Amd §§26-405 & 26-511, NYC Ad Cd; amd §6, Emerg Ten Prot Act of 1974; amd §4, Emerg Hous Rent Cont L
Establishes a methodology for determining major capital improvements (MCI) rent surcharges; provides that such MCI 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.
STATE OF NEW YORK
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3190
2017-2018 Regular Sessions
IN SENATE
January 20, 2017
___________
Introduced by Sens. KRUEGER, AVELLA, BAILEY, HAMILTON, HOYLMAN, LATIMER,
MONTGOMERY, PARKER, PERALTA, PERKINS, SERRANO, SQUADRON, STAVISKY,
STEWART-COUSINS -- 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 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 section 31 of part A of chapter 20 of the laws of 2015, is amended to
4 read as follows:
5 (g) (i) Collection of surcharges to the maximum rent authorized pursu-
6 ant to item (ii) of this subparagraph shall cease when the owner has
7 recovered the cost of the major capital improvement;
8 (ii) There has been since July first, nineteen hundred seventy, a
9 major capital improvement [required for the operation, preservation or
10 maintenance of the structure. An adjustment under this subparagraph (g)
11 for any order of the commissioner issued after the effective date of the
12 rent act of 2015 shall be in an amount sufficient to amortize the cost
13 of the improvements pursuant to this subparagraph (g) over an eight-year
14 period for buildings with thirty-five or fewer units or a nine year
15 period for buildings with more than thiry-five units,]; provided that
16 the commissioner finds that such improvements are deemed depreciable
17 under the internal revenue code and such improvements are required for
18 the operation, preservation or maintenance of the structure. The
19 increase permitted for such capital improvement shall be collected as a
20 monthly surcharge to the maximum rent. It shall be separately designated
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08766-01-7
S. 3190 2
1 and billed as such and shall not be compounded by any other adjustment
2 to the maximum rent. The surcharge allocable to each apartment shall be
3 an amount equal to the cost of the improvement divided by eighty-four,
4 divided by the number of rooms in the building, and then multiplied by
5 the number of rooms in such apartment; provided that the surcharge allo-
6 cable to any apartment in any one year may not exceed an amount equal to
7 six percent of the monthly rent collected by the owner for such apart-
8 ment as set forth in the schedule of gross rents. Any excess above said
9 six percent shall be carried forward and collected in future years as a
10 further surcharge not to exceed an additional six percent in any one
11 year period until the total surcharge equals the amount it would have
12 been if the aforementioned six percent 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 section 29 of part A of
31 chapter 20 of the laws of 2015, 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
S. 3190 3
1 is to be amortized over an eight-year period for a building with thir-
2 ty-five or fewer housing accommodations, or a nine-year period for a
3 building with more than thirty-five housing accommodations, for any
4 determination issued by the division of housing and community renewal
5 after the effective date of the rent act of 2015, based upon cash
6 purchase price exclusive of interest or service charges]. Notwithstand-
7 ing anything to the contrary contained herein, no hardship increase
8 granted pursuant to this paragraph shall, when added to the annual gross
9 rents, as determined by the commissioner, exceed the sum of, (i) the
10 annual operating expenses, (ii) an allowance for management services as
11 determined by the commissioner, (iii) actual annual mortgage debt
12 service (interest and amortization) on its indebtedness to a lending
13 institution, an insurance company, a retirement fund or welfare fund
14 which is operated under the supervision of the banking or insurance laws
15 of the state of New York or the United States, and (iv) eight and one-
16 half percent of that portion of the fair market value of the property
17 which exceeds the unpaid principal amount of the mortgage indebtedness
18 referred to in subparagraph (iii) of this paragraph. Fair market value
19 for the purposes of this paragraph shall be six times the annual gross
20 rent. The collection of any increase in the stabilized rent for any
21 apartment pursuant to this paragraph shall not exceed six percent in any
22 year from the effective date of the order granting the increase over the
