NY State Senate Bill 2019-S2579

Senate Bill S2579

2019-2020 Legislative Session

Approves major capital improvement rent increases and extends the length of time over which major capital improvement expenses may be recovered

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Archive: Last Bill Status - In Senate Committee Housing, Construction And Community Development Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2020	referred to housing, construction and community development
Jan 28, 2019	referred to housing, construction and community development

co-Sponsors

2019-S2579 (ACTIVE) - Details

See Assembly Version of this Bill:: A2356
Current Committee:: Senate Housing, Construction And Community Development
Law Section:: New York City Administrative Code
Laws Affected:: Amd §§26-405 & 26-511, NYC Ad Cd; amd §6, Emerg Ten Prot Act of 1974; amd §4, Emerg Hous Rent Cont L
Versions Introduced in Other Legislative Sessions:: 2017-2018: S8089, A8886
2021-2022: S3398
2023-2024: S1430

2019-S2579 (ACTIVE) - Summary

Approves major capital improvement rent increases and extends the length of time over which major capital improvement expenses may be recovered.

2019-S2579 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S2579

SPONSOR: BAILEY
 
TITLE OF BILL:

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

 
PURPOSE OR GENERAL IDEA OF BILL:

This bill establishes a regulatory framework for the approval of rent
increases to rent regulated property as a result of major capital
improvements (MCIs). Currently, the expenses for MCIs are recovered over
seven years. This bill codifies the MCI as a surcharge to the legal
regulated rent which is separately designated and billed as such, and
mandates that the surcharge for authorized MCIs ceases after the cost of
the improvement is recouped and that MCIs shall only be applied for
improvements not required by law. This bill protects affordable housing
by prohibiting MCIs for any building in which more than fifty percent of

the habitable units are not subject to rent stabilization or rent
control. Finally, this bill prevents landlords from receiving a finan-
cial windfall by charging MCIs to tenants, if an MCI is funded by the
New York State Energy and Development Authority (NYSERDA).

 
SUMMARY OF PROVISIONS:

This legislation establishes criteria for the approval of rent increases
to rent regulated property resulting from major capital improvements
(MCIs), and guards against potential abuses.

Section 1 of the bill amends subparagraph (g) of paragraph 1 of subdivi-
sion g of section 26-405 of the administrative code of the city of New
York, to permit for the individual adjustment of maximum rents in the
case of an MCI where the State Homes and Community Renewal Commissioner
first finds that an improvement is depreciable under the Internal Reven-
ue Code and is required for the operation or preservation of the struc-
ture. However, no MCI rent increases will be approved by the division of
housing and community renewal (DHCR) unless the work performed is an
enhancement or upgrade, or is an addition to such housing accommodation.
Any repair or replacement intended to maintain an existing service is
ineligible. If any outstanding hazardous violations exist, no MCI rent
increase application will be approved unless DHCR determines that such
MCI rent increases will be approved by the Division of Housing and
Community Renewal (DHCR) unless the work performed is an enhancement or
upgrade, or is an addition to such housing accommodation. Any repair or
replacement intended to maintain an existing service is ineligible. If
any outstanding hazardous violations exist, no MCI rent increase appli-
cation will be approved unless DHCR determines that such work is essen-
tial to the alleviation of the violations and such approval is consist-
ent with these provisions. Except in cases of emergency or good cause,
the property owner will file an application and affidavit with DHCR
containing specific information about the scope of the work to be done
and information about the owners of the property, including a statement
confirming that no owners have been found to have harassed or unlawfully
evicted tenants in the five years prior to applying for the MCI. DHCR
will then provide the occupying tenants with such information and will
elicit tenant comments to determine whether the 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.

Paragraph 6-c provides that the increase permitted for MCIs shall be
collected as a separately designated monthly surcharge to the maximum
rent that 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. However, the surcharge to any apartment in any
year may not exceed six percent of the monthly rent collected by the
owner for such apartment. Any excess shall be carried forward and
collected in future years.

Paragraph 6-d ensures that the collection of surcharges for MCIs, as
provided for in paragraphs 6-b and 6-c of this subdivision, shall cease
when the owner has recouped the costs attributable to the MCI.

Section 6 of the bill amends paragraph 3 of subdivision d of section 6
of section 4 of chapter 576 of the laws of 1974 (known as the Emergency
Tenant Protection Act of 1974), to permit an MCI where the State Homes
and Community Renewal Commissioner first finds that an improvement is
depreciable under the Internal Revenue Code and is required for the
operation or preservation of the structure. However, no MCI rent
increases will be approved by DHCR unless the work performed is an
enhancement or upgrade, or is an addition to such housing accommodation.
Any repair or replacement intended to maintain an existing service is
ineligible. If any outstanding hazardous violations exist, no MCI rent
increase application will be approved unless DHCR determines that such
work is essential to the alleviation of the violations and such approval
is consistent with this section.  Except in cases of emergency or good
cause, the property owner will file an application and affidavit with
DHCR containing specific information about the scope of the work to be
done and information about the owners of the property, including a
statement confirming that no owners have been found to have harassed or
unlawfully evicted tenants in the five years prior to the MCI. DHCR will
then provide the occupying tenants with such information and will elicit
tenant comments to determine whether the work has been satisfactorily
completed. No MCI increase shall become effective until any defective or
deficient rehabilitation work has been cured.

