S 1656: Approves major capital improvement rent increases and extends the length of time over which major capital improvement expenses may be recovered.

  
  STATE OF NEW YORK ________________________________________________________________________ 1656 2025-2026 Regular Sessions  IN SENATE 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: 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 27 of part Q of chapter 39 of the laws of 2019, 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 [essential for the preservation energy effi- 10 ciency, functionality, or infrastructure of the entire building, 11 improvement of the structure including heating, windows, plumbing and 12 roofing but shall not be for operational costs or unnecessary cosmetic 13 improvements. The temporary increase based upon a major capital improve- 14 ment under this subparagraph for any order of the commissioner issued 15 after the effective date of the chapter of the laws of two thousand 16 nineteen that amended this subparagraph shall be in an amount sufficient 17 to amortize the cost of the improvements pursuant to this subparagraph 18 (g) over a twelve-year period for buildings with thirty-five or fewer 19 units or a twelve and one-half year period for buildings with more than 20 thirty-five units, and shall be removed from the legal regulated rent 21 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 1 any increases granted by the applicable rent guidelines board. Temporary 2 major capital improvement increases shall be collectible prospectively 3 on the first day of the first month beginning sixty days from the date 4 of mailing notice of approval to the tenant. Such notice shall disclose 5 the total monthly increase in rent and the first month in which the 6 tenant would be required to pay the temporary increase. An approval for 7 a temporary major capital improvement increase shall not include retro- 8 active payments. The collection of any increase shall not exceed two 9 percent in any year from the effective date of the order granting the 10 increase over the rent set forth in the schedule of gross rents, with 11 collectability of any dollar excess above said sum to be spread forward 12 in similar increments and added to the rent as established or set in 13 future years. Upon vacancy, the landlord may add any remaining balance 14 of the temporary major capital improvement increase to the legal regu- 15 lated rent. Notwithstanding any other provision of the law, for any 16 renewal lease commencing on or after June 14, 2019, the collection of 17 any rent increases due to any major capital improvements approved on or 18 after June 16, 2012 and before June 16, 2019 shall not exceed two 19 percent in any year for any tenant in occupancy on the date the major 20 capital improvement was approved,]; provided that the commissioner first 21 finds that such improvements are deemed depreciable under the internal 22 revenue code and such improvements are required for the operation or 23 preservation of the structure. However, no major capital improvement 24 rent increase will be approved by the division of housing and community 25 renewal unless the work performed is an enhancement or upgrade to a 26 housing accommodation or service therein; or is an addition to such 27 housing accommodation and otherwise eligible according to the prerequi- 28 sites for major capital improvement rent increases. Any repair or 29 replacement intended to maintain an existing service shall not be eligi- 30 ble for a major capital improvement rent increase. No application for a 31 major capital improvement rent increase may be approved if there exist 32 any outstanding hazardous violations at the time of the consideration 33 of such application, as determined pursuant to regulations of the divi- 34 sion of housing and community renewal or any agency administering and 35 enforcing a building code in the jurisdiction in which the property is 36 located, unless it is determined by the division of housing and communi- 37 ty renewal that such work is essential to the alleviation of the 38 violations and such approval is consistent with the provisions of this 39 section. Except in the case of emergency or good cause, the owner of the 40 property shall file, not less than thirty days before the commencement 41 of the improvement, with the division of housing and community renewal 42 a statement containing information outlining the scope of work, expected 43 date of completion for such work and an affidavit setting forth the 44 following information: (a) every owner of record and owner of a substan- 45 tial interest in the property or entity owning the property or sponsor- 46 ing the improvement; and (b) a statement that none of such persons 47 had, within the five years prior to the improvement, been found to have 48 harassed or unlawfully evicted tenants by judgment or determination of a 49 court or agency under the penal law, any state or local law regulating 50 rents or any state or local law relating to harassment of tenants or 51 unlawful eviction. Upon receipt of the scope of work and affidavit 52 provided for herein, the division of housing and community renewal shall 53 provide the tenants in occupancy in such buildings with such informa- 54 tion. The division of housing and community renewal shall, in addition, 55 implement procedures including, but not limited to, eliciting tenant 56 comments to determine whether major capital improvement rehabilitation 
