S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7308
 
                        2023-2024 Regular Sessions
 
                           I N  A S S E M B L Y
 
                               May 17, 2023
                                ___________
 
 Introduced by M. of A. ARDILA -- read once and referred to the Committee
   on Housing
 
 AN  ACT  eliminating rent increases based on major capital improvements;
   to amend chapter 274 of the laws of 1946, constituting  the  emergency
   housing rent control law, the emergency tenant protection act of nine-
   teen seventy-four and the administrative code of the city of New York,
   in  relation  to  eliminating  rent increases to pay for major capital
   improvements
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Legislative  findings  and  declaration of emergency. The
 legislature hereby finds and declares that the serious public  emergency
 which  led  to the enactment of the existing laws regulating residential
 rents and evictions continues to exist. The  legislature  further  finds
 that a majority of households currently occupying housing accommodations
 subject  to  rent  laws  are  rent-burdened; that permanent increases in
 rents are no longer necessary to incentivize rental property  owners  to
 make,  or  to compensate landlords for, necessary major capital improve-
 ments; that publicly funded  tax  incentives  and  other  subsidies  are
 available  to  rental  property owners to support major capital improve-
 ments; that value from major  capital  improvements  accrues  to  rental
 property owners through increased property values and sale prices; that,
 due  to  market  conditions  in  localities subject to rent laws, rental
 property owners are already able to realize a reasonable return on their
 investments in major capital  improvements  through  increased  property
 values and sale prices alone; and that provisions for hardship increases
 under  existing rent laws already ensure that rental property owners are
 able to operate rent regulated housing without incurring  undue  losses.
 The  legislature further declares and finds that a substantial number of
 the rent increases previously granted  for  major  capital  improvements
 were  tainted  by  inflated costs, particularly in the last seven years;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD05277-01-3
              

 A. 7308                             2
 
 that the provision of rent increases for major capital  improvements  in
 existing rent laws has resulted in exactions of unjust, unreasonable and
 oppressive rents, as well as profiteering, speculation and other disrup-
 tive  practices tending to produce tenant dislocation and threats to the
 public health, safety  and  general  welfare;  that  such  results  were
 contrary to the intent and purpose of the existing rent laws; that it is
 therefore  necessary to amend the rent laws to remove any provision of a
 rent increase based upon major capital  improvements;  and  that  it  is
 additionally necessary to repeal rent increases based upon major capital
 improvements that became effective within the previous seven years.
   §  2.  (a)  The  division of housing and community renewal, the "divi-
 sion", shall administer the elimination of  rent  increases  based  upon
 major  capital  improvements pursuant to this act. The division shall no
 longer grant rent increases on the basis of major  capital  improvements
 at  buildings  subject to rent regulation or rent stabilization pursuant
 to the emergency rent control law, the emergency tenant  protection  act
 and/or  the  administrative  code  of  the city of New York. All pending
 applications for rent increases based upon  major  capital  improvements
 shall  be denied, and the division shall issue orders disposing of pend-
 ing applications as necessary.
   (b) Any rent increase based upon major capital improvements previously
 ordered by the division, pursuant to the emergency rent control law, the
 emergency tenant protection act and/or the administrative  code  of  the
 city of New York, with an effective date within the seven years prior to
 the  effective  date of this act shall be repealed effective immediately
 unless the division finds a basis for limiting the  repeal  pursuant  to
 subdivision  (d)  of  this  section.  For  all affected housing accommo-
 dations, the division shall determine what the present legal rent  would
 be  for each such accommodation if the division had not ordered any rent
 increases based upon major capital improvements during the repeal  peri-
 od, and this amount shall be the proposed new legal rent.
   (c) Within 180 days of the effective date of this act, the division of
 housing  and  community  renewal  shall determine the proposed new legal
 rents for all affected housing accommodations  pursuant  to  subdivision
 (b)  of  this section and shall also provide written notification to all
 current owners and tenants of affected accommodations as to  the  amount
 of the proposed new legal rents, the basis for the department's determi-
 nation, and the time for each affected party to submit additional infor-
 mation  that  the  division  shall consider before issuing a final order
 determining the new legal rents, which shall not be less than  45  days.
 Unless  an owner of an affected building has submitted a timely applica-
 tion to the division for a limitation pursuant  to  subdivision  (d)  of
 this section, the division shall issue a final order determining the new
 legal  rents  for affected housing accommodations within 365 days of the
 effective date of this act.
   (d) (1) Within 90 days of receiving written  notice  of  proposed  new
 legal  rents  from  the  division  pursuant  to  subdivision (c) of this
 section, a building owner may apply to the commissioner of  housing  and
 community renewal for an order limiting the amount of the repeal of rent
 increases  under  this  act  based upon a finding by the commissioner of
 housing and community renewal that the proposed new legal rents 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. In
 buildings for which the commissioner of housing  and  community  renewal
 finds that the proposed new legal rents are not sufficient to enable the
 A. 7308                             3
 
