S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4539
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                              March 14, 2019
                                ___________
 
 Introduced by Sens. PARKER, 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 requiring the state
   division of housing and community renewal to verify there are no hous-
   ing code violations prior to authorizing a  rent  increase  for  major
   capital improvements
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Paragraph 1 of subdivision  g  of  section  26-405  of  the
 administrative  code  of the city of New York is amended by adding a new
 subparagraph (p) to read as follows:
   (P) ADJUSTMENTS MADE PURSUANT TO SUBPARAGRAPH (G)  OF  THIS  PARAGRAPH
 SHALL  BE  COLLECTIBLE  UPON  THE LANDLORD'S FILING OF A REPORT WITH THE
 CITY RENT AGENCY, SUBJECT TO THE PROVISIONS OF SUBPARAGRAPH (E) OF PARA-
 GRAPH TWO OF SUBDIVISION A OF THIS SECTION AND VERIFICATION BY THE  CITY
 RENT  AGENCY,  IN  COLLABORATION  WITH LOCAL AUTHORITIES RESPONSIBLE FOR
 INSPECTING BUILDINGS, THAT THE APPLICANT DOES NOT HAVE MORE THAN  THIRTY
 CLASS A HOUSING CODE VIOLATIONS OR A CLASS B OR C HOUSING CODE VIOLATION
 ON  THE  PROPERTY.  OUTSTANDING  HOUSING  CODE VIOLATIONS THAT ARE FOUND
 SHALL BE CLEARED, CORRECTED OR ABATED BY THE LANDLORD  AND  VERIFIED  BY
 THE  CITY  RENT  AGENCY  PRIOR TO AUTHORIZATION OF A RENT INCREASE UNDER
 SUBPARAGRAPH (G) OF THIS PARAGRAPH.
   § 2. 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-
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD10617-01-9

 S. 4539                             2
 
 ria  shall  provide  (a) as to hardship applications, for a finding that
 the level of fair rent increase is not sufficient to enable the owner to
 maintain approximately the same average annual net income  (which  shall
 be  computed  without regard to debt service, financing costs or manage-
 ment fees) for the three year period ending on or within six  months  of
 the  date  of  an application pursuant to such criteria as compared with
 annual net income, which prevailed on the average over the period  nine-
 teen  hundred  sixty-eight  through nineteen hundred seventy, or for the
 first three years of operation if the building was completed since nine-
 teen hundred sixty-eight or for the first three  fiscal  years  after  a
 transfer of title to a new owner provided the new owner can establish to
 the  satisfaction  of  the commissioner that he or she acquired title to
 the building as a result of a bona fide sale of the entire building  and
 that  the new owner is unable to obtain requisite records for the fiscal
 years nineteen hundred  sixty-eight  through  nineteen  hundred  seventy
 despite  diligent  efforts to obtain same from predecessors in title and
 further provided that the new owner can provide financial data  covering
 a  minimum  of  six  years under his or her continuous and uninterrupted
 operation of the building to meet the three year to three  year  compar-
 ative  test  periods  herein provided; and (b) as to completed building-
 wide major capital improvements, for a finding  that  such  improvements
 are deemed depreciable under the Internal Revenue Code and that the cost
 is  to  be amortized over an eight-year period for a building with thir-
 ty-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, based upon cash
 purchase price exclusive of interest or service charges.   THE  DIVISION
 OF  HOUSING  AND  COMMUNITY  RENEWAL  SHALL  REQUIRE THE SUBMISSION OF A
 REPORT BY LANDLORDS APPLYING FOR  A  RENT  INCREASE  FOR  MAJOR  CAPITAL
 IMPROVEMENTS  PURSUANT  TO THIS PARAGRAPH AND SUBJECT TO VERIFICATION BY
 THE DIVISION OF HOUSING AND COMMUNITY  RENEWAL,  IN  COLLABORATION  WITH
 LOCAL  AUTHORITIES RESPONSIBLE FOR INSPECTING BUILDINGS, CERTIFYING THAT
 THERE ARE NOT MORE THAN THIRTY CLASS A HOUSING  CODE  VIOLATIONS  NOR  A
 CLASS  B OR C HOUSING CODE VIOLATION ON THE PROPERTY, PRIOR TO RECEIVING
 APPROVAL FOR SUCH RENT INCREASE. Notwithstanding anything to the contra-
 ry contained herein, no hardship increase granted pursuant to this para-
 graph shall, when added to the annual gross rents, as determined by  the
 commissioner, exceed the sum of, (i) the annual operating expenses, (ii)
 an  allowance for management services as 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 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;