 S. 1656 3 1 work has been satisfactorily completed. No major capital improvement 2 rent increase shall become effective until any defective or deficient 3 rehabilitation work has been cured. The increase permitted for such 4 capital improvement shall be collected as a monthly surcharge to the 5 maximum rent. It shall be separately designated and billed as such and 6 shall not be compounded by any other adjustment to the maximum rent. The 7 surcharge allocable to each apartment shall be an amount equal to the 8 cost of the improvement divided by eighty-four, divided by the number of 9 rooms in the building, and then multiplied by the number of rooms in 10 such apartment; provided that the surcharge allocable to any apartment 11 in any one year may not exceed an amount equal to six percent of the 12 monthly rent collected by the owner for such apartment as set forth in 13 the schedule of gross rents. Any excess above said six percent shall be 14 carried forward and collected in future years as a further surcharge not 15 to exceed an additional six percent in any one year period until the 16 total surcharge equals the amount it would have been if the aforemen- 17 tioned six percent limitation did not apply; or 18 § 2. Subparagraph (k) of paragraph 1 of subdivision g of section 19 26-405 of the administrative code of the city of New York, as amended by 20 chapter 749 of the laws of 1990, is amended to read as follows: 21 (k) The landlord has incurred, since January first, nineteen hundred 22 seventy, in connection with and in addition to a concurrent major capi- 23 tal improvement pursuant to subparagraph (g) of this paragraph, other 24 expenditures to improve, restore or preserve the quality of the struc- 25 ture. An adjustment under this subparagraph shall be granted only if 26 such improvements represent an expenditure equal to at least ten per 27 centum of the total operating and maintenance expenses for the preceding 28 year. An adjustment under this subparagraph shall be in addition to any 29 adjustment granted for the concurrent major capital improvement and 30 shall be [in an amount sufficient to amortize the cost of the improve- 31 ments pursuant to this subparagraph over a seven-year period] imple- 32 mented in the same manner as such major capital improvement as a further 33 surcharge to the maximum rent. 34 § 3. Paragraph 6 of subdivision c of section 26-511 of the administra- 35 tive code of the city of New York, as separately amended by section 12 36 of part K of chapter 36 and section 28 of part Q of chapter 39 of the 37 laws of 2019, is amended to read as follows: 38 (6) provides criteria whereby the commissioner may act upon applica- 39 tions by owners for increases in excess of the level of fair rent 40 increase established under this law provided, however, that such crite- 41 ria shall provide [(a) as] in regard to hardship applications, for a 42 finding that the level of fair rent increase is not sufficient to enable 43 the owner to maintain approximately the same average annual net income 44 (which shall be computed without regard to debt service, financing costs 45 or management fees) for the three year period ending on or within six 46 months of the date of an application pursuant to such criteria as 47 compared with annual net income, which prevailed on the average over the 48 period nineteen hundred sixty-eight through nineteen hundred seventy, or 49 for the first three years of operation if the building was completed 50 since nineteen hundred sixty-eight or for the first three fiscal years 51 after a transfer of title to a new owner provided the new owner can 52 establish to the satisfaction of the commissioner that [he or she] they 53 acquired title to the building as a result of a bona fide sale of the 54 entire building and that the new owner is unable to obtain requisite 55 records for the fiscal years nineteen hundred sixty-eight through nine- 56 teen hundred seventy despite diligent efforts to obtain same from prede- 
