| Date of Action |
Assembly Actions -
Lowercase Senate Actions - UPPERCASE |
|---|---|
| Jan 13, 2025 |
referred to housing, construction and community development |
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Senate Bill S1656
2025-2026 Legislative Session
Approves major capital improvement rent increases and extends the length of time over which major capital improvement expenses may be recovered
download bill text pdfSponsored By
(D) 36th Senate District
Current 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
Actions
co-Sponsors
(D) 32nd Senate District
2025-S1656 (ACTIVE) - Details
- 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
2019-2020: S2579
2021-2022: S3398
2023-2024: S1430
2025-S1656 (ACTIVE) - Sponsor Memo
BILL NUMBER: S1656
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 because of major capital improve-
ments (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 improve-
ments 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 safeguards against potential abuses. Section 1 of the bill amends subparagraph (g) of paragraph I 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 t hat 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 84, 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 5 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 an amount equal to the cost of the improvement divided by 84, 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 6 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 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 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 8 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 9 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 neces- sitated by deferred repairs can be covered. This legislation clarifies 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 applications 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 comp laint-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 50 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 divi- sion 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, 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: 2019-20: Referred to Housing, Construction and Community Development 2021-22: Referred to Housing, Construction and Community Development 2023-24: Referred to Housing, Construction and Community Development 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 to enhance over- sight of the process and make the charges fairer for tenants. EFFECTIVE DATE: This act shall take effect immediately with conditions.
2025-S1656 (ACTIVE) - Bill Text download pdf
S T A T E O F N E W Y O R K
________________________________________________________________________
1656
2025-2026 Regular Sessions
I N S E N A T E
January 13, 2025
___________
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 27 of part Q of chapter 39 of the laws of 2019, 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 [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
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD04678-01-5
S. 1656 2 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,]; 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 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 PREREQUI- SITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGI- BLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVI- SION 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 COMMUNI- TY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN- TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR- ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA- TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION S. 1656 3 WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. THE INCREASE PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY SURCHARGE TO THE MAXIMUM RENT. IT SHALL BE SEPARATELY DESIGNATED AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY OTHER ADJUSTMENT TO THE MAXIMUM RENT. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APARTMENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT TO EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMEN- TIONED SIX PERCENT LIMITATION DID NOT APPLY; or § 2. Subparagraph (k) of paragraph 1 of subdivision g of section 26-405 of the administrative code of the city of New York, as amended by chapter 749 of the laws of 1990, is amended to read as follows: (k) The landlord has incurred, since January first, nineteen hundred seventy, in connection with and in addition to a concurrent major capi- tal improvement pursuant to subparagraph (g) of this paragraph, other expenditures to improve, restore or preserve the quality of the struc- ture. An adjustment under this subparagraph shall be granted only if such improvements represent an expenditure equal to at least ten per centum of the total operating and maintenance expenses for the preceding year. An adjustment under this subparagraph shall be in addition to any adjustment granted for the concurrent major capital improvement and shall be [in an amount sufficient to amortize the cost of the improve- ments pursuant to this subparagraph over a seven-year period] IMPLE- MENTED IN THE SAME MANNER AS SUCH MAJOR CAPITAL IMPROVEMENT AS A FURTHER SURCHARGE TO THE MAXIMUM RENT. § 3. Paragraph 6 of subdivision c of section 26-511 of the administra- tive code of the city of New York, as 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- 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] THEY 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- S. 1656 4 cessors in title and further provided that the new owner can provide financial data covering a minimum of six years under [his or her] THEIR continuous 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 a twelve-year period for a building with thirty-five or fewer housing accommodations, or a twelve and one-half-year period for a building with more than thirty-five hous- ing accommodations, for any determination issued by the division of housing and community renewal after the effective date of the the chap- ter 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 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 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 proceeding 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]. 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 management services as determined by the commis- sioner, (iii) actual annual mortgage debt service (interest and amorti- zation) 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 prin- cipal 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 S. 1656 5 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. (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 S. 1656 6 BY ANY ANNUAL ADJUSTMENT OF THE LEVEL OF FAIR RENT PROVIDED FOR UNDER SUBDIVISION B OF SECTION 26-510 OF THIS CHAPTER. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE COST OF THE IMPROVE- MENT DIVIDED BY EIGHTY-FOUR DIVIDED BY THE NUMBER OF ROOMS IN THE BUILD- ING, 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. (6-D) COLLECTION OF SURCHARGES IN EXCESS OF THE LEVEL OF FAIR RENT AUTHORIZED PURSUANT TO PARAGRAPHS 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 26 of part Q of chapter 39 of the laws of 2019, 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 [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 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 S. 1656 7 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 THAT THE COMMIS- SIONER 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 CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDER- ATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN- TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR- ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO HAVE HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA- TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. THE INCREASE PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY SURCHARGE TO THE LEGAL REGULATED RENT. IT SHALL BE SEPARATELY DESIGNATED AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY ANNUAL RENT ADJUSTMENT AUTHOR- IZED BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE SURCHARGE ALLOCA- BLE TO EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN SUCH APART- MENT; PROVIDED THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APARTMENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT TO EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE TOTAL S. 1656 8 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 5 as amended by section 7 of part FF of chapter 56 of the laws of 2024, subparagraph 7 as sepa- rately amended by section 25 of part Q of chapter 39 and section 14 of part K of chapter 36 of the laws of 2019 and subparagraph 8 as amended by section 8 of part K of chapter 36 of the laws of 2019, 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 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 S. 1656 9 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 informed agreement agree to a substantial increase or decrease in dwelling space, 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 installation of new equipment or improve- ments or new furniture or furnishings provided in or to a tenant's hous- ing accommodation. The increase in the maximum rent for the affected housing accommodation shall be one-one hundred sixty-eighth, in the case of a building with thirty-five or fewer housing accommodations, or one- one hundred eightieth, in the case of a building with more than thirty- five housing accommodations where such increase takes effect on or after the effective date of the chapter of the laws of two thousand nineteen that amended this subparagraph, of the total actual cost incurred by the landlord up to thirty thousand dollars in providing such reasonable and verifiable modification or increase in dwelling space, furniture, furnishings, or equipment, including the cost of installation but excluding finance charges and any costs that exceed reasonable costs established by rules and regulations promulgated by the division of housing and community renewal. Such rules and regulations shall include: (i) requirements for work to be done by licensed contractors and a prohibition on common ownership between the landlord and the contractor or vendor; and (ii) a requirement that the owner resolve within the dwelling space all outstanding hazardous or immediately hazardous violations of the uniform fire prevention and building code (Uniform Code), New York city fire code, or New York city building and housing maintenance codes, if applicable. Provided further that an owner who is entitled to a rent increase pursuant to this clause shall not be enti- tled 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. Provided further that the recoverable costs incurred by the landlord, pursuant to this subparagraph, shall be limited to an aggregate cost of thirty thousand dollars in a fifteen year period beginning with the first individual apartment improvement on or after June fourteenth, two thousand nine- teen. 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, nineteen hundred fifty, an increase in the rental value of the housing accommodations as a result of a substantial rehabilitation of the building 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 [essential for the preserva- tion, 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 unneces- sary cosmetic improvements; which for any order of the commissioner issued after the effective date of the chapter of the laws of two thou- sand 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 S. 1656 10 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 collect- ible 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; 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 proceeding 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 applica- tion]; PROVIDED THAT THE COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVE- MENTS 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 ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THER- EIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMU- NITY 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 INFOR- MATION 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 DETERMINATION OF A COURT OR AGENCY UNDER THE S. 1656 11 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 COMMU- NITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFACTORILY COMPLETED. NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. THE INCREASE PERMITTED FOR SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY SURCHARGE TO THE MAXIMUM RENT. IT SHALL BE SEPARATELY DESIGNATED AND BILLED AS SUCH AND SHALL NOT BE COMPOUNDED BY ANY OTHER ADJUSTMENT TO THE MAXIMUM RENT. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLO- CABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APART- MENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE SAID SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT TO EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMENTIONED SIX PERCENT LIMITATION DID NOT APPLY; or (8) there has been since March first, nineteen hundred fifty, in structures containing more than four housing accommodations, other improvements made with the express 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) 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) 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. § 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, S. 1656 12 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 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 S. 1656 13 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; and provided that the amendments to section 26-511 of the rent stabilization law of nineteen hundred sixty-nine made by sections three and four of this act shall expire on the same date as such law expires and shall not affect the expiration of such law as provided under section 26-520 of such law, as from time to time amended.
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