STATE OF NEW YORK
________________________________________________________________________
1406
2023-2024 Regular Sessions
IN SENATE
January 11, 2023
___________
Introduced by Sens. GIANARIS, BAILEY, BRESLIN, BRISPORT, CLEARE,
GOUNARDES, HOYLMAN-SIGAL, JACKSON, LIU, MYRIE, PARKER, RAMOS, RIVERA,
SALAZAR, SANDERS, SEPULVEDA, SERRANO, STAVISKY -- read twice and
ordered printed, and when printed to be committed to the Committee on
Housing, Construction and Community Development
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:
1 Section 1. Legislative findings and declaration of emergency. The
2 legislature hereby finds and declares that the serious public emergency
3 which led to the enactment of the existing laws regulating residential
4 rents and evictions continues to exist. The legislature further finds
5 that a majority of households currently occupying housing accommodations
6 subject to rent laws are rent-burdened; that permanent increases in
7 rents are no longer necessary to incentivize rental property owners to
8 make, or to compensate landlords for, necessary major capital improve-
9 ments; that publicly funded tax incentives and other subsidies are
10 available to rental property owners to support major capital improve-
11 ments; that value from major capital improvements accrues to rental
12 property owners through increased property values and sale prices; that,
13 due to market conditions in localities subject to rent laws, rental
14 property owners are already able to realize a reasonable return on their
15 investments in major capital improvements through increased property
16 values and sale prices alone; and that provisions for hardship increases
17 under existing rent laws already ensure that rental property owners are
18 able to operate rent regulated housing without incurring undue losses.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05277-01-3
S. 1406 2
1 The legislature further declares and finds that a substantial number of
2 the rent increases previously granted for major capital improvements
3 were tainted by inflated costs, particularly in the last seven years;
4 that the provision of rent increases for major capital improvements in
5 existing rent laws has resulted in exactions of unjust, unreasonable and
6 oppressive rents, as well as profiteering, speculation and other disrup-
7 tive practices tending to produce tenant dislocation and threats to the
8 public health, safety and general welfare; that such results were
9 contrary to the intent and purpose of the existing rent laws; that it is
10 therefore necessary to amend the rent laws to remove any provision of a
11 rent increase based upon major capital improvements; and that it is
12 additionally necessary to repeal rent increases based upon major capital
13 improvements that became effective within the previous seven years.
14 § 2. (a) The division of housing and community renewal, the "divi-
15 sion", shall administer the elimination of rent increases based upon
16 major capital improvements pursuant to this act. The division shall no
17 longer grant rent increases on the basis of major capital improvements
18 at buildings subject to rent regulation or rent stabilization pursuant
19 to the emergency rent control law, the emergency tenant protection act
20 and/or the administrative code of the city of New York. All pending
21 applications for rent increases based upon major capital improvements
22 shall be denied, and the division shall issue orders disposing of pend-
23 ing applications as necessary.
24 (b) Any rent increase based upon major capital improvements previously
25 ordered by the division, pursuant to the emergency rent control law, the
26 emergency tenant protection act and/or the administrative code of the
27 city of New York, with an effective date within the seven years prior to
28 the effective date of this act shall be repealed effective immediately
29 unless the division finds a basis for limiting the repeal pursuant to
30 subdivision (d) of this section. For all affected housing accommo-
31 dations, the division shall determine what the present legal rent would
32 be for each such accommodation if the division had not ordered any rent
33 increases based upon major capital improvements during the repeal peri-
34 od, and this amount shall be the proposed new legal rent.
35 (c) Within 180 days of the effective date of this act, the division of
36 housing and community renewal shall determine the proposed new legal
37 rents for all affected housing accommodations pursuant to subdivision
38 (b) of this section and shall also provide written notification to all
39 current owners and tenants of affected accommodations as to the amount
40 of the proposed new legal rents, the basis for the department's determi-
41 nation, and the time for each affected party to submit additional infor-
42 mation that the division shall consider before issuing a final order
43 determining the new legal rents, which shall not be less than 45 days.
44 Unless an owner of an affected building has submitted a timely applica-
45 tion to the division for a limitation pursuant to subdivision (d) of
46 this section, the division shall issue a final order determining the new
47 legal rents for affected housing accommodations within 365 days of the
48 effective date of this act.