23 rent set forth in the schedule of gross rents, with collectability of
24 any dollar excess above said sum to be spread forward in similar incre-
25 ments and added to the stabilized rent as established or set in future
26 years;
27 § 4. Subdivision c of section 26-511 of the administrative code of the
28 city of New York is amended by adding two new paragraphs 6-b and 6-c to
29 read as follows:
30 (6-b) provides criteria whereby the commissioner may act upon applica-
31 tion by owners for increases in excess of the level of fair rent
32 increase established under this law provided, however, that such crite-
33 ria shall provide as to completed building-wide major capital improve-
34 ments, for a finding that such improvements are deemed depreciable under
35 the internal revenue code and such improvements are required for the
36 operation, preservation or maintenance of the structure. The increase
37 permitted for such capital improvement shall be collected as a monthly
38 surcharge to the legal regulated rent. It shall be separately designated
39 and billed as such and shall not be compounded by any annual adjustment
40 of the level of fair rent provided for under subdivision b of section
41 26-510 of this law. The surcharge allocable to each apartment shall be
42 an amount equal to the cost of the improvement divided by eighty-four,
43 divided by the number of rooms in the building, and then multiplied by
44 the number of rooms in such apartment; provided that the surcharge allo-
45 cable to any apartment, in any one year may not exceed an amount equal
46 to six percent of the monthly rent collected by the owner for such
47 apartment as set forth in the schedule of gross rents. Any excess above
48 said six percent shall be carried forward and collected in future years
49 as a further surcharge not to exceed an additional six percent in any
50 one year period until the total surcharge equals the amount it would
51 have been if the aforementioned six percent limitation did not apply.
52 (6-c) collection of surcharges in excess of the level of fair rent
53 authorized pursuant to paragraph six-b of this subdivision shall cease
54 when the owner has recovered the cost of the major capital improvement.
55 § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
56 576 of the laws of 1974, constituting the emergency tenant protection
S. 3190 4
1 act of nineteen seventy-four, as amended by section 30 of part A of
2 chapter 20 of the laws of 2015, is amended to read as follows:
3 (3) (i) collection of surcharges in addition to the legal regulated
4 rent authorized pursuant to subparagraph (ii) of this paragraph shall
5 cease when the owner has recovered the cost of the major capital
6 improvement;
7 (ii) there has been since January first, nineteen hundred seventy-four
8 a major capital improvement [required for the operation, preservation or
9 maintenance of the structure. An adjustment under this paragraph shall
10 be in an amount sufficient to amortize the cost of the improvements
11 pursuant to this paragraph over an eight-year period for a building with
12 thirty-five or fewer housing accommodations, or a nine-year period for a
13 building with more than thirty-five housing accommodations, for any
14 determination issued by the division of housing and community renewal
15 after the effective date of the rent act of 2015,]; provided that the
16 commissioner finds that such improvements are deemed depreciable under
17 the internal revenue code and such improvements are required for the
18 operation, preservation or maintenance of the structure. The increase
19 permitted for such capital improvement shall be collected as a monthly
20 surcharge to the legal regulated rent. It shall be separately designated
21 and billed as such and shall not be compounded by any annual rent
22 adjustment authorized by the rent guidelines board under this act. The
23 surcharge allocable to each apartment shall be an amount equal to the
24 cost of the improvement divided by eighty-four, divided by the number of
25 rooms in the building, and then multiplied by the number of rooms in
26 such apartment; provided that the surcharge allocable to any apartment
27 in any one year may not exceed an amount equal to six percent of the
28 monthly rent collected by the owner for such apartment as set forth in
29 the schedule of gross rents. Any excess above said six percent shall be
30 carried forward and collected in future years as a further surcharge not
31 to exceed an additional six percent in any one year period until the