 S. 1656 4 1 cessors in title and further provided that the new owner can provide 2 financial data covering a minimum of six years under [his or her] their 3 continuous and uninterrupted operation of the building to meet the three 4 year to three year comparative test periods herein provided[; and (b) as 5 to completed building-wide major capital improvements, for a finding 6 that such improvements are deemed depreciable under the Internal Revenue 7 Code and that the cost is to be amortized over a twelve-year period for 8 a building with thirty-five or fewer housing accommodations, or a twelve 9 and one-half-year period for a building with more than thirty-five hous- 10 ing accommodations, for any determination issued by the division of 11 housing and community renewal after the effective date of the the chap- 12 ter of the laws of two thousand nineteen that amended this paragraph and 13 shall be removed from the legal regulated rent thirty years from the 14 date the increase became effective inclusive of any increases granted by 15 the applicable rent guidelines board. Temporary major capital improve- 16 ment increases shall be collectible prospectively on the first day of 17 the first month beginning sixty days from the date of mailing notice of 18 approval to the tenant. Such notice shall disclose the total monthly 19 increase in rent and the first month in which the tenant would be 20 required to pay the temporary increase. An approval for a temporary 21 major capital improvement increase shall not include retroactive 22 payments. The collection of any increase shall not exceed two percent in 23 any year from the effective date of the order granting the increase over 24 the rent set forth in the schedule of gross rents, with collectability 25 of any dollar excess above said sum to be spread forward in similar 26 increments and added to the rent as established or set in future years. 27 Upon vacancy, the landlord may add any remaining balance of the tempo- 28 rary major capital improvement increase to the legal regulated rent. 29 Notwithstanding any other provision of the law, for any renewal lease 30 commencing on or after June 14, 2019, the collection of any rent 31 increases due to any major capital improvements approved on or after 32 June 16, 2012 and before June 16, 2019 shall not exceed two percent in 33 any year for any tenant in occupancy on the date the major capital 34 improvement was approved or based upon cash purchase price exclusive of 35 interest or service charges. Where an application for a temporary major 36 capital improvement increase has been filed, a tenant shall have sixty 37 days from the date of mailing of a notice of a proceeding in which to 38 answer or reply. The state division of housing and community renewal 39 shall provide any responding tenant with the reasons for the division's 40 approval or denial of such application]. Notwithstanding anything to the 41 contrary contained herein, no hardship increase granted pursuant to this 42 paragraph shall, when added to the annual gross rents, as determined by 43 the commissioner, exceed the sum of, (i) the annual operating expenses, 44 (ii) an allowance for management services as determined by the commis- 45 sioner, (iii) actual annual mortgage debt service (interest and amorti- 46 zation) on its indebtedness to a lending institution, an insurance 47 company, a retirement fund or welfare fund which is operated under the 48 supervision of the banking or insurance laws of the state of New York or 49 the United States, and (iv) eight and one-half percent of that portion 50 of the fair market value of the property which exceeds the unpaid prin- 51 cipal amount of the mortgage indebtedness referred to in subparagraph 52 (iii) of this paragraph. Fair market value for the purposes of this 53 paragraph shall be six times the annual gross rent. The collection of 54 any increase in the stabilized rent for any apartment pursuant to this 55 paragraph shall not exceed six percent in any year from the effective 56 date of the order granting the increase over the rent set forth in the 
 S. 1656 5 1 schedule of gross rents, with collectability of any dollar excess above 2 said sum to be spread forward in similar increments and added to the 3 stabilized rent as established or set in future years; 4 § 4. Subdivision c of section 26-511 of the administrative code of the 5 city of New York is amended by adding three new paragraphs 6-b, 6-c and 6 6-d to read as follows: 7 (6-b) provides criteria whereby the commissioner may act upon applica- 8 tion by owners for increases in excess of the level of fair rent 9 increase established under this law provided, however, that such crite- 10 ria shall provide that: 11 (i) as to completed building-wide major capital improvements, first, 12 that a finding that such improvements are deemed depreciable under the 13 internal revenue code and such improvements are required for the opera- 14 tion or preservation of the structure; 15 (ii) however, no major capital improvement rent increase will be 16 approved by the division of housing and community renewal unless the 17 work performed is an enhancement or upgrade to a housing accommodation 18 or service therein; or is an addition to such housing accommodation and 19 otherwise eligible according to the prerequisites for major capital 20 improvement rent increases. Any repair or replacement intended to main- 21 tain an existing service shall not be eligible for a major capital 22 improvement rent increase; 23 (iii) no application for a major capital improvement rent increase may 24 be approved if there exist any outstanding hazardous violations at the 25 time of the consideration of such application, as determined pursuant to 26 regulations of the division of housing and community renewal or any 