49 (d) (1) Within 90 days of receiving written notice of proposed new
50 legal rents from the division pursuant to subdivision (c) of this
51 section, a building owner may apply to the commissioner of housing and
52 community renewal for an order limiting the amount of the repeal of rent
53 increases under this act based upon a finding by the commissioner of
54 housing and community renewal that the proposed new legal rents are not
55 sufficient to enable the owner to maintain an annual gross rent income
56 for such building which exceeds the annual operating expenses of such
S. 1406 3
1 building by a sum equal to at least five percent of such gross rent. In
2 buildings for which the commissioner of housing and community renewal
3 finds that the proposed new legal rents are not sufficient to enable the
4 owner to maintain an annual gross rent income for such building which
5 exceeds the annual operating expenses of such building by a sum equal to
6 at least five percent of such gross rent, the repeal amount of rent
7 increases based upon major capital improvements shall be limited to an
8 amount such that the annual operating expenses of the building do not
9 exceed ninety-five percent of the new proposed annual gross rent income
10 for such building.
11 (2) For the purposes of this subdivision, operating expenses shall
12 consist of the actual, reasonable, costs of fuel, labor, utilities,
13 taxes, other than income or corporate franchise taxes, fees, permits,
14 necessary contracted services and noncapital repairs, insurance, parts
15 and supplies, management fees and other administrative costs and mort-
16 gage interest. For the purposes of this subdivision, mortgage interest
17 shall be deemed to mean interest on a bona fide mortgage including an
18 allocable portion of charges related thereto. Criteria to be considered
19 in determining a bona fide mortgage other than an institutional mortgage
20 shall include: condition of the property, location of the property, the
21 existing mortgage market at the time the mortgage is placed, the term of
22 the mortgage, the amortization rate, the principal amount of the mort-
23 gage, security and other terms and conditions of the mortgage. For the
24 purposes of this subdivision, gross annual rent income for a building
25 shall include a rental value set by the commissioner of housing and
26 community renewal for any unit occupied by the owner or a person related
27 to the owner or unoccupied at the owner's choice for more than one month
28 at the last regulated rent plus the minimum number of guidelines
29 increases or, if no such regulated rent existed or is known, the commis-
30 sioner shall impute a rent consistent with other proposed new legal
31 rents in the building.
32 (e) The division shall require that owners refund any increase in a
33 tenant's security deposit amount collected in excess of a new legal rent
34 established under this act within thirty days of the department's issu-
35 ance of an order determining new legal rents. Such excess security
36 deposit amount may be refunded in the form of a rent credit applied
37 toward the affected tenant's next monthly rent payment, and affected
38 tenants are entitled to self-deduct the refund amount from future rent
39 payments.
40 (f) The new legal rent shall be the legal rent beginning on the date
41 rent is required to be paid next succeeding the issuance of a final
42 order determining new legal rents under this act.
43 (g) Any lease agreement executed after the issuance of a final order
44 determining new legal rents under this act shall be deemed to incorpo-
45 rate the rent amounts and effective dates set forth in such order.
46 (h) Any tenant residing in an affected housing accommodation may
47 assert their entitlement to the repeal of prior rent under subdivision
48 (b) of this section, as a defense or counterclaim in any legal proceed-
49 ing predicated upon a landlord's claim of default in the payment of rent
50 pursuant to an agreement. Any court with jurisdiction over a landlord's
51 claim as to a tenant's default in the payment of rent shall also adjudi-
52 cate and have primary jurisdiction over the tenant's assertion of a
53 defense or counterclaim under this provision if the department has not
54 yet issued an order determining the new legal rent. A court order made
55 under this subdivision shall not in any way be deemed to impair a build-
S. 1406 4
1 ing owner's right or time to apply for a limitation under subdivision
2 (d) of this section.
3 (i) All final orders issued by the department pursuant to subdivisions
4 (b), (c), and (d) of this section shall be subject to appeal pursuant to
5 existing procedures for administrative review before the division.