 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,  the  repeal  amount  of  rent
 increases  based  upon major capital improvements shall be limited to an
 amount such that the annual operating expenses of the  building  do  not
 exceed  ninety-five percent of the new proposed annual gross rent income
 for such building.
   (2) For the purposes of this  subdivision,  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 noncapital repairs, insurance, parts
 and supplies, management fees and other administrative costs  and  mort-
 gage  interest.  For the purposes of this subdivision, 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 mort-
 gage, security and other terms and conditions of the mortgage.  For  the
 purposes  of  this  subdivision, gross annual rent income for a building
 shall include a rental value set by  the  commissioner  of  housing  and
 community renewal 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 commis-
 sioner shall impute a rent consistent  with  other  proposed  new  legal
 rents in the building.
   (e)  The  division  shall require that owners refund any increase in a
 tenant's security deposit amount collected in excess of a new legal rent
 established under this act within thirty days of the department's  issu-
 ance  of  an  order  determining  new  legal rents. Such excess security
 deposit amount may be refunded in the form  of  a  rent  credit  applied
 toward  the  affected  tenant's  next monthly rent payment, and affected
 tenants are entitled to self-deduct the refund amount from  future  rent
 payments.
   (f)  The  new legal rent shall be the legal rent beginning on the date
 rent is required to be paid next succeeding  the  issuance  of  a  final
 order determining new legal rents under this act.
   (g)  Any  lease agreement executed after the issuance of a final order
 determining new legal rents under this act shall be deemed  to  incorpo-
 rate the rent amounts and effective dates set forth in such order.
   (h)  Any  tenant  residing  in  an  affected housing accommodation may
 assert their entitlement to the repeal of prior rent  under  subdivision
 (b)  of this section, as a defense or counterclaim in any legal proceed-
 ing predicated upon a landlord's claim of default in the payment of rent
 pursuant to an agreement. Any court with jurisdiction over a  landlord's
 claim as to a tenant's default in the payment of rent shall also adjudi-
 cate  and  have  primary  jurisdiction  over the tenant's assertion of a
 defense or counterclaim under this provision if the department  has  not
 yet  issued  an order determining the new legal rent. A court order made
 under this subdivision shall not in any way be deemed to impair a build-
 ing owner's right or time to apply for a  limitation  under  subdivision
 (d) of this section.
 A. 7308                             4
 
