major capi-
    23  tal improvement pursuant to subparagraph (g) of  this  paragraph,  other
    24  expenditures  to  improve, restore or preserve the quality of the struc-
    25  ture. An adjustment under this subparagraph shall  be  granted  only  if
    26  such  improvements  represent  an  expenditure equal to at least ten per
    27  centum of the total operating and maintenance expenses for the preceding
    28  year. An adjustment under this subparagraph shall be in addition to  any
    29  adjustment  granted  for  the  concurrent  major capital improvement and
    30  shall be [in an amount sufficient to amortize the cost of  the  improve-
    31  ments  pursuant  to  this  subparagraph over a seven-year period] imple-
    32  mented in the same manner as such major capital improvement as a further
    33  surcharge to the maximum rent.
    34    § 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
    35  tive code of the city of New York, as separately amended by  section  12
    36  of  part  K  of chapter 36 and section 28 of part Q of chapter 39 of the
    37  laws of 2019, is amended to read as follows:
    38    (6) provides criteria whereby the commissioner may act  upon  applica-
    39  tions  by  owners  for  increases  in  excess  of the level of fair rent
    40  increase established under this law provided, however, that such  crite-
    41  ria  shall  provide  [(a)  as] in regard to hardship applications, for a
    42  finding that the level of fair rent increase is not sufficient to enable
    43  the owner to maintain approximately the same average annual  net  income
    44  (which shall be computed without regard to debt service, financing costs
    45  or  management  fees)  for the three year period ending on or within six
    46  months of the date of  an  application  pursuant  to  such  criteria  as
    47  compared with annual net income, which prevailed on the average over the
    48  period nineteen hundred sixty-eight through nineteen hundred seventy, or
    49  for  the  first  three  years of operation if the building was completed
    50  since nineteen hundred sixty-eight or for the first three  fiscal  years
    51  after  a  transfer  of  title  to a new owner provided the new owner can
    52  establish to the  satisfaction  of  the  commissioner  that  he  or  she
    53  acquired  title  to  the building as a result of a bona fide sale of the
    54  entire building and that the new owner is  unable  to  obtain  requisite
    55  records  for the fiscal years nineteen hundred sixty-eight through nine-
    56  teen hundred seventy despite diligent efforts to obtain same from prede-
        S. 1430                             4

     1  cessors in title and further provided that the  new  owner  can  provide
     2  financial  data covering a minimum of six years under his or her contin-
     3  uous and uninterrupted operation of the building to meet the three  year
     4  to  three  year comparative test periods herein provided[; and (b) as to
     5  completed building-wide major capital improvements, for a  finding  that
     6  such improvements are deemed depreciable under the Internal Revenue Code
     7  and  that  the  cost  is to be amortized over a twelve-year period for a
     8  building with thirty-five or fewer housing accommodations, or  a  twelve
     9  and one-half-year period for a building with more than thirty-five hous-
    10  ing  accommodations,  for  any  determination  issued by the division of
    11  housing and community renewal after the effective date of the the  chap-
    12  ter of the laws of two thousand nineteen that amended this paragraph and
    13  shall  be  removed  from  the legal regulated rent thirty years from the
    14  date the increase became effective inclusive of any increases granted by
    15  the applicable rent guidelines board. Temporary major  capital  improve-
    16  ment  increases  shall  be collectible prospectively on the first day of
    17  the first month beginning sixty days from the date of mailing notice  of
    18  approval  to  the  tenant.  Such notice shall disclose the total monthly
    19  increase in rent and the first  month  in  which  the  tenant  would  be
    20  required  to  pay  the  temporary  increase. An approval for a temporary
    21  major  capital  improvement  increase  shall  not  include   retroactive
    22  payments. The collection of any increase shall not exceed two percent in
    23  any year from the effective date of the order granting the increase over
    24  the  rent  set forth in the schedule of gross rents, with collectability
    25  of any dollar excess above said sum to  be  spread  forward  in  similar
    26  increments  and added to the rent as established or set in future years.
    27  Upon vacancy, the landlord may add any remaining balance of  the  tempo-
    28  rary  major  capital  improvement  increase to the legal regulated rent.