32 total surcharge equals the amount it would have been if the aforemen-
33 tioned six percent limitation did not apply, or
34 § 6. The second undesignated paragraph of paragraph (a) of subdivision
35 4 of section 4 of chapter 274 of the laws of 1946, constituting the
36 emergency housing rent control law, as amended by section 25 of part B
37 of chapter 97 of the laws of 2011, subparagraph 7 as amended by section
38 32 of part A of chapter 20 of the laws of 2015, is amended to read as
39 follows:
40 No application for adjustment of maximum rent based upon a sales price
41 valuation shall be filed by the landlord under this subparagraph prior
42 to six months from the date of such sale of the property. In addition,
43 no adjustment ordered by the commission based upon such sales price
44 valuation shall be effective prior to one year from the date of such
45 sale. Where, however, the assessed valuation of the land exceeds four
46 times the assessed valuation of the buildings thereon, the commission
47 may determine a valuation of the property equal to five times the equal-
48 ized assessed valuation of the buildings, for the purposes of this
49 subparagraph. The commission may make a determination that the valuation
50 of the property is an amount different from such equalized assessed
51 valuation where there is a request for a reduction in such assessed
52 valuation currently pending; or where there has been a reduction in the
53 assessed valuation for the year next preceding the effective date of the
54 current assessed valuation in effect at the time of the filing of the
55 application. Net annual return shall be the amount by which the earned
56 income exceeds the operating expenses of the property, excluding mort-
S. 3190 5
1 gage interest and amortization, and excluding allowances for obsoles-
2 cence and reserves, but including an allowance for depreciation of two
3 per centum of the value of the buildings exclusive of the land, or the
4 amount shown for depreciation of the buildings in the latest required
5 federal income tax return, whichever is lower; provided, however, that
6 (1) no allowance for depreciation of the buildings shall be included
7 where the buildings have been fully depreciated for federal income tax
8 purposes or on the books of the owner; or (2) the landlord who owns no
9 more than four rental units within the state has not been fully compen-
10 sated by increases in rental income sufficient to offset unavoidable
11 increases in property taxes, fuel, utilities, insurance and repairs and
12 maintenance, excluding mortgage interest and amortization, and excluding
13 allowances for depreciation, obsolescence and reserves, which have
14 occurred since the federal date determining the maximum rent or the date
15 the property was acquired by the present owner, whichever is later; or
16 (3) the landlord operates a hotel or rooming house or owns a cooperative
17 apartment and has not been fully compensated by increases in rental
18 income from the controlled housing accommodations sufficient to offset
19 unavoidable increases in property taxes and other costs as are allocable
20 to such controlled housing accommodations, including costs of operation
21 of such hotel or rooming house, but excluding mortgage interest and
22 amortization, and excluding allowances for depreciation, obsolescence
23 and reserves, which have occurred since the federal date determining the
24 maximum rent or the date the landlord commenced the operation of the
25 property, whichever is later; or (4) the landlord and tenant voluntarily
26 enter into a valid written lease in good faith with respect to any hous-
27 ing accommodation, which lease provides for an increase in the maximum
28 rent not in excess of fifteen per centum and for a term of not less than
29 two years, except that where such lease provides for an increase in
30 excess of fifteen per centum, the increase shall be automatically
31 reduced to fifteen per centum; or (5) the landlord and tenant by mutual
32 voluntary written agreement agree to a substantial increase or decrease
33 in dwelling space or a change in the services, furniture, furnishings or
34 equipment provided in the housing accommodations; provided that an owner
35 shall be entitled to a rent increase where there has been a substantial
36 modification or increase of dwelling space or an increase in the
37 services, or installation of new equipment or improvements or new furni-
38 ture or furnishings provided in or to a tenant's housing accommodation.