   (i) All final orders issued by the department pursuant to subdivisions
 (b), (c), and (d) of this section shall be subject to appeal pursuant to
 existing procedures for administrative review before the division.
   §  3.  Paragraph 2 of subdivision 3-a, subparagraphs 7, 8, 9 and 10 of
 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, paragraph 2 of subdivision 3-a of section 4
 and subparagraph 8 of the second undesignated paragraph of paragraph (a)
 of subdivision 4 of section 4 as amended by section 8 of part K of chap-
 ter 36 of the laws of 2019, subparagraphs 9 and 10 of the second  undes-
 ignated  paragraph  of  paragraph  (a)  of subdivision 4 of section 4 as
 amended by section 25 of part B of chapter  97  of  the  laws  of  2011,
 subparagraph  7 of the second undesignated paragraph of paragraph (a) of
 subdivision 4 of section 4 as separately amended by section 25 of part Q
 of chapter 39 of the laws of 2019 and section 14 of part K of chapter 36
 of the laws of 2019, are amended to read as follows:
   (2) the amount of  increases  in  maximum  rent  authorized  by  order
 because of increases in dwelling space, services, furniture, furnishings
 or  equipment  [and  the  amount of the temporary increase authorized by
 order because of a major capital improvement].
   (7) [there has been since March first, nineteen hundred fifty, a major
 capital improvement essential for the preservation,  energy  efficiency,
 functionality,  or infrastructure of the entire building, improvement of
 the structure including heating,  windows,  plumbing  and  roofing,  but
 shall not be for operational costs or unnecessary cosmetic improvements;
 which  for any order of the commissioner issued after the effective date
 of the chapter of the laws of two thousand nineteen  that  amended  this
 paragraph the cost of such improvement shall be amortized over a twelve-
 year  period  for  buildings with thirty-five or fewer units or a twelve
 and one-half year period for buildings with more than thirty-five units,
 and shall be removed from the legal regulated rent thirty years from the
 date the increase became effective inclusive of any increases granted by
 the applicable rent guidelines board. Temporary major  capital  improve-
 ment  increases  shall  be collectible prospectively on the first day of
 the first month beginning sixty days from the date of mailing notice  of
 approval  to  the  tenant.  Such notice shall disclose the total monthly
 increase in rent and the first  month  in  which  the  tenant  would  be
 required  to  pay  the  temporary  increase. An approval for a temporary
 major  capital  improvement  increase  shall  not  include   retroactive
 payments. The collection of any increase shall not exceed two 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.
 Upon vacancy, the landlord may add any remaining balance of  the  tempo-
 rary  major  capital  improvement  increase to the legal regulated rent.
 Notwithstanding any other provision of the law, for  any  renewal  lease
 commencing  on  or  after  June  14,  2019,  the  collection of any rent
 increases due to any major capital improvements  approved  on  or  after
 June  16,  2012 and before June 16, 2019 shall not exceed two percent in
 any year for any tenant in occupancy  on  the  date  the  major  capital
 improvement  was approved; provided, however, where an application for a
 temporary major capital improvement increase has been  filed,  a  tenant
 shall have sixty days from the date of mailing of a notice of a proceed-
 ing  in  which  to  answer  or  reply. The state division of housing and
 community renewal shall provide any responding tenant with  the  reasons
 A. 7308                             5