6 § 3. Paragraph 2 of subdivision 3-a, subparagraphs 7, 8, 9 and 10 of
7 the second undesignated paragraph of paragraph (a) of subdivision 4 of
8 section 4 of chapter 274 of the laws of 1946, constituting the emergency
9 housing rent control law, paragraph 2 of subdivision 3-a of section 4
10 and subparagraph 8 of the second undesignated paragraph of paragraph (a)
11 of subdivision 4 of section 4 as amended by section 8 of part K of chap-
12 ter 36 of the laws of 2019, subparagraphs 9 and 10 of the second undes-
13 ignated paragraph of paragraph (a) of subdivision 4 of section 4 as
14 amended by section 25 of part B of chapter 97 of the laws of 2011,
15 subparagraph 7 of the second undesignated paragraph of paragraph (a) of
16 subdivision 4 of section 4 as separately amended by section 25 of part Q
17 of chapter 39 of the laws of 2019 and section 14 of part K of chapter 36
18 of the laws of 2019, are amended to read as follows:
19 (2) the amount of increases in maximum rent authorized by order
20 because of increases in dwelling space, services, furniture, furnishings
21 or equipment [and the amount of the temporary increase authorized by
22 order because of a major capital improvement].
23 (7) [there has been since March first, nineteen hundred fifty, a major
24 capital improvement essential for the preservation, energy efficiency,
25 functionality, or infrastructure of the entire building, improvement of
26 the structure including heating, windows, plumbing and roofing, but
27 shall not be for operational costs or unnecessary cosmetic improvements;
28 which for any order of the commissioner issued after the effective date
29 of the chapter of the laws of two thousand nineteen that amended this
30 paragraph the cost of such improvement shall be amortized over a twelve-
31 year period for buildings with thirty-five or fewer units or a twelve
32 and one-half year period for buildings with more than thirty-five units,
33 and shall be removed from the legal regulated rent thirty years from the
34 date the increase became effective inclusive of any increases granted by
35 the applicable rent guidelines board. Temporary major capital improve-
36 ment increases shall be collectible prospectively on the first day of
37 the first month beginning sixty days from the date of mailing notice of
38 approval to the tenant. Such notice shall disclose the total monthly
39 increase in rent and the first month in which the tenant would be
40 required to pay the temporary increase. An approval for a temporary
41 major capital improvement increase shall not include retroactive
42 payments. The collection of any increase shall not exceed two percent in
43 any year from the effective date of the order granting the increase over
44 the rent set forth in the schedule of gross rents, with collectability
45 of any dollar excess above said sum to be spread forward in similar
46 increments and added to the rent as established or set in future years.
47 Upon vacancy, the landlord may add any remaining balance of the tempo-
48 rary major capital improvement increase to the legal regulated rent.
49 Notwithstanding any other provision of the law, for any renewal lease
50 commencing on or after June 14, 2019, the collection of any rent
51 increases due to any major capital improvements approved on or after
52 June 16, 2012 and before June 16, 2019 shall not exceed two percent in
53 any year for any tenant in occupancy on the date the major capital
54 improvement was approved; provided, however, where an application for a
55 temporary major capital improvement increase has been filed, a tenant
56 shall have sixty days from the date of mailing of a notice of a proceed-
S. 1406 5
1 ing in which to answer or reply. The state division of housing and
2 community renewal shall provide any responding tenant with the reasons
3 for the division's approval or denial of such application; or (8)] there
4 has been since March first, nineteen hundred fifty, in structures
5 containing more than four housing accommodations, other improvements
6 made with the express informed consent of the tenants in occupancy of at
7 least seventy-five per centum of the housing accommodations, provided,
8 however, that no adjustment granted hereunder shall exceed two per
9 centum unless the tenants have agreed to a higher percentage of
10 increase, as herein provided; [(9)] or (8) there has been, since March
11 first, nineteen hundred fifty, a subletting without written consent from
12 the landlord or an increase in the number of adult occupants who are not
13 members of the immediate family of the tenant, and the landlord has not
14 been compensated therefor by adjustment of the maximum rent by lease or
15 order of the commission or pursuant to the federal act; or [(10)] (9)
16 the presence of unique or peculiar circumstances materially affecting
17 the maximum rent has resulted in a maximum rent which is substantially
18 lower than the rents generally prevailing in the same area for substan-
19 tially similar housing accommodations.