    29  Notwithstanding any other provision of the law, for  any  renewal  lease
    30  commencing  on  or  after  June  14,  2019,  the  collection of any rent
    31  increases due to any major capital improvements  approved  on  or  after
    32  June  16,  2012 and before June 16, 2019 shall not exceed two percent in
    33  any year for any tenant in occupancy  on  the  date  the  major  capital
    34  improvement  was approved or based upon cash purchase price exclusive of
    35  interest or service charges. Where an application for a temporary  major
    36  capital  improvement  increase has been filed, a tenant shall have sixty
    37  days from the date of mailing of a notice of a proceeding  in  which  to
    38  answer  or  reply.  The  state division of housing and community renewal
    39  shall provide any responding tenant with the reasons for the  division's
    40  approval or denial of such application]. Notwithstanding anything to the
    41  contrary contained herein, no hardship increase granted pursuant to this
    42  paragraph  shall, when added to the annual gross rents, as determined by
    43  the commissioner, exceed the sum of, (i) the annual operating  expenses,
    44  (ii)  an  allowance for management services as determined by the commis-
    45  sioner, (iii) actual annual mortgage debt service (interest and  amorti-
    46  zation)  on  its  indebtedness  to  a  lending institution, an insurance
    47  company, a retirement fund or welfare fund which is operated  under  the
    48  supervision of the banking or insurance laws of the state of New York or
    49  the  United  States, and (iv) eight and one-half percent of that portion
    50  of the fair market value of the property which exceeds the unpaid  prin-
    51  cipal  amount  of  the mortgage indebtedness referred to in subparagraph
    52  (iii) of this paragraph. Fair market value  for  the  purposes  of  this
    53  paragraph  shall  be  six times the annual gross rent. The collection of
    54  any increase in the stabilized rent for any apartment pursuant  to  this
    55  paragraph  shall  not  exceed six percent in any year from the effective
    56  date of the order granting the increase over the rent set forth  in  the
        S. 1430                             5

     1  schedule  of gross rents, with collectability of any dollar excess above
     2  said sum to be spread forward in similar increments  and  added  to  the
     3  stabilized rent as established or set in future years;
     4    § 4. Subdivision c of section 26-511 of the administrative code of the
     5  city  of New York is amended by adding three new paragraphs 6-b, 6-c and
     6  6-d to read as follows:
     7    (6-b) provides criteria whereby the commissioner may act upon applica-
     8  tion by owners for increases  in  excess  of  the  level  of  fair  rent
     9  increase  established under this law provided, however, that such crite-
    10  ria shall provide that:
    11    (i) as to completed building-wide major capital  improvements,  first,
    12  that  a  finding that such improvements are deemed depreciable under the
    13  internal revenue code and such improvements are required for the  opera-
    14  tion or preservation of the structure;
    15    (ii)  however,  no  major  capital  improvement  rent increase will be
    16  approved by the division of housing and  community  renewal  unless  the
    17  work  performed  is an enhancement or upgrade to a housing accommodation
    18  or service therein; or is an addition to such housing accommodation  and
    19  otherwise  eligible  according  to  the  prerequisites for major capital
    20  improvement rent increases. Any repair or replacement intended to  main-
    21  tain  an  existing  service  shall  not  be eligible for a major capital
    22  improvement rent increase;
    23    (iii) no application for a major capital improvement rent increase may
    24  be approved if there exist any outstanding hazardous violations  at  the
    25  time of the consideration of such application, as determined pursuant to
    26  regulations  of  the  division  of  housing and community renewal or any
    27  agency administering and enforcing a building code in  the  jurisdiction
    28  in  which  the property is located, unless it is determined by the divi-
    29  sion of housing and community renewal that such work is essential to the
    30  alleviation of the violations and such approval is consistent  with  the
    31  provisions  of  this  section.  Except  in the case of emergency or good
    32  cause, the owner of the property shall file, not less than  thirty  days
    33  before the commencement of the improvement, with the division of housing
    34  and  community  renewal a statement containing information outlining the
    35  scope of work, expected date of completion for such work and an  affida-
    36  vit setting forth the following information:
    37    (A)  every  owner of record and owner of a substantial interest in the
    38  property or entity owning the property or  sponsoring  the  improvement;
    39  and
    40    (B)  a  statement that none of such persons had, within the five years
    41  prior to the improvement, been found  to  have  harassed  or  unlawfully
    42  evicted  tenants by judgment or determination of a court or agency under
    43  the penal law, any state or local law regulating rents or any  state  or
    44  local law relating to harassment of tenants or unlawful eviction.
    45    Upon  receipt  of the scope of work and affidavit provided for herein,
    46  the division of housing and community renewal shall provide the  tenants
    47  in  occupancy  in  such buildings with such information. The division of
    48  housing and community renewal shall, in addition,  implement  procedures
    49  including,  but  not  limited to, eliciting tenant comments to determine
    50  whether major capital improvement rehabilitation work has been satisfac-
    51  torily completed. No  major  capital  improvement  rent  increase  shall
    52  become  effective  until  any defective or deficient rehabilitation work
    53  has been cured.