 for the division's approval or denial of such application; 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 informed 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  two  per
 centum  unless  the  tenants  have  agreed  to  a  higher  percentage of
 increase, as herein provided; [(9)] OR (8) 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 compensated therefor by adjustment of the maximum rent by lease  or
 order  of  the  commission or pursuant to the federal act; or [(10)] (9)
 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  substan-
 tially similar housing accommodations.
   § 4. Paragraphs 3, 4, and 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, paragraph 3 of subdivision d as
 amended by section 26 of part Q of chapter 39 of the laws of 2019, para-
 graph 4 of subdivision d as amended by chapter 403 of the laws of  1983,
 paragraph  5  of  subdivision d as amended by chapter 102 of the laws of
 1984, are amended to read as follows:
   (3) [there has been since January first, nineteen hundred seventy-four
 a major capital improvement essential for the preservation, energy effi-
 ciency,  functionality,  or  infrastructure  of  the  entire   building,
 improvement  of  the  structure including heating, windows, plumbing and
 roofing, but shall not be for operation costs  or  unnecessary  cosmetic
 improvements.  An  adjustment under this paragraph shall be in an amount
 sufficient to amortize the cost of the  improvements  pursuant  to  this
 paragraph  over  a twelve-year period for a building with thirty-five or
 fewer housing accommodations, or a twelve  and  one-half  period  for  a
 building  with more than thirty-five housing accommodations and shall be
 removed from the legal regulated rent thirty years  from  the  date  the
 increase  became  effective  inclusive  of  any increases granted by the
 applicable rent guidelines board, for any determination  issued  by  the
 division  of  housing  and community renewal after the effective date of
 the chapter of the laws of two thousand nineteen that amended this para-
 graph. Temporary major capital improvement increases shall be  collecta-
 ble  prospectively  on  the first day of the first month beginning sixty
 days from the date of mailing notice of approval to the  tenant.    Such
 notice  shall  disclose the total monthly increase in rent and the first
 month in which the  tenant  would  be  required  to  pay  the  temporary
 increase. An approval for a temporary major capital improvement increase
 shall  not  include retroactive payments. The collection of any increase
 shall not exceed two 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. Upon vacancy, the landlord  may  add  any
 remaining balance of the temporary major capital improvement increase to
 the  legal  regulated  rent.  Notwithstanding any other provision of the
 law, the collection of any rent increases for any renewal lease commenc-
 ing on or after June 14, 2019, due to  any  major  capital  improvements
 approved  on  or  after June 16, 2012 and before June 16, 2019 shall not
 A. 7308                             6

 exceed two percent in any year for any tenant in occupancy on  the  date
 the major capital improvement was approved, or
   (4)]  an  owner  by  application  to the state division of housing and
 community renewal for increases in the  rents  in  excess  of  the  rent
 adjustment authorized by the rent guidelines board under this act estab-
 lishes  a  hardship,  and the state division finds that the rate of rent
 adjustment is not sufficient to enable the owner  to  maintain  approxi-
 mately  the  same  ratio between operating expenses, including taxes and
 labor costs but excluding debt service, financing costs, and  management
 fees,  and gross rents which prevailed on the average over the immediate
 preceding five year period, or for the entire life of  the  building  if
 less than five years, or
   [(5)] (4) as an alternative to the hardship application provided under
 paragraph [four] THREE 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 main-
 tain 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, 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 admin-
 istrative costs and mortgage interest. For the purposes  of  this  para-
 graph, 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  condi-
 tions 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 unoccu-
 pied 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 [four] THREE 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 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
 A. 7308                             7
 
 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 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. Subparagraphs (g), (h), (i), (j), (k), (m) and (o) of paragraph 1
 of  subdivision  g  of  section 26-405 of the administrative code of the
 city of New York, subparagraph (g) as amended by section 27 of part Q of
 chapter 39 of the laws of 2019, subparagraph (k) as amended  by  chapter
 749 of the laws of 1990, are amended to read as follows:
   (g)  [There  has  been  since  July first, nineteen hundred seventy, a
 major capital improvement essential for the  preservation  energy  effi-
 ciency,   functionality,  or  infrastructure  of  the  entire  building,
 improvement of the structure including heating,  windows,  plumbing  and
 roofing  but  shall not be for operational costs or unnecessary cosmetic
 improvements. The temporary increase based upon a major capital improve-
 ment under this subparagraph for any order of  the  commissioner  issued
 after  the  effective  date  of  the chapter of the laws of two thousand
 nineteen that amended this subparagraph shall be in an amount sufficient
 to amortize the cost of the improvements pursuant to  this  subparagraph
 (g)  over  a  twelve-year period for buildings with thirty-five or fewer
 units or a twelve and one-half year period for buildings with more  than
 thirty-five  units,  and  shall be removed from the legal regulated rent
 thirty years from the date the increase became  effective  inclusive  of
 any increases granted by the applicable rent guidelines board. Temporary
 major  capital  improvement increases shall be collectible prospectively
 on the first day of the first month beginning sixty days from  the  date
 of  mailing notice of approval to the tenant. Such notice shall disclose
 the total monthly increase in rent and the  first  month  in  which  the
 tenant  would be required to pay the temporary increase. An approval for
 a temporary major capital improvement increase shall not include  retro-
 active  payments.  The  collection  of any increase shall not exceed two
 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.  Upon vacancy, the landlord may add any remaining  balance
 of  the  temporary major capital improvement increase to the legal regu-
 lated rent. Notwithstanding any other provision  of  the  law,  for  any
 renewal  lease  commencing  on or after June 14, 2019, the collection of
 any rent increases due to any major capital improvements approved on  or
 after  June  16,  2012  and  before  June  16, 2019 shall not exceed two
 percent in any year for any tenant in occupancy on the  date  the  major
 capital improvement was approved, or
   (h) There have been since March first, nineteen hundred fifty-nine, in
 structures  containing  more  than  four  housing  accommodations, other
 improvements made with the express consent of the tenants  in  occupancy
 A. 7308                             8