20 § 4. Paragraphs 3, 4, and 5 of subdivision d of section 6 of section 4
21 of chapter 576 of the laws of 1974, constituting the emergency tenant
22 protection act of nineteen seventy-four, paragraph 3 of subdivision d as
23 amended by section 26 of part Q of chapter 39 of the laws of 2019, para-
24 graph 4 of subdivision d as amended by chapter 403 of the laws of 1983,
25 paragraph 5 of subdivision d as amended by chapter 102 of the laws of
26 1984, are amended to read as follows:
27 (3) [there has been since January first, nineteen hundred seventy-four
28 a major capital improvement essential for the preservation, energy effi-
29 ciency, functionality, or infrastructure of the entire building,
30 improvement of the structure including heating, windows, plumbing and
31 roofing, but shall not be for operation costs or unnecessary cosmetic
32 improvements. An adjustment under this paragraph shall be in an amount
33 sufficient to amortize the cost of the improvements pursuant to this
34 paragraph over a twelve-year period for a building with thirty-five or
35 fewer housing accommodations, or a twelve and one-half period for a
36 building with more than thirty-five housing accommodations and shall be
37 removed from the legal regulated rent thirty years from the date the
38 increase became effective inclusive of any increases granted by the
39 applicable rent guidelines board, for any determination issued by the
40 division of housing and community renewal after the effective date of
41 the chapter of the laws of two thousand nineteen that amended this para-
42 graph. Temporary major capital improvement increases shall be collecta-
43 ble prospectively on the first day of the first month beginning sixty
44 days from the date of mailing notice of approval to the tenant. Such
45 notice shall disclose the total monthly increase in rent and the first
46 month in which the tenant would be required to pay the temporary
47 increase. An approval for a temporary major capital improvement increase
48 shall not include retroactive payments. The collection of any increase
49 shall not exceed two percent in any year from the effective date of the
50 order granting the increase over the rent set forth in the schedule of
51 gross rents, with collectability of any dollar excess above said sum to
52 be spread forward in similar increments and added to the rent as estab-
53 lished or set in future years. Upon vacancy, the landlord may add any
54 remaining balance of the temporary major capital improvement increase to
55 the legal regulated rent. Notwithstanding any other provision of the
56 law, the collection of any rent increases for any renewal lease commenc-
S. 1406 6
1 ing on or after June 14, 2019, due to any major capital improvements
2 approved on or after June 16, 2012 and before June 16, 2019 shall not
3 exceed two percent in any year for any tenant in occupancy on the date
4 the major capital improvement was approved, or
5 (4)] an owner by application to the state division of housing and
6 community renewal for increases in the rents in excess of the rent
7 adjustment authorized by the rent guidelines board under this act estab-
8 lishes a hardship, and the state division finds that the rate of rent
9 adjustment is not sufficient to enable the owner to maintain approxi-
10 mately the same ratio between operating expenses, including taxes and
11 labor costs but excluding debt service, financing costs, and management
12 fees, and gross rents which prevailed on the average over the immediate
13 preceding five year period, or for the entire life of the building if
14 less than five years, or
15 [(5)] (4) as an alternative to the hardship application provided under
16 paragraph [four] three of this subdivision, owners of buildings acquired
17 by the same owner or a related entity owned by the same principals three
18 years prior to the date of application may apply to the division for
19 increases in excess of the level of applicable guideline increases
20 established under this law based on a finding by the commissioner that
21 such guideline increases are not sufficient to enable the owner to main-
22 tain an annual gross rent income for such building which exceeds the
23 annual operating expenses of such building by a sum equal to at least
24 five percent of such gross rent. For the purposes of this paragraph,
25 operating expenses shall consist of the actual, reasonable, costs of
26 fuel, labor, utilities, taxes, other than income or corporate franchise
27 taxes, fees, permits, necessary contracted services and non-capital
28 repairs, insurance, parts and supplies, management fees and other admin-
29 istrative costs and mortgage interest. For the purposes of this para-
30 graph, mortgage interest shall be deemed to mean interest on a bona fide
31 mortgage including an allocable portion of charges related thereto.