39 The permanent increase in the maximum rent for the affected housing
40 accommodation shall be one-fortieth, in the case of a building with
41 thirty-five or fewer housing accommodations, or one-sixtieth, in the
42 case of a building with more than thirty-five housing accommodations
43 where such permanent increase takes effect on or after September twen-
44 ty-fourth, two thousand eleven, of the total cost incurred by the land-
45 lord in providing such modification or increase in dwelling space,
46 services, furniture, furnishings or equipment, including the cost of
47 installation, but excluding finance charges provided further that an
48 owner who is entitled to a rent increase pursuant to this clause shall
49 not be entitled to a further rent increase based upon the installation
50 of similar equipment, or new furniture or furnishings within the useful
51 life of such new equipment, or new furniture or furnishings. The owner
52 shall give written notice to the commission of any such adjustment
53 pursuant to this clause; or (6) there has been, since March first, nine-
54 teen hundred fifty, an increase in the rental value of the housing
55 accommodations as a result of a substantial rehabilitation of the build-
56 ing or housing accommodation therein which materially adds to the value
S. 3190 6
1 of the property or appreciably prolongs its life, excluding ordinary
2 repairs, maintenance and replacements; or (7) (i) collection of
3 surcharges to the maximum rent authorized pursuant to item (ii) of this
4 clause shall cease when the owner has recovered the cost of the major
5 capital improvement; (ii) there has been since March first, nineteen
6 hundred fifty, a major capital improvement [required for the operation,
7 preservation or maintenance of the structure; which for any order of the
8 commissioner issued after the effective date of the rent act of 2015 the
9 cost of such improvement shall be amortized over an eight-year period
10 for buildings with thirty-five or fewer units or a nine year period for
11 buildings with more than thiry-five units,]; provided that the commis-
12 sioner finds that such improvements are deemed depreciable under the
13 internal revenue code and such improvements are required for the opera-
14 tion, preservation or maintenance of the structure. The increase permit-
15 ted for such capital improvement shall be collected as a monthly
16 surcharge to the maximum rent. It shall be separately designated and
17 billed as such and shall not be compounded by any other adjustment to
18 the maximum rent. The surcharge allocable to each apartment shall be an
19 amount equal to the cost of the improvement divided by eighty-four,
20 divided by the number of rooms in the building, and then multiplied by
21 the number of rooms in such apartment; provided that the surcharge allo-
22 cable to any apartment in any one year may not exceed an amount equal to
23 six percent of the monthly rent collected by the owner for such apart-
24 ment as set forth in the schedule of gross rents. Any excess above said
25 six percent shall be carried forward and collected in future years as a
26 further surcharge not to exceed an additional six percent in any one
27 year period until the total surcharge equals the amount it would have
28 been if the aforementioned six percent limitation did not apply; or (8)
29 there has been since March first, nineteen hundred fifty, in structures
30 containing more than four housing accommodations, other improvements
31 made with the express consent of the tenants in occupancy of at least
32 seventy-five per centum of the housing accommodations, provided, howev-
33 er, that no adjustment granted hereunder shall exceed fifteen per centum
34 unless the tenants have agreed to a higher percentage of increase, as
35 herein provided; or (9) there has been, since March first, nineteen
36 hundred fifty, a subletting without written consent from the landlord or
37 an increase in the number of adult occupants who are not members of the
38 immediate family of the tenant, and the landlord has not been compen-
39 sated therefor by adjustment of the maximum rent by lease or order of
40 the commission or pursuant to the federal act; or (10) the presence of
41 unique or peculiar circumstances materially affecting the maximum rent
42 has resulted in a maximum rent which is substantially lower than the
43 rents generally prevailing in the same area for substantially similar
44 housing accommodations.
45 § 7. This act shall take effect immediately; provided that the amend-
46 ments to section 26-405 of the city rent and rehabilitation law made by
47 sections one and two of this act shall remain in full force and effect
48 only so long as the public emergency requiring the regulation and
49 control of residential rents and evictions continues, as provided in
50 subdivision 3 of section 1 of the local emergency housing rent control
51 act; and provided further that the amendments to section 26-511 of the
52 rent stabilization law of nineteen hundred sixty-nine made by sections
53 three and four of this act shall expire on the same date as such law
54 expires and shall not affect the expiration of such law as provided
55 under section 26-520 of such law, as from time to time amended; and
56 provided further that the amendment to section 6 of the emergency tenant
S. 3190 7
1 protection act of nineteen seventy-four made by section five of this act
2 shall expire on the same date as such act expires and shall not affect
3 the expiration of such act as provided in section 17 of chapter 576 of
4 the laws of 1974, as from time to time amended; and further provided
5 that the amendment to section 4 of the emergency housing rent control
6 law made by section six of this act shall expire on the same date as
7 such law expires and shall not affect the expiration of such law as
8 provided in subdivision 2 of section 1 of chapter 274 of the laws of
9 1946.