 of  at  least  seventy-five  per  centum  of the housing accommodations;
 provided, however, that whenever the city  rent  agency  has  determined
 that  the improvements proposed were part of a plan designed for overall
 improvement  of the structure or increases in services, it may authorize
 increases in maximum rents for all housing accommodations affected  upon
 the  express  consent  of the tenants in occupancy of at least fifty-one
 per centum of the housing accommodations, and provided further  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
   (i)] There has been, since March first, nineteen hundred fifty-nine, a
 subletting  without  written consent from the landlord or an increase in
 the number of adult occupants who are not members of the immediate fami-
 ly of the tenant, and the landlord has not been compensated therefor  by
 adjustment of the maximum rent by lease or order of the city rent agency
 or pursuant to the state rent act or the federal act; or
   [(j)]  (H) 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.
   [(k)  The landlord has incurred, since January first, nineteen hundred
 seventy, in connection with and in addition to a concurrent major  capi-
 tal  improvement  pursuant  to subparagraph (g) of this paragraph, other
 expenditures to improve, restore or preserve the quality of  the  struc-
 ture.  An  adjustment  under  this subparagraph shall be granted only if
 such improvements represent an expenditure equal to  at  least  ten  per
 centum of the total operating and maintenance expenses for the preceding
 year.  An adjustment under this subparagraph shall be in addition to any
 adjustment granted for the  concurrent  major  capital  improvement  and
 shall  be  in  an amount sufficient to amortize the cost of the improve-
 ments pursuant to this subparagraph over a seven-year period.]
   [(m)] (I) Where the rehabilitation or improvement of  sub-standard  or
 deteriorated  housing  accommodations  has been financed under a govern-
 mental program providing assistance through loans, loan insurance or tax
 abatement or has been undertaken under  another  rehabilitation  program
 not so financed but approved by the commissioner.
   [(o)]  (J)  (1) There has been an increase in heating and heating fuel
 expenditures in a property resulting from a city-wide  rise  in  heating
 fuel  costs such that the verifiable expenditures for heating or heating
 fuel in a property for nineteen hundred seventy-four exceeds the verifi-
 able expenditures for such  heating  or  heating  fuel  during  nineteen
 hundred seventy-three.
   (2) To obtain a rental adjustment pursuant to this subparagraph [(o)],
 the  landlord  must  certify that he or she is presently maintaining all
 essential services required to be furnished with respect to the  housing
 accommodations  covered  by  such certification, and that he or she will
 continue to so maintain such essential services for the  period  of  any
 such adjustment.
   (3) To obtain a rental adjustment pursuant to this subparagraph [(o)],
 the  landlord must certify on information and belief that he or she will
 not be earning an amount in excess of the statutory return specified  in
 subparagraph  (a)  of  THIS  paragraph  [one  of  subdivision  g of this
 section] after collection of such rental adjustment, with respect to the
 building or buildings serviced by a single heating plant; and where  the
 building,  or  buildings  serviced  by  a single heating plant, contains
 forty-nine or fewer housing accommodations, the  landlord  must  certify
 A. 7308                             9
 