32 Criteria to be considered in determining a bona fide mortgage other than
33 an institutional mortgage shall include; condition of the property,
34 location of the property, the existing mortgage market at the time the
35 mortgage is placed, the term of the mortgage, the amortization rate, the
36 principal amount of the mortgage, security and other terms and condi-
37 tions of the mortgage. The commissioner shall set a rental value for any
38 unit occupied by the owner or a person related to the owner or unoccu-
39 pied at the owner's choice for more than one month at the last regulated
40 rent plus the minimum number of guidelines increases or, if no such
41 regulated rent existed or is known, the commissioner shall impute a rent
42 consistent with other rents in the building. The amount of hardship
43 increase shall be such as may be required to maintain the annual gross
44 rent income as provided by this paragraph. The division shall not grant
45 a hardship application under this paragraph or paragraph [four] three of
46 this subdivision for a period of three years subsequent to granting a
47 hardship application under the provisions of this paragraph. The
48 collection of any increase in the rent for any housing accommodation
49 pursuant to this paragraph shall not exceed six percent in any year from
50 the effective date of the order granting the increase over the rent set
51 forth in the schedule of gross rents, with collectability of any dollar
52 excess above said sum to be spread forward in similar increments and
53 added to the rent as established or set in future years. No application
54 shall be approved unless the owner's equity in such building exceeds
55 five percent of: (i) the arms length purchase price of the property;
56 (ii) the cost of any capital improvements for which the owner has not
S. 1406 7
1 collected a surcharge; (iii) any repayment of principal of any mortgage
2 or loan used to finance the purchase of the property or any capital
3 improvements for which the owner has not collected a surcharge; and (iv)
4 any increase in the equalized assessed value of the property which
5 occurred subsequent to the first valuation of the property after
6 purchase by the owner. For the purposes of this paragraph, owner's equi-
7 ty shall mean the sum of (i) the purchase price of the property less the
8 principal of any mortgage or loan used to finance the purchase of the
9 property, (ii) the cost of any capital improvement for which the owner
10 has not collected a surcharge less the principal of any mortgage or loan
11 used to finance said improvement, (iii) any repayment of the principal
12 of any mortgage or loan used to finance the purchase of the property or
13 any capital improvement for which the owner has not collected a
14 surcharge, and (iv) any increase in the equalized assessed value of the
15 property which occurred subsequent to the first valuation of the proper-
16 ty after purchase by the owner.
17 § 5. Subparagraphs (g), (h), (i), (j), (k), (m) and (o) of paragraph 1
18 of subdivision g of section 26-405 of the administrative code of the
19 city of New York, subparagraph (g) as amended by section 27 of part Q of
20 chapter 39 of the laws of 2019, subparagraph (k) as amended by chapter
21 749 of the laws of 1990, are amended to read as follows:
22 (g) [There has been since July first, nineteen hundred seventy, a
23 major capital improvement essential for the preservation energy effi-
24 ciency, functionality, or infrastructure of the entire building,
25 improvement of the structure including heating, windows, plumbing and
26 roofing but shall not be for operational costs or unnecessary cosmetic
27 improvements. The temporary increase based upon a major capital improve-
28 ment under this subparagraph for any order of the commissioner issued
29 after the effective date of the chapter of the laws of two thousand
30 nineteen that amended this subparagraph shall be in an amount sufficient
31 to amortize the cost of the improvements pursuant to this subparagraph
32 (g) over a twelve-year period for buildings with thirty-five or fewer
33 units or a twelve and one-half year period for buildings with more than
34 thirty-five units, and shall be removed from the legal regulated rent
35 thirty years from the date the increase became effective inclusive of
36 any increases granted by the applicable rent guidelines board. Temporary
37 major capital improvement increases shall be collectible prospectively
38 on the first day of the first month beginning sixty days from the date
39 of mailing notice of approval to the tenant. Such notice shall disclose
40 the total monthly increase in rent and the first month in which the
41 tenant would be required to pay the temporary increase. An approval for
42 a temporary major capital improvement increase shall not include retro-
43 active payments. The collection of any increase shall not exceed two
44 percent in any year from the effective date of the order granting the
45 increase over the rent set forth in the schedule of gross rents, with
46 collectability of any dollar excess above said sum to be spread forward
47 in similar increments and added to the rent as established or set in
