S T A T E O F N E W Y O R K
________________________________________________________________________
1493
2013-2014 Regular Sessions
I N S E N A T E
(PREFILED)
January 9, 2013
___________
Introduced by Sens. KRUEGER, AVELLA, HASSELL-THOMPSON, HOYLMAN, MONTGOM-
ERY, PERALTA, PERKINS, SERRANO, STAVISKY, STEWART-COUSINS -- 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 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:
Section 1. Subparagraph (g) of paragraph 1 of subdivision g of section
26-405 of the administrative code of the city of New York, as amended by
chapter 749 of the laws of 1990, is amended to read as follows:
(g) (I) COLLECTION OF SURCHARGES TO THE MAXIMUM RENT AUTHORIZED PURSU-
ANT TO ITEM (II) OF THIS SUBPARAGRAPH SHALL CEASE WHEN THE OWNER HAS
RECOVERED THE COST OF THE MAJOR CAPITAL IMPROVEMENT;
(II) There has been since July first, nineteen hundred seventy, a
major capital improvement [required for the operation, preservation or
maintenance of the structure. An adjustment under this subparagraph (g)
shall be in an amount sufficient to amortize the cost of the improve-
ments pursuant to this subparagraph (g) over a seven-year period];
PROVIDED THAT THE COMMISSIONER FINDS THAT SUCH IMPROVEMENTS ARE DEEMED
DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE
REQUIRED FOR THE OPERATION, PRESERVATION OR MAINTENANCE OF THE STRUC-
TURE. THE INCREASE PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE
COLLECTED AS A MONTHLY SURCHARGE TO THE MAXIMUM RENT. IT SHALL BE SEPA-
RATELY DESIGNATED AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY
OTHER ADJUSTMENT TO THE MAXIMUM RENT. THE SURCHARGE ALLOCABLE TO EACH
APARTMENT SHALL BE AN AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT
DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING,
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00868-01-3
S. 1493 2
AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED
THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT
EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE MONTHLY RENT COLLECTED BY
THE OWNER FOR SUCH APARTMENT AS SET FORTH IN THE SCHEDULE OF GROSS
RENTS. ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE CARRIED FORWARD AND
COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT TO EXCEED AN ADDI-
TIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE TOTAL SURCHARGE
EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMENTIONED SIX PERCENT
LIMITATION DID NOT APPLY; or
S 2. Subparagraph (k) of paragraph 1 of subdivision g of section
26-405 of the administrative code of the city of New York, as amended by
chapter 749 of the laws of 1990, is amended to read as follows:
(k) The landlord has incurred, since January first, nineteen hundred
seventy, in connection with and in addition to a concurrent major capi-
tal improvement pursuant to subparagraph (g) of this paragraph, other
expenditures to improve, restore or preserve the quality of the struc-
ture. An adjustment under this subparagraph shall be granted only if
such improvements represent an expenditure equal to at least ten per
centum of the total operating and maintenance expenses for the preceding
year. An adjustment under this subparagraph shall be in addition to any
adjustment granted for the concurrent major capital improvement and
shall be [in an amount sufficient to amortize the cost of the improve-
ments pursuant to this subparagraph over a seven-year period] IMPLE-
MENTED IN THE SAME MANNER AS SUCH MAJOR CAPITAL IMPROVEMENT AS A FURTHER
SURCHARGE TO THE MAXIMUM RENT.