 that  the  amount expended directly for heating or heating fuel in nine-
 teen hundred seventy-four equalled or exceeded ten per cent of the total
 rental income which  was  derived  from  the  property  during  nineteen
 hundred  seventy-four; and, where the building, or buildings serviced by
 a single heating plant, contains fifty or  more  housing  accommodations
 the  landlord must certify that the amount expended directly for heating
 or heating fuel in nineteen hundred seventy-four  equalled  or  exceeded
 seven  and  one-half  percentum  of  the  total  rental income which was
 derived from the property during nineteen hundred seventy-four.
   (4) The total rental adjustments for a property  to  be  allocated  or
 deemed  allocated  pursuant  to this subparagraph [(o)] shall not exceed
 one-half of the gross amount by which the total verifiable  expenditures
 for  heating  or  heating fuel for nineteen hundred seventy-four exceeds
 the total verifiable expenditures for such heating or heating  fuel  for
 nineteen hundred seventy-three.
   (5)  Such  total rental adjustments shall be allocated or deemed allo-
 cated pursuant to this subparagraph [(o)] to all housing  accommodations
 subject to this chapter, to all other housing accommodations, and to all
 commercial,  professional  and  similar facilities in or associated with
 the property in a manner to be determined by the  agency.  In  no  event
 shall any adjustment in maximum rent pursuant to this subparagraph [(o)]
 for  any housing accommodations subject to this chapter exceed a monthly
 increase of two dollars per room, as defined by item eight below. In any
 apartment containing five or more rooms, any increase shall  not  exceed
 the total of nine dollars.
   (6) Any adjustment pursuant to this subparagraph [(o)] shall be effec-
 tive  for  all or part of the period July first, nineteen hundred seven-
 ty-five  through  June  thirtieth,  nineteen  hundred  seventy-six.  Any
 adjustment  pursuant  to this subparagraph shall automatically expire no
 later than June thirtieth, nineteen hundred seventy-six.
   (7) The rental increases provided for herein shall  be  effective  and
 collectible upon the landlord's filing a report with the agency on forms
 prescribed  by  the agency and upon giving such notice to the tenants as
 the agency shall prescribe, subject to adjustments  upon  order  of  the
 agency.
   (8)  In  determining  the  amount  of  an  adjustment allocation of an
 adjustment pursuant to  this  subparagraph  [(o)],  only  living  rooms,
 kitchens  over fifty-nine square feet in area, dining rooms and bedrooms
 shall be considered rooms; bathrooms, foyers, and kitchenettes shall not
 be considered rooms.
   § 6. Subdivision a of section 26-407 of the administrative code of the
 city of New York is amended to read as follows:
   a. Notwithstanding any provisions of  this  chapter,  any  labor  cost
 pass-along  rent  increase requested of, or received from, any tenant on
 or after July first, nineteen  hundred  seventy-two[,  pursuant  to  the
 provisions  of  subparagraph  (1)  of  paragraph one of subdivision g of
 section 26-405 of this title,] shall not exceed the maximum rent adjust-
 ment as provided under this chapter after the  effective  date  of  this
 section.
   § 7. Paragraph 6 of subdivision c of section 26-511 of the administra-
 tive code of the city of New York as separately amended by section 12 of
 part  K of chapter 36 and section 28 of part Q of chapter 39 of the laws
 of 2019, 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-
 A. 7308                            10
 