    54    (6-c) the increase permitted for such  capital  improvement  shall  be
    55  collected  as  a monthly surcharge to the legal regulated rent. It shall
    56  be separately designated and billed as such and shall not be  compounded
        S. 1430                             6

     1  by  any  annual  adjustment of the level of fair rent provided for under
     2  subdivision b of section 26-510 of this chapter. The surcharge allocable
     3  to each apartment shall be an amount equal to the cost of  the  improve-
     4  ment divided by eighty-four divided by the number of rooms in the build-
     5  ing,  and  then  multiplied  by  the  number of rooms in such apartment;
     6  provided that the surcharge allocable to any apartment, in any one  year
     7  may  not  exceed  an  amount  equal  to  six percent of the monthly rent
     8  collected by the owner for such apartment as set forth in  the  schedule
     9  of  gross  rents.  Any  excess  above  said six percent shall be carried
    10  forward and collected in future years as  a  further  surcharge  not  to
    11  exceed  an additional six percent in any one year period until the total
    12  surcharge equals the amount it would have been if the aforementioned six
    13  percent limitation did not apply.
    14    (6-d) collection of surcharges in excess of the  level  of  fair  rent
    15  authorized  pursuant  to  paragraphs six-b and six-c of this subdivision
    16  shall cease when the owner has recovered the cost of the  major  capital
    17  improvement.
    18    § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
    19  576  of  the  laws of 1974, constituting the emergency tenant protection
    20  act of nineteen seventy-four, as amended by section  26  of  part  Q  of
    21  chapter 39 of the laws of 2019, is amended to read as follows:
    22    (3)  (i)  collection  of surcharges in addition to the legal regulated
    23  rent authorized pursuant to subparagraph (ii) of  this  paragraph  shall
    24  cease  when  the  owner  has  recovered  the  cost  of the major capital
    25  improvement;
    26    (ii) there has been since January first, nineteen hundred seventy-four
    27  a major capital improvement  [essential  for  the  preservation,  energy
    28  efficiency,  functionality,  or  infrastructure  of the entire building,
    29  improvement of the structure including heating,  windows,  plumbing  and
    30  roofing,  but  shall  not be for operation costs or unnecessary cosmetic
    31  improvements. An adjustment under this paragraph shall be in  an  amount
    32  sufficient  to  amortize  the  cost of the improvements pursuant to this
    33  paragraph over a twelve-year period for a building with  thirty-five  or
    34  fewer  housing  accommodations,  or  a  twelve and one-half period for a
    35  building with more than thirty-five housing accommodations and shall  be
    36  removed  from  the  legal  regulated rent thirty years from the date the
    37  increase became effective inclusive of  any  increases  granted  by  the
    38  applicable  rent  guidelines  board, for any determination issued by the
    39  division of housing and community renewal after the  effective  date  of
    40  the chapter of the laws of two thousand nineteen that amended this para-
    41  graph.  Temporary major capital improvement increases shall be collecta-
    42  ble prospectively on the first day of the first  month  beginning  sixty
    43  days  from  the  date of mailing notice of approval to the tenant.  Such
    44  notice shall disclose the total monthly increase in rent and  the  first
    45  month  in  which  the  tenant  would  be  required  to pay the temporary
    46  increase. An approval for a temporary major capital improvement increase
    47  shall not include retroactive payments. The collection of  any  increase
    48  shall  not exceed two percent in any year from the effective date of the
    49  order granting the increase over the rent set forth in the  schedule  of
    50  gross  rents, with collectability of any dollar excess above said sum to
    51  be spread forward in similar increments and added to the rent as  estab-
    52  lished  or  set  in future years. Upon vacancy, the landlord may add any
    53  remaining balance of the temporary major capital improvement increase to
    54  the legal regulated rent. Notwithstanding any  other  provision  of  the
    55  law, the collection of any rent increases for any renewal lease commenc-
    56  ing  on  or  after  June 14, 2019, due to any major capital improvements
        S. 1430                             7

     1  approved on or after June 16, 2012 and before June 16,  2019  shall  not
     2  exceed  two  percent in any year for any tenant in occupancy on the date
     3  the major capital improvement was approved]; provided that  the  commis-
     4  sioner  first  finds that such improvements are deemed depreciable under
     5  the  internal  revenue  code and such improvements are required  for the
     6  operation or preservation of the structure.  However, no  major  capital
     7  improvement  rent  increase  will be approved by the division of housing
