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A02459 Summary:

BILL NOA02459A
 
SAME ASSAME AS S00523-A
 
SPONSORO'Donnell (MS)
 
COSPNSRLopez V, Silver, Glick, Ortiz, Gottfried, Kavanagh, Rosenthal, Farrell, Perry, Titus, Castro, Mayer
 
MLTSPNSRBarron, Brennan, Clark, Cook, Cymbrowitz, Dinowitz, Heastie, Hooper, Jacobs, Kellner, Lentol, McEneny, Millman, Scarborough, Wright
 
Amd SS26-405 & 26-511, NYC Ad Cd; amd S6, Emerg Ten Prot Act of 1974; amd S4, Emerg Hous Rent Cont L
 
Establishes a methodology for determining major capital improvements (MCI) rent surcharges based on a seven year schedule; provides that such MCI's shall be calculated as a rent surcharge and shall not become part of the base legal regulated rent by which rent increases are calculated, and requires the amount thereof to be separately designated and billed as such; codifies current practices regarding the annual 6% cap on MCI increases and the methodology for determining MCI surcharges based on the number of rooms; requires that rent surcharges authorized for major capital improvements shall cease when the cost of the improvement has been recovered.
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A02459 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         2459--A
 
                               2011-2012 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 18, 2011
                                       ___________
 
        Introduced  by M. of A. O'DONNELL, V. LOPEZ, SILVER, GLICK, ORTIZ, GOTT-
          FRIED, KAVANAGH, ROSENTHAL, FARRELL, PERRY, TITUS  --  Multi-Sponsored
          by  --  M.  of  A.   BARRON, BRENNAN, CASTRO, CLARK, COOK, CYMBROWITZ,
          DINOWITZ, HEASTIE, HOOPER, JACOBS, KELLNER, LENTOL, McENENY,  MILLMAN,
          SCARBOROUGH,  WRIGHT  --  read  once  and referred to the Committee on

          Housing -- recommitted to the Committee on Housing in accordance  with
          Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered
          reprinted as amended and recommitted to said committee
 
        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 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:
 
     1    Section 1. Subparagraph (g) of paragraph 1 of subdivision g of section
     2  26-405 of the administrative code of the city of New York, as amended by
     3  chapter 749 of the laws of 1990,  is amended to read as follows:

     4    (g) (i) Collection of surcharges to the maximum rent authorized pursu-
     5  ant  to  item  (ii)  of this subparagraph shall cease when the owner has
     6  recovered the cost of the major capital improvement;
     7    (ii) There has been since July  first,  nineteen  hundred  seventy,  a
     8  major  capital  improvement [required for the operation, preservation or
     9  maintenance of the structure. An adjustment under this subparagraph  (g)
    10  shall  be  in  an amount sufficient to amortize the cost of the improve-
    11  ments pursuant to this  subparagraph  (g)  over  a  seven-year  period];
    12  provided  that  the commissioner finds that such improvements are deemed
    13  depreciable under the internal revenue code and  such  improvements  are

    14  required  for  the  operation, preservation or maintenance of the struc-
    15  ture. The increase permitted  for  such  capital  improvement  shall  be
    16  collected  as a monthly surcharge to the maximum rent. It shall be sepa-
    17  rately designated and billed as such and shall not be compounded by  any
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD00854-03-1

        A. 2459--A                          2
 
     1  other  adjustment  to  the maximum rent. The surcharge allocable to each
     2  apartment shall be an amount  equal  to  the  cost  of  the  improvement

     3  divided by  eighty-four, divided by the number of rooms in the building,
     4  and  then  multiplied by the number of rooms in such apartment; provided
     5  that the surcharge allocable to any apartment in any one  year  may  not
     6  exceed  an  amount equal to six percent of the monthly rent collected by
     7  the owner for such apartment as set  forth  in  the  schedule  of  gross
     8  rents.    Any excess above said six percent shall be carried forward and
     9  collected in future years as a further surcharge not to exceed an  addi-
    10  tional  six  percent  in  any  one year period until the total surcharge
    11  equals the amount it would have been if the aforementioned  six  percent
    12  limitation did not apply; or
    13    §  2.  Subparagraph  (k)  of  paragraph  1 of subdivision g of section