 ria  shall provide [(a)] as to hardship applications, for a finding that
 the level of fair rent increase is not sufficient to enable the owner to
 maintain approximately the same average annual net income  (which  shall
 be  computed  without regard to debt service, financing costs or manage-
 ment fees) for the three year period ending on or within six  months  of
 the  date  of  an application pursuant to such criteria as compared with
 annual net income, which prevailed on the average over the period  nine-
 teen  hundred  sixty-eight  through nineteen hundred seventy, or for the
 first three years of operation if the building was completed since nine-
 teen hundred sixty-eight or for the first three  fiscal  years  after  a
 transfer of title to a new owner provided the new owner can establish to
 the  satisfaction  of  the commissioner that he or she acquired title to
 the building as a result of a bona fide sale of the entire building  and
 that  the new owner is unable to obtain requisite records for the fiscal
 years nineteen hundred  sixty-eight  through  nineteen  hundred  seventy
 despite  diligent  efforts to obtain same from predecessors in title and
 further provided that the new owner can provide financial data  covering
 a  minimum  of  six  years under his or her continuous and uninterrupted
 operation of the building to meet the three year to three  year  compar-
 ative  test  periods herein provided[; and (b) as to completed building-
 wide major capital improvements, for a finding  that  such  improvements
 are deemed depreciable under the Internal Revenue Code and that the cost
 is  to  be amortized over a twelve-year period for a building with thir-
 ty-five or fewer housing accommodations, or a twelve  and  one-half-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 the chapter of the laws  of  two
 thousand  nineteen that amended this paragraph and shall be removed from
 the legal regulated rent thirty years from the date the increase  became
 effective  inclusive  of  any  increases  granted by the applicable rent
 guidelines board. Temporary major capital improvement increases shall be
 collectible prospectively on the first day of the first month  beginning
 sixty  days  from  the date of mailing notice of approval to the tenant.
 Such notice shall disclose the total monthly increase in  rent  and  the
 first  month  in which the tenant would be required to pay the temporary
 increase. An approval for a temporary major capital improvement increase
 shall not include retroactive payments. The collection of  any  increase
 shall  not exceed two 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.  Upon vacancy, the landlord may add any
 remaining balance of the temporary major capital improvement increase to
 the legal regulated rent. Notwithstanding any  other  provision  of  the
 law,  for  any  renewal  lease commencing on or after June 14, 2019, the
 collection of any rent increases due to any major  capital  improvements
 approved  on  or  after June 16, 2012 and before June 16, 2019 shall not
 exceed two percent in any year for any tenant in occupancy on  the  date
 the  major  capital improvement was approved or based upon cash purchase
 price exclusive of interest or service charges. Where an application for
 a temporary major capital improvement increase has been filed, a  tenant
 shall have sixty days from the date of mailing of a notice of a proceed-
 ing  in  which  to  answer  or  reply. The state division of housing and
 community renewal shall provide any responding tenant with  the  reasons
 for  the  division's  approval  or denial of such application.] Notwith-
 standing anything to the contrary contained herein, no hardship increase
 A. 7308                            11
 
 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 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 incre-
 ments and added to the stabilized rent as established or set  in  future
 years;
   §  8. If any clause, sentence, paragraph, subdivision, section or part
 of this act shall be adjudged by any court of competent jurisdiction  to
 be  invalid,  such  judgment shall not affect, impair, or invalidate the
 remainder thereof, but shall be confined in its operation to the clause,
 sentence, paragraph,  subdivision,  section  or  part  thereof  directly
 involved  in  the  controversy  in  which  such judgment shall have been
 rendered. It is hereby declared to be the intent of the legislature that
 this act would have been enacted even if such invalid provisions had not
 been included herein. It is further declared to be  the  intent  of  the
 legislature  that  this act would have been enacted even if subdivisions
 (b), (c), (d), (e), (f), (g), (h), and (i) of section two  of  this  act
 had not been included herein.
   § 9. This act shall take effect immediately; provided:
   (a)  that the amendments to section 26-511 of chapter 4 of title 26 of
 the administrative code of the city of New York 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 under  section  26-520  of
 such law; and
   (b) that the amendments to sections 26-405 and 26-407 of the city rent
 and  rehabilitation  law made by sections five and six 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  emer-
 gency housing rent control act.
   (c)  Effective  immediately,  the addition, amendment and/or repeal of
 any rule or regulation necessary for the implementation of this  act  on
 its  effective date are authorized to be made and completed on or before
 such effective date.