S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   8886
 
                           I N  A S S E M B L Y
 
                              January 5, 2018
                                ___________
 
 Introduced  by  M.  of  A.  O'DONNELL  --  read once and referred to the
   Committee on Housing
 
 AN ACT to amend the administrative code of the city  of  New  York,  the
   emergency tenant protection act of nineteen seventy-four and the emer-
   gency housing rent control law, in relation to approving major capital
   improvement rent increases and extending the length of time over which
   major capital improvement expenses may be recovered
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   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
 section 31 of part A of chapter 20 of the laws of 2015,  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  AND  NO  ADJUSTMENT
 SHALL  BE  ALLOWED  FOR ANY BUILDING IN WHICH MORE THAN FIFTY PERCENT OF
 THE HABITABLE UNITS ARE  NOT  SUBJECT  TO  RENT  STABILIZATION  OR  RENT
 CONTROL;
   (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)
 for any order of the commissioner issued after the effective date of the
 rent act of 2015 shall be in an amount sufficient to amortize  the  cost
 of the improvements pursuant to this subparagraph (g) over an eight-year
 period  for  buildings  with  thirty-five  or fewer units or a nine year
 period for buildings with more than thiry-five  units,];  PROVIDED  THAT
 THE COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIA-
 BLE  UNDER  THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED
 FOR THE  OPERATION  OR  PRESERVATION  OF  THE  STRUCTURE  AND;  PROVIDED
 FURTHER,  THAT  SUCH  IMPROVEMENTS  ARE  NOT  REQUIRED  BY  LAW,  AS THE
 COLLECTION OF SURCHARGES TO THE MAXIMUM RENT AUTHORIZED ARE NOT  PERMIT-
 TED  FOR  SUCH IMPROVEMENTS.  HOWEVER, NO MAJOR CAPITAL IMPROVEMENT RENT
 INCREASE WILL BE APPROVED BY  THE  DIVISION  OF  HOUSING  AND  COMMUNITY
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
              

                       [ ] is old law to be omitted.
                                                            LBD13894-01-7

 A. 8886                             2
 
 RENEWAL  UNLESS  THE  WORK  PERFORMED  IS AN ENHANCEMENT OR UPGRADE TO A
 HOUSING ACCOMMODATION OR SERVICE THEREIN; OR  IS  AN  ADDITION  TO  SUCH
 HOUSING  ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUI-
 SITES  FOR  MAJOR  CAPITAL  IMPROVEMENT  RENT  INCREASES.  ANY REPAIR OR
 REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGI-
 BLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR  A
 MAJOR  CAPITAL  IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST
 ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF
 SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE  DIVISION
 OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORC-
 ING  A  BUILDING  CODE  IN  THE  JURISDICTION  IN  WHICH THE PROPERTY IS
 LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNI-
 TY RENEWAL THAT SUCH  WORK  IS  ESSENTIAL  TO  THE  ALLEVIATION  OF  THE
 VIOLATIONS  AND  SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS
 SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE
 PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE  THE  COMMENCEMENT
 OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A
 STATEMENT  CONTAINING  INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED
 DATE OF COMPLETION FOR SUCH WORK AND  AN  AFFIDAVIT  SETTING  FORTH  THE
 FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN-
 TIAL  INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR-
 ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS  HAD,
 WITHIN  THE  FIVE  YEARS  PRIOR  TO  THE IMPROVEMENT, BEEN FOUND TO HAVE
 HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A
 COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL  LAW  REGULATING
 RENTS  OR  ANY  STATE  OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR
 UNLAWFUL EVICTION. UPON RECEIPT OF  THE  SCOPE  OF  WORK  AND  AFFIDAVIT
 PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL
 PROVIDE  THE  TENANTS  IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA-
 TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN  ADDITION,
 IMPLEMENT  PROCEDURES  INCLUDING,  BUT  NOT LIMITED TO, ELICITING TENANT
 COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL  IMPROVEMENT  REHABILITATION
 WORK  HAS  BEEN  SATISFACTORILY  COMPLETED. NO MAJOR CAPITAL IMPROVEMENT
 RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY  DEFECTIVE  OR  DEFICIENT
 REHABILITATION  WORK  HAS  BEEN  CURED.  THE INCREASE PERMITTED FOR SUCH
 CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A  MONTHLY  SURCHARGE  TO  THE
 MAXIMUM  RENT.  IT SHALL BE SEPARATELY 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,  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
   § 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-