S 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
tive code of the city of New York, as amended by chapter 116 of the laws
of 1997, is amended to read as follows:
(6) provides criteria whereby the commissioner may act upon applica-
tions by owners for increases in excess of the level of fair rent
increase established under this law provided, however, that such crite-
ria shall provide [(a)] as to hardship applications, for a finding that
the level of fair rent increase is not sufficient to enable the owner to
maintain approximately the same average annual net income (which shall
be computed without regard to debt service, financing costs or manage-
ment fees) for the three year period ending on or within six months of
the date of an application pursuant to such criteria as compared with
annual net income, which prevailed on the average over the period nine-
teen hundred sixty-eight through nineteen hundred seventy, or for the
first three years of operation if the building was completed since nine-
teen hundred sixty-eight or for the first three fiscal years after a
transfer of title to a new owner provided the new owner can establish to
the satisfaction of the commissioner that he or she acquired title to
the building as a result of a bona fide sale of the entire building and
that the new owner is unable to obtain requisite records for the fiscal
years nineteen hundred sixty-eight through nineteen hundred seventy
despite diligent efforts to obtain same from predecessors in title and
further provided that the new owner can provide financial data covering
a minimum of six years under his or her continuous and uninterrupted
operation of the building to meet the three year to three year compar-
ative test periods herein provided[; and (b) as to completed building-
wide major capital improvements, for a finding that such improvements
are deemed depreciable under the Internal Revenue Code and that the cost
is to be amortized over a seven-year period, based upon cash purchase
price exclusive of interest or service charges]. Notwithstanding
anything to the contrary contained herein, no hardship increase granted
S. 1493 3
pursuant to this paragraph shall, when added to the annual gross rents,
as determined by the commissioner, exceed the sum of, (i) the annual
operating expenses, (ii) an allowance for management services as deter-
mined by the commissioner, (iii) actual annual mortgage debt service
(interest and amortization) on its indebtedness to a lending institu-
tion, an insurance company, a retirement fund or welfare fund which is
operated under the supervision of the banking or insurance laws of the
state of New York or the United States, and (iv) eight and one-half
percent of that portion of the fair market value of the property which
exceeds the unpaid principal amount of the mortgage indebtedness
referred to in subparagraph (iii) of this paragraph. Fair market value
for the purposes of this paragraph shall be six times the annual gross
rent. The collection of any increase in the stabilized rent for any
apartment pursuant to this paragraph shall not exceed six percent in any
year from the effective date of the order granting the increase over the
rent set forth in the schedule of gross rents, with collectability of
any dollar excess above said sum to be spread forward in similar incre-
ments and added to the stabilized rent as established or set in future
years;
S 4. Subdivision c of section 26-511 of the administrative code of the
city of New York is amended by adding two new paragraphs 6-b and 6-c to
read as follows:
(6-B) PROVIDES CRITERIA WHEREBY THE COMMISSIONER MAY ACT UPON APPLICA-
TION BY OWNERS FOR INCREASES IN EXCESS OF THE LEVEL OF FAIR RENT
INCREASE ESTABLISHED UNDER THIS LAW PROVIDED, HOWEVER, THAT SUCH CRITE-
RIA SHALL PROVIDE AS TO COMPLETED BUILDING-WIDE MAJOR CAPITAL IMPROVE-
MENTS, FOR A FINDING THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER
THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE
OPERATION, PRESERVATION OR MAINTENANCE OF THE STRUCTURE. THE INCREASE
PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY
SURCHARGE TO THE LEGAL REGULATED RENT. IT SHALL BE SEPARATELY DESIGNATED
AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY ANNUAL ADJUSTMENT
OF THE LEVEL OF FAIR RENT PROVIDED FOR UNDER SUBDIVISION B OF SECTION
26-510 OF THIS LAW. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE
AN AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR,
DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY
THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLO-
CABLE TO ANY APARTMENT, IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL
TO SIX PERCENT OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH
APARTMENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE
SAID SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS
AS A FURTHER SURCHARGE NOT TO EXCEED AN ADDITIONAL SIX PERCENT IN ANY
ONE YEAR PERIOD UNTIL THE TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD
HAVE BEEN IF THE AFOREMENTIONED SIX PERCENT LIMITATION DID NOT APPLY.
(6-C) COLLECTION OF SURCHARGES IN EXCESS OF THE LEVEL OF FAIR RENT
AUTHORIZED PURSUANT TO PARAGRAPH SIX-B OF THIS SUBDIVISION SHALL CEASE
WHEN THE OWNER HAS RECOVERED THE COST OF THE MAJOR CAPITAL IMPROVEMENT.