48 future years. Upon vacancy, the landlord may add any remaining balance
49 of the temporary major capital improvement increase to the legal regu-
50 lated rent. Notwithstanding any other provision of the law, for any
51 renewal lease commencing on or after June 14, 2019, the collection of
52 any rent increases due to any major capital improvements approved on or
53 after June 16, 2012 and before June 16, 2019 shall not exceed two
54 percent in any year for any tenant in occupancy on the date the major
55 capital improvement was approved, or
S. 1406 8
1 (h) There have been since March first, nineteen hundred fifty-nine, in
2 structures containing more than four housing accommodations, other
3 improvements made with the express consent of the tenants in occupancy
4 of at least seventy-five per centum of the housing accommodations;
5 provided, however, that whenever the city rent agency has determined
6 that the improvements proposed were part of a plan designed for overall
7 improvement of the structure or increases in services, it may authorize
8 increases in maximum rents for all housing accommodations affected upon
9 the express consent of the tenants in occupancy of at least fifty-one
10 per centum of the housing accommodations, and provided further that no
11 adjustment granted hereunder shall exceed fifteen per centum unless the
12 tenants have agreed to a higher percentage of increase, as herein
13 provided; or
14 (i)] There has been, since March first, nineteen hundred fifty-nine, a
15 subletting without written consent from the landlord or an increase in
16 the number of adult occupants who are not members of the immediate fami-
17 ly of the tenant, and the landlord has not been compensated therefor by
18 adjustment of the maximum rent by lease or order of the city rent agency
19 or pursuant to the state rent act or the federal act; or
20 [(j)] (h) The presence of unique or peculiar circumstances materially
21 affecting the maximum rent has resulted in a maximum rent which is
22 substantially lower than the rents generally prevailing in the same area
23 for substantially similar housing accommodations.
24 [(k) The landlord has incurred, since January first, nineteen hundred
25 seventy, in connection with and in addition to a concurrent major capi-
26 tal improvement pursuant to subparagraph (g) of this paragraph, other
27 expenditures to improve, restore or preserve the quality of the struc-
28 ture. An adjustment under this subparagraph shall be granted only if
29 such improvements represent an expenditure equal to at least ten per
30 centum of the total operating and maintenance expenses for the preceding
31 year. An adjustment under this subparagraph shall be in addition to any
32 adjustment granted for the concurrent major capital improvement and
33 shall be in an amount sufficient to amortize the cost of the improve-
34 ments pursuant to this subparagraph over a seven-year period.]
35 [(m)] (i) Where the rehabilitation or improvement of sub-standard or
36 deteriorated housing accommodations has been financed under a govern-
37 mental program providing assistance through loans, loan insurance or tax
38 abatement or has been undertaken under another rehabilitation program
39 not so financed but approved by the commissioner.
40 [(o)] (j) (1) There has been an increase in heating and heating fuel
41 expenditures in a property resulting from a city-wide rise in heating
42 fuel costs such that the verifiable expenditures for heating or heating
43 fuel in a property for nineteen hundred seventy-four exceeds the verifi-
44 able expenditures for such heating or heating fuel during nineteen
45 hundred seventy-three.
46 (2) To obtain a rental adjustment pursuant to this subparagraph [(o)],
47 the landlord must certify that he or she is presently maintaining all
48 essential services required to be furnished with respect to the housing
49 accommodations covered by such certification, and that he or she will
50 continue to so maintain such essential services for the period of any
51 such adjustment.
52 (3) To obtain a rental adjustment pursuant to this subparagraph [(o)],
53 the landlord must certify on information and belief that he or she will
54 not be earning an amount in excess of the statutory return specified in
55 subparagraph (a) of this paragraph [one of subdivision g of this
56 section] after collection of such rental adjustment, with respect to the
S. 1406 9
1 building or buildings serviced by a single heating plant; and where the
2 building, or buildings serviced by a single heating plant, contains
3 forty-nine or fewer housing accommodations, the landlord must certify
4 that the amount expended directly for heating or heating fuel in nine-
5 teen hundred seventy-four equalled or exceeded ten per cent of the total
6 rental income which was derived from the property during nineteen
7 hundred seventy-four; and, where the building, or buildings serviced by
8 a single heating plant, contains fifty or more housing accommodations
9 the landlord must certify that the amount expended directly for heating
10 or heating fuel in nineteen hundred seventy-four equalled or exceeded
11 seven and one-half percentum of the total rental income which was
12 derived from the property during nineteen hundred seventy-four.