 A. 8886                             3
 
 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.
   § 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
 tive code of the city of New York, as amended by section 29 of part A of
 chapter 20 of the laws of 2015, 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] IN REGARD 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 management 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 nineteen hundred sixty-eight through nineteen hundred seventy, or
 for the first three years of operation if  the  building  was  completed
 since  nineteen  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  nine-
 teen hundred seventy despite diligent efforts to obtain same from prede-
 cessors  in  title  and  further provided that the new owner can provide
 financial data covering a minimum of six years under his or her  contin-
 uous  and uninterrupted operation of the building to meet the three year
 to three year comparative 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 an  eight-year  period  for  a
 building  with  thirty-five  or fewer housing accommodations, or a nine-
 year period for a building with more than thirty-five  housing  accommo-
 dations,  for  any  determination  issued by the division of housing and
 community renewal after the effective date of  the  rent  act  of  2015,
 based  upon  cash purchase price exclusive of interest or service charg-
 es].   Notwithstanding anything to the  contrary  contained  herein,  no
 hardship  increase  granted 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 manage-
 ment services as determined by the  commissioner,  (iii)  actual  annual
 mortgage debt service (interest and amortization) on its indebtedness to
 a  lending  institution,  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

 A. 8886                             4
 
 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 increments and added to the stabilized rent as established or
 set in future years;
   § 4.  Paragraph 6-a of subdivision c of section 26-511 of the adminis-
 trative code of the city of New York, is amended to read as follows:
   (6-a)  provides  criteria  whereby  as  an alternative to the hardship
 application provided under paragraph six of this subdivision  owners  of
 buildings  acquired  by  the same owner or a related entity owned by the
 same principals three years prior to the date of application  may  apply
 to  the  division  for  increases  in  excess of the level of applicable
 guideline increases established under this law based on a finding by the
 commissioner that such guideline increases are not sufficient to  enable
 the  owner  to  maintain  an  annual gross rent income for such building
 which exceeds the annual operating expenses of such building  by  a  sum
 equal  to  at least five percent of such gross rent. For the purposes of
 this paragraph, operating expenses shall consist of the actual,  reason-
 able,  costs  of  fuel,  labor,  utilities,  taxes, other than income or
 corporate franchise taxes, fees, permits, necessary contracted  services
 and  non-capital repairs, insurance, parts and supplies, management fees
 and other administrative costs and mortgage interest. For  the  purposes
 of this paragraph, mortgage interest shall be deemed to mean interest on
 a  bona  fide mortgage including an allocable portion of charges related
 thereto. Criteria to be considered in determining a bona  fide  mortgage
 other  than  an  institutional  mortgage shall include; condition of the
 property, location of the property, the existing mortgage market at  the
 time  the mortgage is placed, the term of the mortgage, the amortization
 rate, the principal amount of the mortgage, security and other terms and
 conditions of the mortgage. The commissioner shall set  a  rental  value
 for  any  unit occupied by the owner or a person related to the owner or
 unoccupied at the owner's choice for more than one  month  at  the  last
 regulated rent plus the minimum number of guidelines increases or, if no
 such regulated rent existed or is known, the commissioner shall impute a
 rent consistent with other rents in the building. The amount of hardship
 increase  shall  be such as may be required to maintain the annual gross
 rent income as provided by this paragraph. The division shall not  grant
 a  hardship  application  under  this paragraph or paragraph six of this
 subdivision for (I) a period of three years  subsequent  to  granting  a
 hardship  application  under the provisions of this paragraph OR (II) TO
 THE OWNER OF ANY BUILDING IN WHICH MORE THAN FIFTY PERCENT OF THE  HABI-
 TABLE  UNITS ARE NOT SUBJECT TO RENT STABILIZATION OR RENT CONTROL.  The
 collection of any increase in the rent  for  any  housing  accommodation
 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 increments and
 added to the rent as established or set in future years. No  application
 shall  be  approved  unless  the owner's equity in such building exceeds
 five percent of: (i) the arms length purchase  price  of  the  property;
 (ii)  the  cost  of any capital improvements for which the owner has not
 collected a surcharge; (iii) any repayment of principal of any  mortgage
 or  loan  used  to  finance  the purchase of the property or any capital
 improvements for which the owner has not collected a surcharge and  (iv)