S 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
576 of the laws of 1974, constituting the emergency tenant protection
act of nineteen seventy-four, as amended by chapter 749 of the laws of
1990, is amended to read as follows:
(3) (I) COLLECTION OF SURCHARGES IN ADDITION TO THE LEGAL REGULATED
RENT AUTHORIZED PURSUANT TO SUBPARAGRAPH (II) OF THIS PARAGRAPH SHALL
CEASE WHEN THE OWNER HAS RECOVERED THE COST OF THE MAJOR CAPITAL
IMPROVEMENT;
S. 1493 4
(II) there has been since January first, nineteen hundred seventy-four
a major capital improvement [required for the operation, preservation or
maintenance of the structure. An adjustment under this paragraph shall
be in an amount sufficient to amortize the cost of the improvements
pursuant to this paragraph over a seven-year period]; PROVIDED THAT THE
COMMISSIONER FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER
THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE
OPERATION, PRESERVATION OR MAINTENANCE OF THE STRUCTURE. THE INCREASE
PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY
SURCHARGE TO THE LEGAL REGULATED RENT. IT SHALL BE SEPARATELY DESIGNATED
AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY ANNUAL RENT
ADJUSTMENT AUTHORIZED BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE
SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE
COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF
ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN
SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT
IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE
MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APARTMENT AS SET FORTH IN
THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE
CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT
TO EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE
TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMEN-
TIONED SIX PERCENT LIMITATION DID NOT APPLY, or
S 6. The second undesignated paragraph of paragraph (a) of subdivision
4 of section 4 of chapter 274 of the laws of 1946, constituting the
emergency housing rent control law, as amended by section 25 of part B
of chapter 97 of the laws of 2011, is amended to read as follows:
No application for adjustment of maximum rent based upon a sales price
valuation shall be filed by the landlord under this subparagraph prior
to six months from the date of such sale of the property. In addition,
no adjustment ordered by the commission based upon such sales price
valuation shall be effective prior to one year from the date of such
sale. Where, however, the assessed valuation of the land exceeds four
times the assessed valuation of the buildings thereon, the commission
may determine a valuation of the property equal to five times the equal-
ized assessed valuation of the buildings, for the purposes of this
subparagraph. The commission may make a determination that the valuation
of the property is an amount different from such equalized assessed
valuation where there is a request for a reduction in such assessed
valuation currently pending; or where there has been a reduction in the
assessed valuation for the year next preceding the effective date of the
current assessed valuation in effect at the time of the filing of the
application. Net annual return shall be the amount by which the earned
income exceeds the operating expenses of the property, excluding mort-
gage interest and amortization, and excluding allowances for obsoles-
cence and reserves, but including an allowance for depreciation of two
per centum of the value of the buildings exclusive of the land, or the
amount shown for depreciation of the buildings in the latest required
federal income tax return, whichever is lower; provided, however, that
(1) no allowance for depreciation of the buildings shall be included
where the buildings have been fully depreciated for federal income tax
purposes or on the books of the owner; or (2) the landlord who owns no
more than four rental units within the state has not been fully compen-
sated by increases in rental income sufficient to offset unavoidable
increases in property taxes, fuel, utilities, insurance and repairs and
maintenance, excluding mortgage interest and amortization, and excluding
S. 1493 5
allowances for depreciation, obsolescence and reserves, which have
occurred since the federal date determining the maximum rent or the date
the property was acquired by the present owner, whichever is later; or
(3) the landlord operates a hotel or rooming house or owns a cooperative
apartment and has not been fully compensated by increases in rental
income from the controlled housing accommodations sufficient to offset
unavoidable increases in property taxes and other costs as are allocable
to such controlled housing accommodations, including costs of operation
of such hotel or rooming house, but excluding mortgage interest and
amortization, and excluding allowances for depreciation, obsolescence
and reserves, which have occurred since the federal date determining the
maximum rent or the date the landlord commenced the operation of the
property, whichever is later; or (4) the landlord and tenant voluntarily
enter into a valid written lease in good faith with respect to any hous-
ing accommodation, which lease provides for an increase in the maximum
rent not in excess of fifteen per centum and for a term of not less than
two years, except that where such lease provides for an increase in
excess of fifteen per centum, the increase shall be automatically
reduced to fifteen per centum; or (5) the landlord and tenant by mutual
voluntary written agreement agree to a substantial increase or decrease
in dwelling space or a change in the services, furniture, furnishings or
equipment provided in the housing accommodations; provided that an owner
shall be entitled to a rent increase where there has been a substantial
modification or increase of dwelling space or an increase in the
services, or installation of new equipment or improvements or new furni-
ture or furnishings provided in or to a tenant's housing accommodation.