 S. 4539                             3
 
   §  3.  Subdivision  d  of section 6 of section 4 of chapter 576 of the
 laws of 1974, constituting the emergency tenant protection act of  nine-
 teen  seventy-four,  is  amended  by adding a new paragraph 6 to read as
 follows:
   (6)  ADJUSTMENTS  MADE  PURSUANT  TO PARAGRAPH (3) OF THIS SUBDIVISION
 SHALL BE COLLECTABLE UPON THE LANDLORD'S FILING OF  A  REPORT  WITH  THE
 STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL AND SUBJECT TO VERIFICA-
 TION  BY THE STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, IN COLLAB-
 ORATION WITH LOCAL AUTHORITIES  RESPONSIBLE  FOR  INSPECTING  BUILDINGS,
 THAT  THE  APPLICANT DOES NOT HAVE MORE THAN THIRTY CLASS A HOUSING CODE
 VIOLATIONS OR A CLASS B OR C HOUSING CODE  VIOLATION  ON  THE  PROPERTY.
 OUTSTANDING  HOUSING  CODE  VIOLATIONS  THAT ARE FOUND SHALL BE CLEARED,
 CORRECTED OR ABATED BY THE LANDLORD AND VERIFIED BY THE  STATE  DIVISION
 OF  HOUSING  AND  COMMUNITY  RENEWAL  PRIOR  TO  AUTHORIZATION OF A RENT
 INCREASE UNDER PARAGRAPH (3) OF THIS SUBDIVISION.
   § 4. 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
 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

 S. 4539                             4
 
 unavoidable increases in property taxes and other costs as are allocable
 to such controlled housing accommodations, including costs of  operation
 of  such  hotel  or  rooming  house, but excluding mortgage interest and
 amortization,  and  excluding  allowances for depreciation, obsolescence
 and reserves, which have occurred since the federal date determining the
 maximum rent or the date the landlord commenced  the  operation  of  the
 property, whichever is later; or (4) the landlord and tenant voluntarily
 enter into a valid written lease in good faith with respect to any hous-
 ing  accommodation,  which lease provides for an increase in the maximum
 rent not in excess of fifteen per centum and for a term of not less than
 two years, except that where such lease  provides  for  an  increase  in
 excess  of  fifteen  per  centum,  the  increase  shall be automatically
 reduced to fifteen per centum; or (5) the landlord and tenant by  mutual
 voluntary  written agreement agree to a substantial increase or decrease
 in dwelling space or a change in the services, furniture, furnishings or
 equipment provided in the housing accommodations; provided that an owner
 shall be entitled to a rent increase where there has been a  substantial
 modification  or  increase  of  dwelling  space  or  an  increase in the
 services, or installation of new equipment or improvements or new furni-
 ture or furnishings provided in or to a tenant's housing  accommodation.
 The  permanent  increase  in  the  maximum rent for the affected housing
 accommodation shall be one-fortieth, in the  case  of  a  building  with
 thirty-five  or  fewer  housing  accommodations, or one-sixtieth, in the
 case of a building with more  than  thirty-five  housing  accommodations
 where  such  permanent increase takes effect on or after September twen-
 ty-fourth, two thousand eleven, of the total cost incurred by the  land-
 lord  in  providing  such  modification  or  increase in dwelling space,
 services, furniture, furnishings or equipment,  including  the  cost  of
 installation,  but  excluding  finance  charges provided further that an
 owner who is entitled to a rent increase pursuant to this  clause  shall
 not  be  entitled to a further rent increase based upon the installation
 of similar equipment, or new furniture or furnishings within the  useful
 life  of  such new equipment, or new furniture or furnishings. The owner
 shall give written notice to  the  commission  of  any  such  adjustment
 pursuant to this clause; or (6) there has been, since March first, nine-
 teen  hundred  fifty,  an  increase  in  the rental value of the housing
 accommodations as a result of a substantial rehabilitation of the build-
 ing or housing accommodation therein which materially adds to the  value
 of  the  property  or  appreciably prolongs its life, excluding ordinary
 repairs, maintenance and replacements; or (7) 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]  THIRTY-FIVE
 units,  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 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

 S. 4539                             5
 
 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 accommodations.  ADJUSTMENTS MADE PURSUANT  TO  SUBPARA-
 GRAPH  (7)  OF  THIS  PARAGRAPH SHALL BE COLLECTIBLE UPON THE LANDLORD'S
 FILING OF A REPORT WITH THE COMMISSION AND SUBJECT  TO  VERIFICATION  BY
 THE  COMMISSION, IN COLLABORATION WITH LOCAL AUTHORITIES RESPONSIBLE FOR
 INSPECTING BUILDINGS, THAT THE APPLICANT DOES NOT HAVE MORE THAN  THIRTY
 CLASS A HOUSING CODE VIOLATIONS OR A CLASS B OR C HOUSING CODE VIOLATION
 ON THE PROPERTY. OUTSTANDING HOUSING CODE VOLITIONS THAT ARE FOUND SHALL
 BE  CLEARED,  CORRECTED  OR  ABATED  BY THE LANDLORD AND VERIFIED BY THE
 COMMISSION PRIOR TO AUTHORIZATION OF A RENT INCREASE UNDER  SUBPARAGRAPH
 (7) OF THIS PARAGRAPH.
   §  5.  This  act  shall take effect on the sixtieth day after it shall
 have become a law; provided that:
   (a) the amendments to section 26-405 of the city  rent  and  rehabili-
 tation  law  made  by section one of this act shall remain in full force
 and effect only as 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;
   (b)  the amendments to section 26-511 of the rent stabilization law of
 nineteen hundred sixty-nine made by section two 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;
   (c)  the amendment to section 6 of the emergency tenant protection act
 of nineteen seventy-four made by section three 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
   (d) the amendment to section 4 of the emergency housing  rent  control
 law  made  by  section 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  in  subdivision  2  of section 1 of chapter 274 of the laws of
 1946.