13 (4) The total rental adjustments for a property to be allocated or
14 deemed allocated pursuant to this subparagraph [(o)] shall not exceed
15 one-half of the gross amount by which the total verifiable expenditures
16 for heating or heating fuel for nineteen hundred seventy-four exceeds
17 the total verifiable expenditures for such heating or heating fuel for
18 nineteen hundred seventy-three.
19 (5) Such total rental adjustments shall be allocated or deemed allo-
20 cated pursuant to this subparagraph [(o)] to all housing accommodations
21 subject to this chapter, to all other housing accommodations, and to all
22 commercial, professional and similar facilities in or associated with
23 the property in a manner to be determined by the agency. In no event
24 shall any adjustment in maximum rent pursuant to this subparagraph [(o)]
25 for any housing accommodations subject to this chapter exceed a monthly
26 increase of two dollars per room, as defined by item eight below. In any
27 apartment containing five or more rooms, any increase shall not exceed
28 the total of nine dollars.
29 (6) Any adjustment pursuant to this subparagraph [(o)] shall be effec-
30 tive for all or part of the period July first, nineteen hundred seven-
31 ty-five through June thirtieth, nineteen hundred seventy-six. Any
32 adjustment pursuant to this subparagraph shall automatically expire no
33 later than June thirtieth, nineteen hundred seventy-six.
34 (7) The rental increases provided for herein shall be effective and
35 collectible upon the landlord's filing a report with the agency on forms
36 prescribed by the agency and upon giving such notice to the tenants as
37 the agency shall prescribe, subject to adjustments upon order of the
38 agency.
39 (8) In determining the amount of an adjustment allocation of an
40 adjustment pursuant to this subparagraph [(o)], only living rooms,
41 kitchens over fifty-nine square feet in area, dining rooms and bedrooms
42 shall be considered rooms; bathrooms, foyers, and kitchenettes shall not
43 be considered rooms.
44 § 6. Subdivision a of section 26-407 of the administrative code of the
45 city of New York is amended to read as follows:
46 a. Notwithstanding any provisions of this chapter, any labor cost
47 pass-along rent increase requested of, or received from, any tenant on
48 or after July first, nineteen hundred seventy-two[, pursuant to the
49 provisions of subparagraph (1) of paragraph one of subdivision g of
50 section 26-405 of this title,] shall not exceed the maximum rent adjust-
51 ment as provided under this chapter after the effective date of this
52 section.
53 § 7. Paragraph 6 of subdivision c of section 26-511 of the administra-
54 tive code of the city of New York as separately amended by section 12 of
55 part K of chapter 36 and section 28 of part Q of chapter 39 of the laws
56 of 2019, is amended to read as follows:
S. 1406 10
1 (6) provides criteria whereby the commissioner may act upon applica-
2 tions by owners for increases in excess of the level of fair rent
3 increase established under this law provided, however, that such crite-
4 ria shall provide [(a)] as to hardship applications, for a finding that
5 the level of fair rent increase is not sufficient to enable the owner to
6 maintain approximately the same average annual net income (which shall
7 be computed without regard to debt service, financing costs or manage-
8 ment fees) for the three year period ending on or within six months of
9 the date of an application pursuant to such criteria as compared with
10 annual net income, which prevailed on the average over the period nine-
11 teen hundred sixty-eight through nineteen hundred seventy, or for the
12 first three years of operation if the building was completed since nine-
13 teen hundred sixty-eight or for the first three fiscal years after a
14 transfer of title to a new owner provided the new owner can establish to
15 the satisfaction of the commissioner that he or she acquired title to
16 the building as a result of a bona fide sale of the entire building and
17 that the new owner is unable to obtain requisite records for the fiscal
18 years nineteen hundred sixty-eight through nineteen hundred seventy
19 despite diligent efforts to obtain same from predecessors in title and
20 further provided that the new owner can provide financial data covering
21 a minimum of six years under his or her continuous and uninterrupted
22 operation of the building to meet the three year to three year compar-
23 ative test periods herein provided[; and (b) as to completed building-
24 wide major capital improvements, for a finding that such improvements
25 are deemed depreciable under the Internal Revenue Code and that the cost
26 is to be amortized over a twelve-year period for a building with thir-
27 ty-five or fewer housing accommodations, or a twelve and one-half-year
28 period for a building with more than thirty-five housing accommodations,
29 for any determination issued by the division of housing and community
30 renewal after the effective date of the the chapter of the laws of two
31 thousand nineteen that amended this paragraph and shall be removed from
32 the legal regulated rent thirty years from the date the increase became
33 effective inclusive of any increases granted by the applicable rent
34 guidelines board. Temporary major capital improvement increases shall be
35 collectible prospectively on the first day of the first month beginning
36 sixty days from the date of mailing notice of approval to the tenant.