 A. 8886                             5
 
 any  increase  in  the  equalized  assessed  value of the property which
 occurred subsequent  to  the  first  valuation  of  the  property  after
 purchase by the owner. For the purposes of this paragraph, owner's equi-
 ty shall mean the sum of (i) the purchase price of the property less the
 principal  of  any  mortgage or loan used to finance the purchase of the
 property, (ii) the cost of any capital improvement for which  the  owner
 has not collected a surcharge less the principal of any mortgage or loan
 used  to  finance said improvement, (iii) any repayment of the principal
 of any mortgage or loan used to finance the purchase of the property  or
 any  capital  improvement  for  which  the  owner  has  not  collected a
 surcharge, and (iv) any increase in the equalized assessed value of  the
 property which occurred subsequent to the first valuation of the proper-
 ty after purchase by the owner.
   § 5. Subdivision c of section 26-511 of the administrative code of the
 city  of New York is amended by adding three new paragraphs 6-b, 6-c and
 6-d 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 THAT:
   (I) AS TO COMPLETED BUILDING-WIDE MAJOR CAPITAL  IMPROVEMENTS,  FIRST,
 THAT  A  FINDING THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE
 INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE  OPERA-
 TION OR PRESERVATION OF THE STRUCTURE;
   (II)  HOWEVER,  NO  MAJOR  CAPITAL  IMPROVEMENT  RENT INCREASE WILL BE
 APPROVED BY THE DIVISION OF HOUSING AND  COMMUNITY  RENEWAL  UNLESS  THE
 WORK  PERFORMED  IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION
 OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION  AND
 OTHERWISE  ELIGIBLE  ACCORDING  TO  THE  PREREQUISITES FOR MAJOR CAPITAL
 IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO  MAIN-
 TAIN  AN  EXISTING  SERVICE  SHALL  NOT  BE ELIGIBLE FOR A MAJOR CAPITAL
 IMPROVEMENT RENT INCREASE;
   (III) NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY
 BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS  AT  THE
 TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO
 REGULATIONS  OF  THE  DIVISION  OF  HOUSING AND COMMUNITY RENEWAL OR ANY
 AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN  THE  JURISDICTION
 IN  WHICH  THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVI-
 SION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE
 ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT  WITH  THE
 PROVISIONS  OF  THIS  SECTION.  EXCEPT  IN THE CASE OF EMERGENCY OR GOOD
 CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN  THIRTY  DAYS
 BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING
 AND  COMMUNITY  RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE
 SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN  AFFIDA-
 VIT SETTING FORTH THE FOLLOWING INFORMATION:
   (A)  EVERY  OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE
 PROPERTY OR ENTITY OWNING THE PROPERTY OR  SPONSORING  THE  IMPROVEMENT;
 AND
   (B)  A  STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS
 PRIOR TO THE IMPROVEMENT, BEEN FOUND  TO  HAVE  HARASSED  OR  UNLAWFULLY
 EVICTED  TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER
 THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY  STATE  OR
 LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION.
   UPON  RECEIPT  OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN,
 THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE  TENANTS