The permanent increase in the maximum rent for the affected housing
accommodation shall be one-fortieth, in the case of a building with
thirty-five or fewer housing accommodations, or one-sixtieth, in the
case of a building with more than thirty-five housing accommodations
where such permanent increase takes effect on or after September twen-
ty-fourth, two thousand eleven, of the total cost incurred by the land-
lord in providing such modification or increase in dwelling space,
services, furniture, furnishings or equipment, including the cost of
installation, but excluding finance charges provided further that an
owner who is entitled to a rent increase pursuant to this clause shall
not be entitled to a further rent increase based upon the installation
of similar equipment, or new furniture or furnishings within the useful
life of such new equipment, or new furniture or furnishings. The owner
shall give written notice to the commission of any such adjustment
pursuant to this clause; or (6) there has been, since March first, nine-
teen hundred fifty, an increase in the rental value of the housing
accommodations as a result of a substantial rehabilitation of the build-
ing or housing accommodation therein which materially adds to the value
of the property or appreciably prolongs its life, excluding ordinary
repairs, maintenance and replacements; or (7) (I) COLLECTION OF
SURCHARGES TO THE MAXIMUM RENT AUTHORIZED PURSUANT TO ITEM (II) OF THIS
CLAUSE SHALL CEASE WHEN THE OWNER HAS RECOVERED THE COST OF THE MAJOR
CAPITAL IMPROVEMENT; (II) there has been since March first, nineteen
hundred fifty, a major capital improvement [required for the operation,
preservation or maintenance of the structure]; PROVIDED THAT THE COMMIS-
SIONER FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE
INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE OPERA-
TION, PRESERVATION OR MAINTENANCE OF THE STRUCTURE. THE INCREASE PERMIT-
TED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY
SURCHARGE TO THE MAXIMUM RENT. IT SHALL BE SEPARATELY DESIGNATED AND
S. 1493 6
BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY OTHER ADJUSTMENT TO
THE MAXIMUM RENT. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE AN
AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR,
DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY
THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLO-
CABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO
SIX PERCENT OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APART-
MENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE SAID
SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A
FURTHER SURCHARGE NOT TO EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE
YEAR PERIOD UNTIL THE TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE
BEEN IF THE AFOREMENTIONED SIX PERCENT LIMITATION DID NOT APPLY; or (8)
there has been since March first, nineteen hundred fifty, in structures
containing more than four housing accommodations, other improvements
made with the express consent of the tenants in occupancy of at least
seventy-five per centum of the housing accommodations, provided, howev-
er, that no adjustment granted hereunder shall exceed fifteen per centum
unless the tenants have agreed to a higher percentage of increase, as
herein provided; or (9) there has been, since March first, nineteen
hundred fifty, a subletting without written consent from the landlord or
an increase in the number of adult occupants who are not members of the
immediate family of the tenant, and the landlord has not been compen-
sated therefor by adjustment of the maximum rent by lease or order of
the commission or pursuant to the federal act; or (10) the presence of
unique or peculiar circumstances materially affecting the maximum rent
has resulted in a maximum rent which is substantially lower than the
rents generally prevailing in the same area for substantially similar
housing accommodations.
S 7. This act shall take effect immediately; provided that the amend-
ments to section 26-405 of the city rent and rehabilitation law made by
sections one and two of this act shall remain in full force and effect
only so long as the public emergency requiring the regulation and
control of residential rents and evictions continues, as provided in
subdivision 3 of section 1 of the local emergency housing rent control
act; and provided further that the amendments to section 26-511 of the
rent stabilization law of nineteen hundred sixty-nine made by sections
three and four of this act shall expire on the same date as such law
expires and shall not affect the expiration of such law as provided
under section 26-520 of such law, as from time to time amended; and
provided further that the amendment to section 6 of the emergency tenant
protection act of nineteen seventy-four made by section five of this act
shall expire on the same date as such act expires and shall not affect
the expiration of such act as provided in section 17 of chapter 576 of
the laws of 1974, as from time to time amended; and further provided
that the amendment to section 4 of the emergency housing rent control
law made by section six of this act shall expire on the same date as
such law expires and shall not affect the expiration of such law as
provided in subdivision 2 of section 1 of chapter 274 of the laws of
1946.