    14  26-405 of the administrative code of the city of New York, as amended by
    15  chapter 749 of the laws of 1990,  is amended to read as follows:
    16    (k) The landlord has incurred, since January first,  nineteen  hundred
    17  seventy,  in connection with and in addition to a concurrent major capi-
    18  tal improvement pursuant to subparagraph (g) of  this  paragraph,  other
    19  expenditures  to  improve, restore or preserve the quality of the struc-
    20  ture. An adjustment under this subparagraph shall  be  granted  only  if
    21  such  improvements  represent  an  expenditure equal to at least ten per
    22  centum of the total operating and maintenance expenses for the preceding
    23  year. An adjustment under this subparagraph shall be in addition to  any
    24  adjustment  granted  for  the  concurrent  major capital improvement and
    25  shall be [in an amount sufficient to amortize the cost of  the  improve-

    26  ments  pursuant  to  this subparagraph over a seven-year  period] imple-
    27  mented in the same manner as such major capital improvement as a further
    28  surcharge to the maximum rent.
    29    § 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
    30  tive code of the city of New York, as amended by chapter 116 of the laws
    31  of 1997,  is amended to read as follows:
    32    (6) provides criteria whereby the commissioner may act  upon  applica-
    33  tions  by  owners  for  increases  in  excess  of the level of fair rent
    34  increase established under this law provided, however, that such  crite-
    35  ria  shall provide [(a)] as to hardship applications, for a finding that
    36  the level of fair rent increase is not sufficient to enable the owner to
    37  maintain approximately the same average annual net income  (which  shall

    38  be  computed  without regard to debt service, financing costs or manage-
    39  ment fees) for the three year period ending on or within six  months  of
    40  the  date  of  an application pursuant to such criteria as compared with
    41  annual net income, which prevailed on the average over the period  nine-
    42  teen  hundred  sixty-eight  through nineteen hundred seventy, or for the
    43  first three years of operation if the building was completed since nine-
    44  teen hundred sixty-eight or for the first three  fiscal  years  after  a
    45  transfer of title to a new owner provided the new owner can establish to
    46  the  satisfaction  of  the commissioner that he or she acquired title to
    47  the building as a result of a bona fide sale of the entire building  and
    48  that  the new owner is unable to obtain requisite records for the fiscal
    49  years nineteen hundred  sixty-eight  through  nineteen  hundred  seventy

    50  despite  diligent  efforts to obtain same from predecessors in title and
    51  further provided that the new owner can provide financial data  covering
    52  a  minimum  of  six  years under his or her continuous and uninterrupted
    53  operation of the building to meet the three year to three  year  compar-
    54  ative  test  periods herein provided[; and (b) as to completed building-
    55  wide major capital improvements, for a finding  that  such  improvements
    56  are deemed depreciable under the Internal Revenue Code and that the cost

        A. 2459--A                          3

     1  is  to  be  amortized over a seven-year period, based upon cash purchase
     2  price exclusive  of  interest  or  service  charges].    Notwithstanding
     3  anything  to the contrary contained herein, no hardship increase granted

     4  pursuant  to this paragraph shall, when added to the annual gross rents,
     5  as determined by the commissioner, exceed the sum  of,  (i)  the  annual
     6  operating  expenses, (ii) an allowance for management services as deter-
     7  mined by the commissioner, (iii) actual  annual  mortgage  debt  service
     8  (interest  and  amortization)  on its indebtedness to a lending institu-
     9  tion, an insurance company, a retirement fund or welfare fund  which  is
    10  operated  under  the supervision of the banking or insurance laws of the
    11  state of New York or the United States,  and  (iv)  eight  and  one-half
    12  percent  of  that portion of the fair market value of the property which
    13  exceeds  the  unpaid  principal  amount  of  the  mortgage  indebtedness
    14  referred  to  in subparagraph (iii) of this paragraph. Fair market value
    15  for the purposes of this paragraph shall be six times the  annual  gross

    16  rent.  The  collection  of  any  increase in the stabilized rent for any
    17  apartment pursuant to this paragraph shall not exceed six percent in any
    18  year from the effective date of the order granting the increase over the
    19  rent set forth in the schedule of gross rents,  with  collectability  of
    20  any  dollar excess above said sum to be spread forward in similar incre-
    21  ments and added to the stabilized rent as established or set  in  future
    22  years;
    23    § 4. Subdivision c of section 26-511 of the administrative code of the
    24  city  of New York is amended by adding two new paragraphs 6-b and 6-c to
    25  read as follows:
    26    (6-b) provides criteria whereby the commissioner may act upon applica-
    27  tion by owners for increases  in  excess  of  the  level  of  fair  rent
    28  increase  established under this law provided, however, that such crite-