 A. 8886                             6
 
 IN  OCCUPANCY  IN  SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF
 HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION,  IMPLEMENT  PROCEDURES
 INCLUDING,  BUT  NOT  LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE
 WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFAC-
 TORILY  COMPLETED.  NO  MAJOR  CAPITAL  IMPROVEMENT  RENT INCREASE SHALL
 BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR  DEFICIENT  REHABILITATION  WORK
 HAS BEEN CURED.
   (6-C)  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 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.
   (6-D) COLLECTION OF SURCHARGES IN EXCESS OF THE  LEVEL  OF  FAIR  RENT
 AUTHORIZED  PURSUANT  TO  PARAGRAPH  SIX-B AND SIX-C OF THIS SUBDIVISION
 SHALL CEASE WHEN THE OWNER HAS RECOVERED THE COST OF THE  MAJOR  CAPITAL
 IMPROVEMENT.
   § 6. 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 section  30  of  part  A  of
 chapter 20 of the laws of 2015, 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 AND NO ADJUSTMENT SHALL BE ALLOWED FOR ANY BUILDING IN WHICH
 MORE THAN FIFTY PERCENT OF THE HABITABLE UNITS ARE NOT SUBJECT  TO  RENT
 STABILIZATION OR RENT CONTROL;
   (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 an eight-year period for a building with
 thirty-five or fewer housing accommodations, or a nine-year period for a
 building  with  more  than  thirty-five  housing accommodations, for any
 determination issued by the division of housing  and  community  renewal
 after  the  effective  date of the rent act of 2015,]; PROVIDED THAT THE
 COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE  DEEMED  DEPRECIABLE
 UNDER  THE  INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR
 THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEVER, NO MAJOR  CAPI-
 TAL  IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUS-
 ING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR
 UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION
 TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE  ACCORDING  TO  THE
 PREREQUISITES  FOR  MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR
 OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING  SERVICE  SHALL  NOT  BE
 ELIGIBLE  FOR  A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION

 A. 8886                             7
 
 FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED  IF  THERE
 EXIST  ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDER-
 ATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF  THE
 DIVISION  OF  HOUSING  AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING
 AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE  PROPERTY
 IS  LOCATED,  UNLESS  IT  IS  DETERMINED  BY THE DIVISION OF HOUSING AND
 COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF  THE
 VIOLATIONS  AND  SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS
 SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE
 PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE  THE  COMMENCEMENT
 OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A
 STATEMENT  CONTAINING  INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED
 DATE OF COMPLETION FOR SUCH WORK AND  AN  AFFIDAVIT  SETTING  FORTH  THE
 FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN-
 TIAL  INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR-
 ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS  HAD,
 WITHIN  THE  FIVE  YEARS  PRIOR  TO  THE IMPROVEMENT, BEEN FOUND TO HAVE
 HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A
 COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL  LAW  REGULATING
 RENTS  OR  ANY  STATE  OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR
 UNLAWFUL EVICTION. UPON RECEIPT OF  THE  SCOPE  OF  WORK  AND  AFFIDAVIT
 PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL
 PROVIDE  THE  TENANTS  IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA-
 TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN  ADDITION,
 IMPLEMENT  PROCEDURES  INCLUDING,  BUT  NOT LIMITED TO, ELICITING TENANT
 COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL  IMPROVEMENT  REHABILITATION
 WORK  HAS  BEEN  SATISFACTORILY  COMPLETED. NO MAJOR CAPITAL IMPROVEMENT
 RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY  DEFECTIVE  OR  DEFICIENT
 REHABILITATION  WORK  HAS  BEEN  CURED.  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  AUTHOR-
 IZED  BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE SURCHARGE ALLOCA-
 BLE 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  APART-
 MENT;  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 AFOREMENTIONED SIX
 PERCENT LIMITATION DID NOT APPLY, or
   § 7. 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, subparagraph 7 as amended by section
 32 of part A of chapter 20 of the laws of 2015, 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

 A. 8886                             8
 
 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
 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,