The increase permitted for MCIs shall be collected as a separately
designated monthly surcharge to the maximum rent that shall not be
compounded by any annual rent adjustment authorized by the Rent Guide-
lines Board (RGE). The surcharge allocable to each apartment shall be
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. However, the surcharge to any
apartment in any year may not exceed six percent of the monthly rent
collected by the owner for such apartment. Any excess shall be carried
forward and collected in future years. The collection of surcharges for
MCIs shall cease when the owner has recouped the costs attributable to
the MCI.


Section 7 of the bill amends the second undesignated paragraph of para-
graph (a) of subdivision 4 of Section 4 of chapter 274 of the laws of
1946 (known as the Emergency Housing Rent Control Law), to permit an MCI
where the State Homes and Community Renewal Commissioner first finds
that an improvement is depreciable under the Internal Revenue Code and
is required for the operation or preservation of the structure. However,
no MCI rent increases will be approved by DHCR unless the work performed
is an enhancement or upgrade, or is an addition to such housing accommo-
dation. Any repair or replacement intended to maintain an existing
service is ineligible. If any outstanding hazardous violations exist, no
MCI rent increase application will be approved unless DHCR determines
that such work is essential to the alleviation of the violations and
such approval is consistent with this section. Except in cases of emer-
gency or good cause, the property owner will file an application and
affidavit with DHCR containing specific information about the scope of
the work to be done and information about the owners of the property,
including a statement confirming that no owners have been found to have
harassed or unlawfully evicted tenants in the five years prior to the
MCI. DHCR will then provide the occupying tenants with such information
and will elicit tenant comments to determine whether the work has been
satisfactorily completed.

The increase permitted for MCIs shall be collected as a separately
designated monthly surcharge to the maximum rent that 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 apart-
ment. However, the surcharge to any apartment in any year may not exceed
six percent of the monthly rent collected by the owner for such apart-
ment. Any excess shall be carried forward and collected in future years.
The collection of surcharges for MCIs shall cease when the owner has
recouped the costs attributable to the MCI.

Section 8 of the bill amends paragraph 5 of subdivision d of section 6
of section 4 of chapter 576 of the laws of 1974, constituting the emer-
gency tenant protection act of nineteen seventy-four to stipulate that
eligibility for alternatives to the hardship application are to extend
only to buildings in which more than half of the habitable units are
subject to rent stabilization or rent control, while a new paragraph 6
is added.

Section 9 of the bill amends paragraph 1 of subdivision g of section
26-405 of the administrative code of the city of New York by adding a
new subparagraph (p), to prohibit adjustments for any MCIs or for any
other expenditures to improve, restore or preserve the quality of a
structure if such MCI is a project funded by the New York State Energy
Research and Development Authority (NYSERDA).

Section 10 of the bill sets forth the effective date.

 
JUSTIFICATION:

In 1989, the Court of Appeals held that building owners could increase
rent levels in perpetuity based on Major Capital Improvements (MCIs) to
their buildings, with the result that tenants are forced to pay for
these improvements long after costs have been fully recovered, and even
after they have outlived their useful life. Ansonia Residents Assn v.
DHCR, 75 N.Y.2d 206, 551 N.Y.S.2d 871 (1989). This is because the MCI
"amortization period", which ordinarily refers to the spreading out and
paying off of capital expenses in regular installments over a specific
period of time, can instead serve as a tactic for boosting rent levels
forever.

Unfortunately, many landlords utilize MCI charges as an unscrupulous
means to raise the rent of their units above the legal maximum rent,
unfairly burdening their tenants, circumventing the rent regulations,
and edging their apartments out of rent regulation. To guard against
this, this legislation requires applicants to submit a statement
confirming that no owners have been found to have harassed or unlawfully
evicted tenants in the prior five years.

Although some MCI charges are legitimate, many landlords are granted MCI
charges for work that is simply routine maintenance, and not an actual
improvement. This is not the intent of the MCI program, which grew out
of 1970s-era concerns that landlords needed to be incentivized to invest
in their buildings. Under the current MCI program, landlords may be
incentivized to do the opposite. Though this may lead to larger costs
down the road, landlords may prefer this course of action because regu-
lar maintenance cannot be covered by an MCI, but a major overhaul'
necessitated by deferred repairs can be covered. This legislation clari-
fies that MCIs will only be approved if the work performed is an
enhancement, upgrade, or addition, while repairs or replacements
intended to maintain existing services are ineligible. Also, MCI appli-
cations will not be approved where outstanding hazardous violations
exist, unless DHCR finds that such work is essential to the alleviation
of the violations.