     8  and community renewal unless the work performed  is  an  enhancement  or
     9  upgrade to a housing accommodation or service therein; or is an addition
    10  to  such  housing  accommodation and otherwise eligible according to the
    11  prerequisites for major capital improvement rent increases.  Any  repair
    12  or  replacement  intended  to  maintain an existing service shall not be
    13  eligible for a major capital improvement rent increase.  No  application
    14  for  a  major capital improvement rent increase may be approved if there
    15  exist any outstanding hazardous violations at the time of the  consider-
    16  ation  of such application, as determined pursuant to regulations of the
    17  division of housing and community renewal or any agency    administering
    18  and  enforcing a building code in the jurisdiction in which the property
    19  is located, unless it is determined  by  the  division  of  housing  and
    20  community  renewal that such work is essential to the alleviation of the
    21  violations and such approval is consistent with the provisions  of  this
    22  section. Except in the case of emergency or good cause, the owner of the
    23  property  shall  file, not less than thirty days before the commencement
    24  of the improvement, with the division of housing and community renewal a
    25  statement  containing  information outlining the scope of work, expected
    26  date of completion for such work and  an  affidavit  setting  forth  the
    27  following information: (a) every owner of record and owner of a substan-
    28  tial  interest in the property or entity owning the property or sponsor-
    29  ing the improvement; and (b) a statement that none of such persons  had,
    30  within  the  five  years  prior  to  the improvement, been found to have
    31  harassed or unlawfully evicted tenants by judgment or determination of a
    32  court or agency under the penal law, any state or local  law  regulating
    33  rents  or  any  state or local law relating to harassment  of tenants or
    34  unlawful eviction. Upon receipt of  the  scope  of  work  and  affidavit
    35  provided for herein, the division of housing and community renewal shall
    36  provide  the  tenants  in occupancy in such buildings with such informa-
    37  tion. The division of housing and community renewal shall, in  addition,
    38  implement  procedures  including,  but  not limited to, eliciting tenant
    39  comments to determine whether major capital  improvement  rehabilitation
    40  work  has  been  satisfactorily  completed. No major capital improvement
    41  rent increase shall become effective until any  defective  or  deficient
    42  rehabilitation  work  has  been  cured.  The increase permitted for such
    43  capital improvement shall be collected as a  monthly  surcharge  to  the
    44  legal  regulated  rent.  It shall be separately designated and billed as
    45  such and shall not be compounded by any annual rent  adjustment  author-
    46  ized by the rent guidelines board under this act. The surcharge  alloca-
    47  ble  to  each  apartment  shall  be  an  amount equal to the cost of the
    48  improvement divided by eighty-four, divided by the number  of  rooms  in
    49  the  building, and then multiplied by the number of rooms in such apart-
    50  ment;  provided that the surcharge allocable to any apartment in any one
    51  year may not exceed an amount equal to six percent of the  monthly  rent
    52  collected  by  the owner for such apartment as set forth in the schedule
    53  of gross rents. Any excess above  said  six  percent  shall  be  carried
    54  forward  and  collected  in  future  years as a further surcharge not to
    55  exceed an additional six percent in any one year period until the  total
        S. 1430                             8

     1  surcharge equals the amount it would have been if the aforementioned six
     2  percent limitation did not apply, or
     3    § 6. The second undesignated paragraph of paragraph (a) of subdivision
     4  4  of  section  4  of  chapter 274 of the laws of 1946, constituting the
     5  emergency housing rent control law, as amended by section 25 of  part  B
     6  of  chapter 97 of the laws of 2011, subparagraph 5 as amended by section
     7  36 of part Q of chapter 39 of the laws of 2019, subparagraph 7 as  sepa-
     8  rately  amended  by section 25 of part Q of chapter 39 and section 14 of
     9  part K of chapter 36 of the laws of 2019 and subparagraph 8  as  amended
    10  by  section 8 of part K of chapter 36 of the laws of 2019, is amended to
    11  read as follows:
    12    No application for adjustment of maximum rent based upon a sales price
    13  valuation shall be filed by the landlord under this  subparagraph  prior
    14  to  six  months from the date of such sale of the property. In addition,
    15  no adjustment ordered by the commission  based  upon  such  sales  price
    16  valuation  shall  be  effective  prior to one year from the date of such
    17  sale. Where, however, the assessed valuation of the  land  exceeds  four
    18  times  the  assessed  valuation of the buildings thereon, the commission