 A. 8886                             9
 
 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 AND NO ADJUSTMENT SHALL BE ALLOWED FOR ANY BUILDING
 IN WHICH MORE THAN FIFTY PERCENT OF THE HABITABLE UNITS ARE NOT  SUBJECT
 TO  RENT  STABILIZATION OR RENT CONTROL; (II) there has been since March
 first, nineteen hundred fifty, a major capital improvement [required for
 the operation, preservation or maintenance of the structure;  which  for
 any  order  of  the  commissioner issued after the effective date of the
 rent act of 2015 the cost of such improvement shall be amortized over an
 eight-year period for buildings with thirty-five or  fewer  units  or  a
 nine  year  period  for  buildings with more than thiry-five units, or];
 PROVIDED THAT THE COMMISSIONER FIRST FINDS THAT  SUCH  IMPROVEMENTS  ARE
 DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS
 ARE  REQUIRED FOR THE OPERATION OR PRESERVATION OF THE STRUCTURE. HOWEV-
 ER, NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED  BY  THE
 DIVISION  OF  HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS
 AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN;
 OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND  OTHERWISE  ELIGIBLE
 ACCORDING  TO  THE  PREREQUISITES  FOR  MAJOR  CAPITAL  IMPROVEMENT RENT
 INCREASES.  ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN  AN  EXISTING
 SERVICE  SHALL  NOT  BE  ELIGIBLE  FOR  A MAJOR CAPITAL IMPROVEMENT RENT
 INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT  RENT  INCREASE
 MAY  BE  APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT
 THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED  PURSU-
 ANT  TO  REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR
 ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE  JURISDIC-
 TION  IN  WHICH  THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE
 DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO
 THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS  CONSISTENT  WITH
 THE  PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD
 CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN  THIRTY  DAYS
 BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING
 AND  COMMUNITY  RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE
 SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN  AFFIDA-
 VIT  SETTING  FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD
 AND OWNER OF A SUBSTANTIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE
 PROPERTY OR SPONSORING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF
 SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE  IMPROVEMENT,  BEEN
 FOUND  TO  HAVE  HARASSED  OR  UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR
 DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL  LAW,  ANY  STATE  OR
 LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASS-
 MENT  OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK
 AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY

 A. 8886                            10
 
 RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN  SUCH  BUILDINGS  WITH
 SUCH  INFORMATION.  THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL,
 IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICIT-
 ING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHA-
 BILITATION  WORK  HAS  BEEN  SATISFACTORILY  COMPLETED. NO MAJOR CAPITAL
 IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE  OR
 DEFICIENT REHABILITATION WORK HAS BEEN CURED. THE INCREASE PERMITTED FOR
 SUCH  CAPITAL  IMPROVEMENT  SHALL BE COLLECTED AS A MONTHLY SURCHARGE TO
 THE MAXIMUM RENT. IT SHALL BE SEPARATELY 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, 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
 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, however, that no adjust-
 ment  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.
   § 8. Paragraph 5 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 102 of the laws of
 1984, is amended and a new paragraph 6 is added to read as follows:
   (5) as an alternative to the hardship application provided under para-
 graph four of this subdivision, owners of buildings acquired by the same
 owner or a related entity owned by the same principals three years prior
 to the date of application may apply to the division  for  increases  in
 excess  of the level of applicable guideline increases established under
 this law based on a finding by  the  commissioner  that  such  guideline
 increases  are  not sufficient to enable the owner to maintain an annual
 gross rent income for such building which exceeds the  annual  operating
 expenses  of  such  building  by a sum equal to at least five percent of
 such gross rent PROVIDED, THAT MORE THAN HALF OF THE HABITABLE UNITS  IN
 THE BUILDING ARE SUBJECT TO RENT STABILIZATION OR RENT CONTROL.  For the
 purposes  of  this  paragraph,  operating  expenses shall consist of the
 actual, reasonable, costs of fuel, labor, utilities, taxes,  other  than
 income or corporate franchise taxes, fees, permits, necessary contracted
 services and non-capital repairs, insurance, parts and supplies, manage-