    29  ria shall provide as to completed building-wide major  capital  improve-
    30  ments, for a finding that such improvements are deemed depreciable under
    31  the  internal  revenue  code  and such improvements are required for the
    32  operation, preservation or maintenance of the  structure.  The  increase
    33  permitted  for  such capital improvement shall be collected as a monthly
    34  surcharge to the legal regulated rent. It shall be separately designated
    35  and billed as such and shall not be compounded by any annual  adjustment
    36  of  the  level  of fair rent provided for under subdivision b of section
    37  26-510 of this law.  The surcharge allocable to each apartment shall  be
    38  an  amount  equal to the cost of the improvement divided by eighty-four,

    39  divided by the number of rooms in the building, and then  multiplied  by
    40  the number of rooms in such apartment; provided that the surcharge allo-
    41  cable  to  any apartment, in any one year may not exceed an amount equal
    42  to six percent of the monthly rent  collected  by  the  owner  for  such
    43  apartment as set forth in the schedule of gross rents.  Any excess above
    44  said  six percent shall be carried forward and collected in future years
    45  as a further surcharge not to exceed an additional six  percent  in  any
    46  one  year  period  until  the total surcharge equals the amount it would
    47  have been if the aforementioned six percent limitation did not apply.
    48    (6-c) collection of surcharges in excess of the  level  of  fair  rent

    49  authorized  pursuant  to paragraph six-b of this subdivision shall cease
    50  when the owner has recovered the cost of the major capital improvement.
    51    § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
    52  576 of the laws of 1974, constituting the  emergency  tenant  protection
    53  act  of  nineteen seventy-four, as amended by chapter 749 of the laws of
    54  1990, is amended to read as follows:
    55    (3) (i) collection of surcharges in addition to  the  legal  regulated
    56  rent  authorized  pursuant  to subparagraph (ii) of this paragraph shall

        A. 2459--A                          4
 
     1  cease when the owner  has  recovered  the  cost  of  the  major  capital
     2  improvement;
     3    (ii) there has been since January first, nineteen hundred seventy-four

     4  a major capital improvement [required for the operation, preservation or
     5  maintenance  of the structure.  An adjustment under this paragraph shall
     6  be in an amount sufficient to amortize  the  cost  of  the  improvements
     7  pursuant  to this paragraph over a seven-year period]; provided that the
     8  commissioner finds that such improvements are deemed  depreciable  under
     9  the  internal  revenue  code  and such improvements are required for the
    10  operation, preservation or maintenance of the structure.   The  increase
    11  permitted  for  such capital improvement shall be collected as a monthly
    12  surcharge to the legal regulated rent. It shall be separately designated
    13  and billed as such and shall  not  be  compounded  by  any  annual  rent

    14  adjustment  authorized  by the rent guidelines board under this act. The
    15  surcharge allocable to each apartment shall be an amount  equal  to  the
    16  cost of the improvement divided by eighty-four, divided by the number of
    17  rooms  in  the  building,  and then multiplied by the number of rooms in
    18  such apartment; provided that the surcharge allocable to  any  apartment
    19  in  any  one  year  may not exceed an amount equal to six percent of the
    20  monthly rent collected by the owner for such apartment as set  forth  in
    21  the schedule of gross rents.  Any excess above said six percent shall be
    22  carried forward and collected in future years as a further surcharge not
    23  to  exceed  an  additional  six percent in any one year period until the

    24  total surcharge equals the amount it would have been  if  the  aforemen-
    25  tioned six percent limitation did not apply, or
    26    § 6. The second undesignated paragraph of paragraph (a) of subdivision
    27  4  of  section  4  of  chapter 274 of the laws of 1946, constituting the
    28  emergency housing rent control law, as amended by section 25 of  part  B
    29  of chapter 97 of the laws of 2011, is amended to read as follows:
    30    No application for adjustment of maximum rent based upon a sales price
    31  valuation  shall  be filed by the landlord under this subparagraph prior
    32  to six months from the date of such sale of the property.  In  addition,
    33  no  adjustment  ordered  by  the  commission based upon such sales price
    34  valuation shall be effective prior to one year from  the  date  of  such
    35  sale.  Where,  however,  the assessed valuation of the land exceeds four