    19  may determine a valuation of the property equal to five times the equal-
    20  ized assessed valuation of the  buildings,  for  the  purposes  of  this
    21  subparagraph. The commission may make a determination that the valuation
    22  of  the  property  is  an  amount different from such equalized assessed
    23  valuation where there is a request for  a  reduction  in  such  assessed
    24  valuation  currently pending; or where there has been a reduction in the
    25  assessed valuation for the year next preceding the effective date of the
    26  current assessed valuation in effect at the time of the  filing  of  the
    27  application.  Net  annual return shall be the amount by which the earned
    28  income exceeds the operating expenses of the property,  excluding  mort-
    29  gage  interest  and  amortization, and excluding allowances for obsoles-
    30  cence and reserves, but including an allowance for depreciation  of  two
    31  per  centum  of the value of the buildings exclusive of the land, or the
    32  amount shown for depreciation of the buildings in  the  latest  required
    33  federal  income  tax return, whichever is lower; provided, however, that
    34  (1) no allowance for depreciation of the  buildings  shall  be  included
    35  where  the  buildings have been fully depreciated for federal income tax
    36  purposes or on the books of the owner; or (2) the landlord who  owns  no
    37  more  than four rental units within the state has not been fully compen-
    38  sated by increases in rental income  sufficient  to  offset  unavoidable
    39  increases  in property taxes, fuel, utilities, insurance and repairs and
    40  maintenance, excluding mortgage interest and amortization, and excluding
    41  allowances for  depreciation,  obsolescence  and  reserves,  which  have
    42  occurred since the federal date determining the maximum rent or the date
    43  the  property  was acquired by the present owner, whichever is later; or
    44  (3) the landlord operates a hotel or rooming house or owns a cooperative
    45  apartment and has not been fully  compensated  by  increases  in  rental
    46  income  from  the controlled housing accommodations sufficient to offset
    47  unavoidable increases in property taxes and other costs as are allocable
    48  to such controlled housing accommodations, including costs of  operation
    49  of  such  hotel  or  rooming  house, but excluding mortgage interest and
    50  amortization, and excluding allowances  for  depreciation,  obsolescence
    51  and reserves, which have occurred since the federal date determining the
    52  maximum  rent  or  the  date the landlord commenced the operation of the
    53  property, whichever is later; or (4) the landlord and tenant voluntarily
    54  enter into a valid written lease in good faith with respect to any hous-
    55  ing accommodation, which lease provides for an increase in  the  maximum
    56  rent not in excess of fifteen per centum and for a term of not less than
        S. 1430                             9

     1  two  years,  except  that  where  such lease provides for an increase in
     2  excess of fifteen  per  centum,  the  increase  shall  be  automatically
     3  reduced  to fifteen per centum; or (5) the landlord and tenant by mutual
     4  voluntary  written informed agreement agree to a substantial increase or
     5  decrease in dwelling space, furniture, furnishings or equipment provided
     6  in the housing accommodations; provided that an owner shall be  entitled
     7  to  a  rent  increase where there has been a substantial modification or
     8  increase of dwelling space, or installation of new equipment or improve-
     9  ments or new furniture or furnishings provided in or to a tenant's hous-
    10  ing accommodation. The temporary increase in the maximum  rent  for  the
    11  affected housing accommodation shall be one-one hundred sixty-eighth, in
    12  the case of a building with thirty-five or fewer housing accommodations,
    13  or  one-one  hundred eightieth, in the case of a building with more than
    14  thirty-five housing accommodations where such increase takes  effect  on
    15  or  after  the effective date of the chapter of the laws of two thousand
    16  nineteen that amended  this  subparagraph,  of  the  total  actual  cost
    17  incurred  by  the  landlord  up to fifteen thousand dollars in providing
    18  such reasonable and verifiable  modification  or  increase  in  dwelling
    19  space,  furniture,  furnishings,  or  equipment,  including  the cost of
    20  installation but excluding finance charges and  any  costs  that  exceed
    21  reasonable costs established by rules and regulations promulgated by the
    22  division  of  housing  and community renewal. Such rules and regulations
    23  shall include:   (i) requirements  for  work  to  be  done  by  licensed
    24  contractors  and  a prohibition on common ownership between the landlord
    25  and the contractor or vendor; and (ii)  a  requirement  that  the  owner
    26  resolve  within  the  dwelling  space all outstanding hazardous or imme-