 A. 8886                            11
 
 ment  fees and other administrative costs and mortgage interest. For the
 purposes of this paragraph, mortgage interest shall be  deemed  to  mean
 interest  on  a  bona  fide  mortgage  including an allocable portion of
 charges related thereto. Criteria to be considered in determining a bona
 fide  mortgage  other  than  an institutional mortgage shall include[;]:
 condition of the property, location of the property, the existing  mort-
 gage  market  at  the time the mortgage is placed, the term of the mort-
 gage, the amortization rate, the principal amount of the mortgage, secu-
 rity and other terms and conditions of the  mortgage.  The  commissioner
 shall  set a rental value for any unit occupied by the owner or a person
 related to the owner or unoccupied at the owner's choice for  more  than
 one  month  at the last regulated rent plus the minimum number of guide-
 lines increases or, if no such regulated rent existed or is  known,  the
 commissioner  shall  impute  a  rent  consistent with other rents in the
 building. The amount of hardship  increase  shall  be  such  as  may  be
 required  to  maintain  the annual gross rent income as provided by this
 paragraph. The division shall not grant  a  hardship  application  under
 this  paragraph  or  paragraph  four of this subdivision for a period of
 three years subsequent to granting  a  hardship  application  under  the
 provisions of this paragraph. The collection of any increase in the rent
 for  any  housing  accommodation  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  increments and added to the rent as estab-
 lished or set in future years. No application shall be  approved  unless
 the  owner's  equity  in  such building exceeds five percent of: (i) the
 arms length purchase price of the property; (ii) the cost of any capital
 improvements for which the owner has not collected  a  surcharge;  (iii)
 any  repayment  of principal of any mortgage or loan used to finance the
 purchase of the property or any capital improvements for which the owner
 has not collected a surcharge; and (iv) any increase  in  the  equalized
 assessed  value  of  the property which occurred subsequent to the first
 valuation of the property after purchase by the owner. For the  purposes
 of this paragraph, owner's equity shall mean the sum of (i) the purchase
 price of the property less the principal of any mortgage or loan used to
 finance  the  purchase  of  the  property,  (ii) the cost of any capital
 improvement for which the owner has not collected a surcharge  less  the
 principal  of  any  mortgage  or  loan used to finance said improvement,
 (iii) any repayment of the principal of any mortgage  or  loan  used  to
 finance  the  purchase  of  the  property or any capital improvement for
 which the owner has not collected a surcharge, and (iv) any increase  in
 the  equalized  assessed value of the property which occurred subsequent
 to the first valuation of the property after purchase by  the  owner[.];
 OR
   (6) NOTWITHSTANDING PARAGRAPH THREE OF THIS SUBDIVISION THERE SHALL BE
 NO  ADJUSTMENT FOR ANY MAJOR CAPITAL IMPROVEMENT FUNDED IN ANY PART FROM
 MONEYS PROVIDED BY THE NEW YORK STATE ENERGY  RESEARCH  AND  DEVELOPMENT
 AUTHORITY.
   § 9. Paragraph 1 of subdivision g of section 26-405 of the administra-
 tive  code  of  the city of New York is amended by adding a new subpara-
 graph (p) to read as follows:
   (P) NOTWITHSTANDING SUBPARAGRAPH (G) OR (K) OF THIS  PARAGRAPH,  THERE
 SHALL  BE  NO  ADJUSTMENT  FOR  ANY MAJOR CAPITAL IMPROVEMENT OR FOR ANY
 OTHER EXPENDITURES TO IMPROVE, RESTORE OR  PRESERVE  THE  QUALITY  OF  A
 STRUCTURE IF SUCH MAJOR CAPITAL IMPROVEMENT OR SUCH OTHER EXPENDITURE IS

 A. 8886                            12
 
 FUNDED  IN  ANY  PART  FROM MONEYS PROVIDED BY THE NEW YORK STATE ENERGY
 RESEARCH AND DEVELOPMENT AUTHORITY.
   § 10. 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, two and nine 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; provided that the amendments to section 26-511 of the rent stabili-
 zation  law  of nineteen hundred sixty-nine made by sections three, four
 and five 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; provided  that
 the  amendments  to  section 6 of the emergency tenant protection act of
 nineteen seventy-four made by sections six and eight 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 provided that the amend-
 ments  to  section  4  of the emergency housing rent control law made by
 section seven 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.