This bill also delineates a better process of consultation between DHCR,
the landlord-applicant, and the existing tenants. According to media
reports, until the creation of the Tenant Protection Unit (TPU) in 2012,
the oversight process was "exclusively complaint-driven, meaning the
onus fell on tenants to prove an owner's application was incorrect,
misleading, or even fraudulent. This legislation requires that appli-
cants submit specific information about the scope of the work to be done
and information about the owners of the property.  DHCR will then
provide occupying tenants with this information and will elicit tenant
feedback to determine whether the work has been completed. No MCIs will
be made effective until deficient work has been cured.

In addition, MCIs such as window replacements or heating-system improve-
ments create energy savings that further increase the profitability of
MCIs. Apart from MCI surcharges approved by DHCR, the NYSERDA Multifami-
ly Performance Program offers landlords incentives to invest in energy-
efficient building upgrades, including implementing environmentally
friendly measures to address specific energy and operational needs of
buildings. In many.cases, landlords have filed applications with both
DHCR and NYSERDA for the imposition of MCI charges for capital work that
fall within NYSERDA's jurisdiction for receiving funds. This practice of
double-dipping, wherein a landlord takes advantage of two different
incentive programs for the same work, violates the intent of these
provisions and, if permitted, results in a windfall to landlords. This
bill clarifies that such double-dipping is not permitted.

Further, to protect rent regulated tenants from rent increases, this
bill would put restrictions on a building's eligibility to apply for
MCIs and ensure that building repairs required by law shall not be
charged as MCIs. Currently, if a building is approved for an MCI, the
only people legally subject to rent increases from MCIs are rent stabi-
lized and rent controlled tenants. The rent increases that result from
MCIs are permanent even after the cost of the improvement is met, and
often place a high burden on tenants living in rent regulated units.
What can often occur is a situation in which the rent becomes too high
for rent regulated tenants to afford, which can force them to seek more
affordable housing elsewhere. Once the tenants have vacated the rent
regulated unit, landlords can deregulate the unit and list it at market
rate. This bill would tighten the parameters for buildings to apply for
MCIs to protect rent stabilized and rent controlled tenants from these
permanent rent increases. To provide this protection, this bill would
prohibit any building which has less than fifty percent of habitable
units subject to rent stabilization or rent control from receiving MCIs.

For the foregoing reasons, the lack of statutory criteria to guide the
division of Housing and Community Renewal (DHCR) in its MCI application
determinations is a major source of the problem. In response, this bill
seeks to balance the conflicting concerns of maintaining affordable
housing while ensuring that adequate incentives exist for investment in
MCIs, in order to preserve and improve our affordable housing stock. To
do so, this legislation provides such criteria and includes safeguards
to prevent abuse.

 
PRIOR LEGISLATIVE HISTORY:

2017-18: S.80089/A.8886A(O'Donnell) - Amended print number S8089 A

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

To be determined.

 
IMPACT ON REGULATION OF BUSINESSES AND INDIVIDUALS:

Amends the way landlords may charge tenants for MCIs in order to enhance
oversight of the process and make the charges fairer for tenants.

 
EFFECTIVE DATE:
This act shall take effect immediately; provided that the amendments 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 stabilization 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 amendments to section 4 of
the emergency housing rent control law made by section seven of this act
shall expire on the same date as s 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.

2019-S2579 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   2579
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                             January 28, 2019
                                ___________
 
 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:
 
   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;
   (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.  HOWEVER, NO MAJOR
 CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY  THE  DIVISION  OF
 HOUSING  AND  COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCE-
 MENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS  AN
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD03017-01-9

 S. 2579                             2
 
 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 APPLICA-
 TION 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  ADMINIS-
 TERING  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 COMMU-
 NITY  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  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  DETERMI-
 NATION  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 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
   § 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

 S. 2579                             3
 
 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
 annual gross rent. The collection of any increase in the stabilized rent
 for any apartment pursuant  to  this  paragraph  shall  not  exceed  six

 S. 2579                             4
 
 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. 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
 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.

 S. 2579                             5
 
   (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.
   § 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 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;
   (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
 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

 S. 2579                             6
 
 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
   § 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, 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
 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

 S. 2579                             7
 
 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,
 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

 S. 2579                             8
 
 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; 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. 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
 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
 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

 S. 2579                             9
 
 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 (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  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 sublet-
 ting  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  compensated  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 accommo-
 dations.
   § 7. 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.  For the purposes of this paragraph, operating expenses
 shall consist of the actual, reasonable, costs of  fuel,  labor,  utili-
 ties,  taxes,  other  than  income  or  corporate franchise taxes, fees,
 permits, necessary contracted services and non-capital  repairs,  insur-
 ance, 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 institu-
 tional 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 occu-
 pied 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

 S. 2579                            10
 
 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 applica-
 tion 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 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) 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 improve-
 ment, (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.
   § 8. 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
 FUNDED  IN  ANY  PART  FROM MONEYS PROVIDED BY THE NEW YORK STATE ENERGY
 RESEARCH AND DEVELOPMENT AUTHORITY.
   § 9. 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 eight 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 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;  provided  that  the

 S. 2579                            11
 
 amendments  to section 6 of the emergency tenant protection act of nine-
 teen seventy-four made by sections five and  seven  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  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.

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Senate Bill S2579

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Sponsored By

Jamaal T. Bailey