37 Such notice shall disclose the total monthly increase in rent and the
38 first month in which the tenant would be required to pay the temporary
39 increase. An approval for a temporary major capital improvement increase
40 shall not include retroactive payments. The collection of any increase
41 shall not exceed two percent in any year from the effective date of the
42 order granting the increase over the rent set forth in the schedule of
43 gross rents, with collectability of any dollar excess above said sum to
44 be spread forward in similar increments and added to the rent as estab-
45 lished or set in future years. Upon vacancy, the landlord may add any
46 remaining balance of the temporary major capital improvement increase to
47 the legal regulated rent. Notwithstanding any other provision of the
48 law, for any renewal lease commencing on or after June 14, 2019, the
49 collection of any rent increases due to any major capital improvements
50 approved on or after June 16, 2012 and before June 16, 2019 shall not
51 exceed two percent in any year for any tenant in occupancy on the date
52 the major capital improvement was approved or based upon cash purchase
53 price exclusive of interest or service charges. Where an application for
54 a temporary major capital improvement increase has been filed, a tenant
55 shall have sixty days from the date of mailing of a notice of a proceed-
56 ing in which to answer or reply. The state division of housing and
S. 1406 11
1 community renewal shall provide any responding tenant with the reasons
2 for the division's approval or denial of such application.] Notwith-
3 standing anything to the contrary contained herein, no hardship increase
4 granted pursuant to this paragraph shall, when added to the annual gross
5 rents, as determined by the commissioner, exceed the sum of, (i) the
6 annual operating expenses, (ii) an allowance for management services as
7 determined by the commissioner, (iii) actual annual mortgage debt
8 service (interest and amortization) on its indebtedness to a lending
9 institution, an insurance company, a retirement fund or welfare fund
10 which is operated under the supervision of the banking or insurance laws
11 of the state of New York or the United States, and (iv) eight and one-
12 half percent of that portion of the fair market value of the property
13 which 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 § 8. If any clause, sentence, paragraph, subdivision, section or part
24 of this act shall be adjudged by any court of competent jurisdiction to
25 be invalid, such judgment shall not affect, impair, or invalidate the
26 remainder thereof, but shall be confined in its operation to the clause,
27 sentence, paragraph, subdivision, section or part thereof directly
28 involved in the controversy in which such judgment shall have been
29 rendered. It is hereby declared to be the intent of the legislature that
30 this act would have been enacted even if such invalid provisions had not
31 been included herein. It is further declared to be the intent of the
32 legislature that this act would have been enacted even if subdivisions
33 (b), (c), (d), (e), (f), (g), (h), and (i) of section two of this act
34 had not been included herein.
35 § 9. This act shall take effect immediately; provided:
36 (a) that the amendments to section 26-511 of chapter 4 of title 26 of
37 the administrative code of the city of New York made by section seven of
38 this act shall expire on the same date as such law expires and shall not
39 affect the expiration of such law as provided under section 26-520 of
40 such law; and
41 (b) that the amendments to sections 26-405 and 26-407 of the city rent
42 and rehabilitation law made by sections five and six of this act shall
43 remain in full force and effect only as long as the public emergency
44 requiring the regulation and control of residential rents and evictions
45 continues, as provided in subdivision 3 of section 1 of the local emer-
46 gency housing rent control act.
47 (c) Effective immediately, the addition, amendment and/or repeal of
48 any rule or regulation necessary for the implementation of this act on
49 its effective date are authorized to be made and completed on or before
50 such effective date.