    27  diately hazardous violations of the uniform fire prevention and building
    28  code (Uniform Code), New York city fire code, or New York city  building
    29  and  housing  maintenance codes, if applicable. Provided further that an
    30  owner who is entitled to a rent increase pursuant to this  clause  shall
    31  not  be  entitled to a further rent increase based upon the installation
    32  of similar equipment, or new furniture or furnishings within the  useful
    33  life  of  such  new equipment, or new furniture or furnishings. Provided
    34  further that the recoverable costs incurred by the landlord, pursuant to
    35  this subparagraph, shall be limited to  an  aggregate  cost  of  fifteen
    36  thousand  dollars  that  may  be expended on no more than three separate
    37  individual apartment improvements in a  fifteen  year  period  beginning
    38  with  the  first individual apartment improvement on or after June four-
    39  teenth, two thousand nineteen. Provided further that  increases  to  the
    40  legal  regulated  rent  pursuant to this paragraph shall be removed from
    41  the legal regulated rent thirty years from the date the increase  became
    42  effective  inclusive  of  any  increases  granted by the applicable rent
    43  guidelines board. The owner shall give written notice to the  commission
    44  of  any  such adjustment pursuant to this clause; or (6) there has been,
    45  since March first, nineteen hundred fifty, an  increase  in  the  rental
    46  value  of  the housing accommodations as a result of a substantial reha-
    47  bilitation of the building or housing accommodation therein which  mate-
    48  rially  adds  to  the  value of the property or appreciably prolongs its
    49  life, excluding ordinary repairs, maintenance and replacements;  or  (7)
    50  (i)  collection of surcharges to the maximum rent authorized pursuant to
    51  item (ii) of this clause shall cease when the owner  has  recovered  the
    52  cost  of  the major capital improvement; (ii) there has been since March
    53  first, nineteen hundred fifty, a major  capital  improvement  [essential
    54  for  the  preservation, energy efficiency, functionality, or infrastruc-
    55  ture of the entire building,  improvement  of  the  structure  including
    56  heating, windows, plumbing and roofing, but shall not be for operational
        S. 1430                            10

     1  costs  or  unnecessary cosmetic improvements; which for any order of the
     2  commissioner issued after the effective date of the chapter of the  laws
     3  of  two  thousand  nineteen that amended this paragraph the cost of such
     4  improvement  shall  be amortized over a twelve-year period for buildings
     5  with thirty-five or fewer units or a twelve and one-half year period for
     6  buildings with more than thirty-five units, and shall  be  removed  from
     7  the  legal regulated rent thirty years from the date the increase became
     8  effective inclusive of any increases  granted  by  the  applicable  rent
     9  guidelines board. Temporary major capital improvement increases shall be
    10  collectible  prospectively on the first day of the first month beginning
    11  sixty days from the date of mailing notice of approval  to  the  tenant.
    12  Such  notice  shall  disclose the total monthly increase in rent and the
    13  first month in which the tenant would be required to pay  the  temporary
    14  increase. An approval for a temporary major capital improvement increase
    15  shall  not  include retroactive payments. The collection of any increase
    16  shall not exceed two percent in any year from the effective date of  the
    17  order  granting  the increase over the rent set forth in the schedule of
    18  gross rents, with collectability of any dollar excess above said sum  to
    19  be  spread forward in similar increments and added to the rent as estab-
    20  lished or set in future years.  Upon vacancy, the landlord may  add  any
    21  remaining balance of the temporary major capital improvement increase to
    22  the  legal  regulated  rent.  Notwithstanding any other provision of the
    23  law, for any renewal lease commencing on or after  June  14,  2019,  the
    24  collection  of  any rent increases due to any major capital improvements
    25  approved on or after June 16, 2012 and before June 16,  2019  shall  not
    26  exceed  two  percent in any year for any tenant in occupancy on the date
    27  the major capital improvement was approved; provided, however, where  an
    28  application  for a temporary major capital improvement increase has been
    29  filed, a tenant shall have sixty days from the  date  of  mailing  of  a
    30  notice  of  a proceeding in which to answer or reply. The state division
    31  of housing and community renewal shall  provide  any  responding  tenant
    32  with  the reasons for the division's approval or denial of such applica-
    33  tion]; provided that the commissioner first finds that such improvements
    34  are deemed depreciable under the internal revenue code and such improve-
    35  ments are required for the operation or preservation of  the  structure.