    36  times the assessed valuation of the buildings  thereon,  the  commission
    37  may determine a valuation of the property equal to five times the equal-
    38  ized  assessed  valuation  of  the  buildings,  for the purposes of this
    39  subparagraph. The commission may make a determination that the valuation
    40  of the property is an amount  different  from  such  equalized  assessed
    41  valuation  where  there  is  a  request for a reduction in such assessed
    42  valuation currently pending; or where there has been a reduction in  the
    43  assessed valuation for the year next preceding the effective date of the
    44  current  assessed  valuation  in effect at the time of the filing of the
    45  application. Net annual return shall be the amount by which  the  earned
    46  income  exceeds  the operating expenses of the property, excluding mort-
    47  gage interest and amortization, and excluding  allowances  for  obsoles-

    48  cence  and  reserves, but including an allowance for depreciation of two
    49  per centum of the value of the buildings exclusive of the land,  or  the
    50  amount  shown  for  depreciation of the buildings in the latest required
    51  federal income tax return, whichever is lower; provided,  however,  that
    52  (1)  no  allowance  for  depreciation of the buildings shall be included
    53  where the buildings have been fully depreciated for federal  income  tax
    54  purposes  or  on the books of the owner; or (2) the landlord who owns no
    55  more than four rental units within the state has not been fully  compen-
    56  sated  by  increases  in  rental income sufficient to offset unavoidable

        A. 2459--A                          5
 
     1  increases in property taxes, fuel, utilities, insurance and repairs  and
     2  maintenance, excluding mortgage interest and amortization, and excluding

     3  allowances  for  depreciation,  obsolescence  and  reserves,  which have
     4  occurred since the federal date determining the maximum rent or the date
     5  the  property  was acquired by the present owner, whichever is later; or
     6  (3) the landlord operates a hotel or rooming house or owns a cooperative
     7  apartment and has not been fully  compensated  by  increases  in  rental
     8  income  from  the controlled housing accommodations sufficient to offset
     9  unavoidable increases in property taxes and other costs as are allocable
    10  to such controlled housing accommodations, including costs of  operation
    11  of  such  hotel  or  rooming  house, but excluding mortgage interest and
    12  amortization, and excluding allowances  for  depreciation,  obsolescence
    13  and reserves, which have occurred since the federal date determining the
    14  maximum  rent  or  the  date the landlord commenced the operation of the

    15  property, whichever is later; or (4) the landlord and tenant voluntarily
    16  enter into a valid written lease in good faith with respect to any hous-
    17  ing accommodation, which lease provides for an increase in  the  maximum
    18  rent not in excess of fifteen per centum and for a term of not less than
    19  two  years,  except  that  where  such lease provides for an increase in
    20  excess of fifteen  per  centum,  the  increase  shall  be  automatically
    21  reduced  to fifteen per centum; or (5) the landlord and tenant by mutual
    22  voluntary written agreement agree to a substantial increase or  decrease
    23  in dwelling space or a change in the services, furniture, furnishings or
    24  equipment provided in the housing accommodations; provided that an owner
    25  shall  be entitled to a rent increase where there has been a substantial
    26  modification or increase  of  dwelling  space  or  an  increase  in  the

    27  services, or installation of new equipment or improvements or new furni-
    28  ture  or furnishings provided in or to a tenant's housing accommodation.
    29  The permanent increase in the maximum  rent  for  the  affected  housing
    30  accommodation  shall  be  one-fortieth,  in  the case of a building with
    31  thirty-five or fewer housing accommodations,  or  one-sixtieth,  in  the
    32  case  of  a  building  with more than thirty-five housing accommodations
    33  where such permanent increase takes effect on or after  September  twen-
    34  ty-fourth,  two thousand eleven, of the total cost incurred by the land-
    35  lord in providing such  modification  or  increase  in  dwelling  space,
    36  services,  furniture,  furnishings  or  equipment, including the cost of
    37  installation, but excluding finance charges  provided  further  that  an
    38  owner  who  is entitled to a rent increase pursuant to this clause shall

    39  not be entitled to a further rent increase based upon  the  installation
    40  of  similar equipment, or new furniture or furnishings within the useful
    41  life of such new equipment, or new furniture or furnishings.  The  owner
    42  shall  give  written  notice  to  the  commission of any such adjustment
    43  pursuant to this clause; or (6) there has been, since March first, nine-
    44  teen hundred fifty, an increase in  the  rental  value  of  the  housing
    45  accommodations as a result of a substantial rehabilitation of the build-
    46  ing  or housing accommodation therein which materially adds to the value
    47  of the property or appreciably prolongs  its  life,  excluding  ordinary
    48  repairs,   maintenance  and  replacements;  or  (7)  (i)  collection  of
    49  surcharges to the maximum rent authorized pursuant to item (ii) of  this

    50  clause  shall  cease  when the owner has recovered the cost of the major
    51  capital improvement; (ii) there has been  since  March  first,  nineteen
    52  hundred  fifty, a major capital improvement [required for the operation,
    53  preservation or maintenance of the structure]; provided that the commis-
    54  sioner finds that such improvements are  deemed  depreciable  under  the
    55  internal  revenue code and such improvements are required for the opera-
    56  tion, preservation or maintenance of the structure. The increase permit-

        A. 2459--A                          6
 
     1  ted for such  capital  improvement  shall  be  collected  as  a  monthly
     2  surcharge  to  the  maximum  rent. It shall be separately designated and

     3  billed as such and shall not be compounded by any  other  adjustment  to
     4  the  maximum rent. The surcharge allocable to each apartment shall be an
     5  amount equal to the cost of the improvement  divided  by    eighty-four,
     6  divided  by  the number of rooms in the building, and then multiplied by
     7  the number of rooms in such apartment; provided that the surcharge allo-
     8  cable to any apartment in any one year may not exceed an amount equal to
     9  six percent of the monthly rent collected by the owner for  such  apart-
    10  ment as set forth in the schedule of gross rents.  Any excess above said
    11  six  percent shall be carried forward and collected in future years as a
    12  further surcharge not to exceed an additional six  percent  in  any  one

    13  year  period  until  the total surcharge equals the amount it would have
    14  been if the aforementioned six percent limitation did not apply; or  (8)
    15  there  has been since March first, nineteen hundred fifty, in structures
    16  containing more than four  housing  accommodations,  other  improvements
    17  made  with  the  express consent of the tenants in occupancy of at least
    18  seventy-five per centum of the housing accommodations, provided,  howev-
    19  er, that no adjustment granted hereunder shall exceed fifteen per centum
    20  unless  the  tenants  have agreed to a higher percentage of increase, as
    21  herein provided; or (9) there has  been,  since  March  first,  nineteen
    22  hundred fifty, a subletting without written consent from the landlord or
    23  an  increase in the number of adult occupants who are not members of the
    24  immediate family of the tenant, and the landlord has  not  been  compen-

    25  sated  therefor  by  adjustment of the maximum rent by lease or order of
    26  the commission or pursuant to the federal act; or (10) the  presence  of
    27  unique  or  peculiar circumstances materially affecting the maximum rent
    28  has resulted in a maximum rent which is  substantially  lower  than  the
    29  rents  generally  prevailing  in the same area for substantially similar
    30  housing accommodations.
    31    § 7. This act shall take effect immediately; provided that the  amend-
    32  ments  to section 26-405 of the city rent and rehabilitation law made by
    33  sections one and two of this act shall remain in full force  and  effect
    34  only  so  long  as  the  public  emergency  requiring the regulation and
    35  control of residential rents and evictions  continues,  as  provided  in
    36  subdivision  3  of section 1 of the local emergency housing rent control

    37  act; and provided further that the amendments to section 26-511  of  the
    38  rent  stabilization  law of nineteen hundred sixty-nine made by sections
    39  three and four of this act shall expire on the same  date  as  such  law
    40  expires  and  shall  not  affect  the expiration of such law as provided
    41  under section 26-520 of such law, as from  time  to  time  amended;  and
    42  provided further that the amendment to section 6 of the emergency tenant
    43  protection act of nineteen seventy-four made by section five of this act
    44  shall  expire  on the same date as such act expires and shall not affect
    45  the expiration of such act as provided in section 17 of chapter  576  of
    46  the  laws  of  1974,  as from time to time amended; and further provided
    47  that the amendment to section 4 of the emergency  housing  rent  control
    48  law  made  by  section  six of this act shall expire on the same date as

    49  such law expires and shall not affect the  expiration  of  such  law  as
    50  provided  in  subdivision  2  of section 1 of chapter 274 of the laws of
    51  1946.
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