    36  However,  no major capital improvement rent increase will be approved by
    37  the division of housing and community renewal unless the work  performed
    38  is an enhancement or upgrade to a housing accommodation or service ther-
    39  ein;  or  is  an  addition  to  such housing accommodation and otherwise
    40  eligible according to the prerequisites for  major  capital  improvement
    41  rent  increases.    Any  repair  or  replacement intended to maintain an
    42  existing service shall not be eligible for a major  capital  improvement
    43  rent  increase.  No  application  for  a  major capital improvement rent
    44  increase may be  approved  if  there  exist  any  outstanding  hazardous
    45  violations  at  the  time  of  the consideration of such application, as
    46  determined pursuant to regulations of the division of housing and commu-
    47  nity renewal or any agency administering and enforcing a  building  code
    48  in  the  jurisdiction  in  which  the  property is located, unless it is
    49  determined by the division of housing and community  renewal  that  such
    50  work is essential to the alleviation of the violations and such approval
    51  is consistent with the provisions of this section. Except in the case of
    52  emergency  or good cause, the owner of the property shall file, not less
    53  than thirty days before the commencement of the  improvement,  with  the
    54  division  of housing and community renewal a statement containing infor-
    55  mation outlining the scope of work, expected date of completion for such
    56  work and an affidavit setting forth the following information: (a) every
        S. 1430                            11

     1  owner of record and owner of a substantial interest in the  property  or
     2  entity  owning  the  property  or  sponsoring the improvement; and (b) a
     3  statement that none of such persons had, within the five years prior  to
     4  the  improvement,  been  found  to  have  harassed or unlawfully evicted
     5  tenants by judgment or determination of a  court  or  agency  under  the
     6  penal law, any state or local law regulating rents or any state or local
     7  law relating to harassment of tenants or unlawful eviction. Upon receipt
     8  of  the scope of work and affidavit provided for herein, the division of
     9  housing and community renewal shall provide the tenants in occupancy  in
    10  such buildings with such information. The division of housing and commu-
    11  nity renewal shall, in addition, implement procedures including, but not
    12  limited to, eliciting tenant comments to determine whether major capital
    13  improvement  rehabilitation  work  has been satisfactorily completed. No
    14  major capital improvement rent increase shall become effective until any
    15  defective or deficient rehabilitation work has been cured. The  increase
    16  permitted  for  such capital improvement shall be collected as a monthly
    17  surcharge to the maximum rent. It shall  be  separately  designated  and
    18  billed  as  such  and shall not be compounded by any other adjustment to
    19  the maximum rent. The surcharge allocable to each apartment shall be  an
    20  amount  equal  to  the  cost  of the improvement divided by eighty-four,
    21  divided by the number of rooms in the building, and then  multiplied  by
    22  the number of rooms in such apartment; provided that the surcharge allo-
    23  cable to any apartment in any one year may not exceed an amount equal to
    24  six  percent  of the monthly rent collected by the owner for such apart-
    25  ment as set forth in the schedule of gross rents.  Any excess above said
    26  six percent shall be carried forward and collected in future years as  a
    27  further  surcharge  not  to  exceed an additional six percent in any one
    28  year period until the total surcharge equals the amount  it  would  have
    29  been  if the aforementioned six percent limitation did not apply; or (8)
    30  there has been since March first, nineteen hundred fifty, in  structures
    31  containing  more  than  four  housing accommodations, other improvements
    32  made with the express informed consent of the tenants in occupancy of at
    33  least seventy-five per centum of the housing  accommodations,  provided,
    34  however,  that  no  adjustment  granted  hereunder  shall exceed two per
    35  centum unless  the  tenants  have  agreed  to  a  higher  percentage  of
    36  increase,  as  herein  provided;  (9) there has been, since March first,
    37  nineteen hundred fifty, a subletting without written  consent  from  the
    38  landlord  or  an  increase  in the number of adult occupants who are not
    39  members of the immediate family of the tenant, and the landlord has  not
    40  been  compensated therefor by adjustment of the maximum rent by lease or
    41  order of the commission or pursuant to the  federal  act;  or  (10)  the
    42  presence  of  unique  or peculiar circumstances materially affecting the
    43  maximum rent has resulted in a maximum rent which is substantially lower
    44  than the rents generally prevailing in the same area  for  substantially
    45  similar housing accommodations.
    46    § 7. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
    47  576  of  the  laws of 1974, constituting the emergency tenant protection
    48  act of nineteen seventy-four, as amended by chapter 102 of the  laws  of
    49  1984, is amended and a new paragraph 6 is added to read as follows:
    50    (5) as an alternative to the hardship application provided under para-
    51  graph four of this subdivision, owners of buildings acquired by the same
    52  owner or a related entity owned by the same principals three years prior
    53  to  the  date  of application may apply to the division for increases in
    54  excess of the level of applicable guideline increases established  under
    55  this  law  based  on  a  finding by the commissioner that such guideline
    56  increases are not sufficient to enable the owner to maintain  an  annual
        S. 1430                            12

     1  gross  rent  income for such building which exceeds the annual operating
     2  expenses of such building by a sum equal to at  least  five  percent  of
     3  such gross rent.  For the purposes of this paragraph, operating expenses
     4  shall  consist  of  the actual, reasonable, costs of fuel, labor, utili-
     5  ties, taxes, other than  income  or  corporate  franchise  taxes,  fees,
     6  permits,  necessary  contracted services and non-capital repairs, insur-
     7  ance, parts and supplies, management fees and other administrative costs
     8  and mortgage interest. For the  purposes  of  this  paragraph,  mortgage
     9  interest  shall  be  deemed  to  mean  interest  on a bona fide mortgage
    10  including an allocable portion of charges related thereto.  Criteria  to
    11  be considered in determining a bona fide mortgage other than an institu-
    12  tional mortgage shall include[;]: condition of the property, location of
    13  the  property,  the existing mortgage market at the time the mortgage is
    14  placed, the term of the mortgage, the amortization rate,  the  principal
    15  amount  of  the mortgage, security and other terms and conditions of the
    16  mortgage. The commissioner shall set a rental value for any  unit  occu-
    17  pied  by the owner or a person related to the owner or unoccupied at the
    18  owner's choice for more than one month at the last regulated  rent  plus
    19  the minimum number of guidelines increases or, if no such regulated rent
    20  existed  or  is  known,  the commissioner shall impute a rent consistent
    21  with other rents in the building. The amount of hardship increase  shall
    22  be  such  as may be required to maintain the annual gross rent income as
    23  provided by this paragraph. The division  shall  not  grant  a  hardship
    24  application  under  this paragraph or paragraph four of this subdivision
    25  for a period of three years subsequent to granting a  hardship  applica-
    26  tion  under  the  provisions  of  this  paragraph. The collection of any
    27  increase in the rent for any  housing  accommodation  pursuant  to  this
    28  paragraph  shall  not  exceed six percent in any year from the effective
    29  date of the order granting the increase over the rent set forth  in  the
    30  schedule  of gross rents, with collectability of any dollar excess above
    31  said sum to be spread forward in similar increments  and  added  to  the
    32  rent  as  established  or  set  in future years. No application shall be
    33  approved unless the owner's equity in such building exceeds five percent
    34  of: (i) the arms length purchase price of the property; (ii) the cost of
    35  any capital improvements  for  which  the  owner  has  not  collected  a
    36  surcharge; (iii) any repayment of principal of any mortgage or loan used
    37  to  finance the purchase of the property or any capital improvements for
    38  which the owner has not collected a surcharge; and (iv) any increase  in
    39  the  equalized  assessed value of the property which occurred subsequent
    40  to the first valuation of the property after purchase by the owner.  For
    41  the purposes of this paragraph, owner's equity shall mean the sum of (i)
    42  the purchase price of the property less the principal of any mortgage or
    43  loan  used to finance the purchase of the property, (ii) the cost of any
    44  capital improvement for which the owner has not  collected  a  surcharge
    45  less the principal of any mortgage or loan used to finance said improve-
    46  ment,  (iii) any repayment of the principal of any mortgage or loan used
    47  to finance the purchase of the property or any capital  improvement  for
    48  which  the owner has not collected a surcharge, and (iv) any increase in
    49  the equalized assessed value of the property which  occurred  subsequent
    50  to  the  first valuation of the property after purchase by the owner[.];
    51  or
    52    (6) notwithstanding paragraph three of this subdivision there shall be
    53  no adjustment for any major capital improvement funded in any part  from
    54  moneys  provided  by  the New York state energy research and development
    55  authority.
        S. 1430                            13

     1    § 8. Paragraph 1 of subdivision g of section 26-405 of the administra-
     2  tive code of the city of New York is amended by adding  a  new  subpara-
     3  graph (p) to read as follows:
     4    (p)  Notwithstanding  subparagraph (g) or (k) of this paragraph, there
     5  shall be no adjustment for any major  capital  improvement  or  for  any
     6  other  expenditures  to  improve,  restore  or preserve the quality of a
     7  structure if such major capital improvement or such other expenditure is
     8  funded in any part from moneys provided by the  New  York  state  energy
     9  research and development authority.
    10    §  9. This act shall take effect immediately; provided that the amend-
    11  ments to section 26-405 of the city rent and rehabilitation law made  by
    12  sections  one,  two and eight of this act shall remain in full force and
    13  effect only so long as the public emergency requiring the regulation and
    14  control of residential rents and evictions  continues,  as  provided  in
    15  subdivision  3  of section 1 of the local emergency housing rent control
    16  act; and provided that the amendments to  section  26-511  of  the  rent
    17  stabilization  law of nineteen hundred sixty-nine made by sections three
    18  and four of this act shall expire on the same date as such  law  expires
    19  and  shall  not  affect  the  expiration  of  such law as provided under
    20  section 26-520 of such law, as from time to time amended.