27 agency administering and enforcing a building code in the jurisdiction 28 in which the property is located, unless it is determined by the divi- 29 sion of housing and community renewal that such work is essential to the 30 alleviation of the violations and such approval is consistent with the 31 provisions of this section. Except in the case of emergency or good 32 cause, the owner of the property shall file, not less than thirty days 33 before the commencement of the improvement, with the division of housing 34 and community renewal a statement containing information outlining the 35 scope of work, expected date of completion for such work and an affida- 36 vit setting forth the following information: 37 (A) every owner of record and owner of a substantial interest in the 38 property or entity owning the property or sponsoring the improvement; 39 and 40 (B) a statement that none of such persons had, within the five years 41 prior to the improvement, been found to have harassed or unlawfully 42 evicted tenants by judgment or determination of a court or agency under 43 the penal law, any state or local law regulating rents or any state or 44 local law relating to harassment of tenants or unlawful eviction. 45 Upon receipt of the scope of work and affidavit provided for herein, 46 the division of housing and community renewal shall provide the tenants 47 in occupancy in such buildings with such information. The division of 48 housing and community renewal shall, in addition, implement procedures 49 including, but not limited to, eliciting tenant comments to determine 50 whether major capital improvement rehabilitation work has been satisfac- 51 torily completed. No major capital improvement rent increase shall 52 become effective until any defective or deficient rehabilitation work 53 has been cured. 54 (6-c) the increase permitted for such capital improvement shall be 55 collected as a monthly surcharge to the legal regulated rent. It shall 56 be separately designated and billed as such and shall not be compounded 
 S. 1656 6 1 by any annual adjustment of the level of fair rent provided for under 2 subdivision b of section 26-510 of this chapter. The surcharge allocable 3 to each apartment shall be an amount equal to the cost of the improve- 4 ment divided by eighty-four divided by the number of rooms in the build- 5 ing, and then multiplied by the number of rooms in such apartment; 6 provided that the surcharge allocable to any apartment, in any one year 7 may not exceed an amount equal to six percent of the monthly rent 8 collected by the owner for such apartment as set forth in the schedule 9 of gross rents. Any excess above said six percent shall be carried 10 forward and collected in future years as a further surcharge not to 11 exceed an additional six percent in any one year period until the total 12 surcharge equals the amount it would have been if the aforementioned six 13 percent limitation did not apply. 14 (6-d) collection of surcharges in excess of the level of fair rent 15 authorized pursuant to paragraphs six-b and six-c of this subdivision 16 shall cease when the owner has recovered the cost of the major capital 17 improvement. 18 § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter 19 576 of the laws of 1974, constituting the emergency tenant protection 20 act of nineteen seventy-four, as amended by section 26 of part Q of 21 chapter 39 of the laws of 2019, is amended to read as follows: 22 (3) (i) collection of surcharges in addition to the legal regulated 23 rent authorized pursuant to subparagraph (ii) of this paragraph shall 24 cease when the owner has recovered the cost of the major capital 25 improvement; 26 (ii) there has been since January first, nineteen hundred seventy-four 27 a major capital improvement [essential for the preservation, energy 28 efficiency, functionality, or infrastructure of the entire building, 29 improvement of the structure including heating, windows, plumbing and 30 roofing, but shall not be for operation costs or unnecessary cosmetic 31 improvements. An adjustment under this paragraph shall be in an amount 32 sufficient to amortize the cost of the improvements pursuant to this 33 paragraph over a twelve-year period for a building with thirty-five or 34 fewer housing accommodations, or a twelve and one-half period for a 35 building with more than thirty-five housing accommodations and shall be 36 removed from the legal regulated rent thirty years from the date the 37 increase became effective inclusive of any increases granted by the 38 applicable rent guidelines board, for any determination issued by the 39 division of housing and community renewal after the effective date of 40 the chapter of the laws of two thousand nineteen that amended this para- 41 graph. Temporary major capital improvement increases shall be collecta- 42 ble prospectively on the first day of the first month beginning sixty 43 days from the date of mailing notice of approval to the tenant. Such 44 notice shall disclose the total monthly increase in rent and the first 45 month in which the tenant would be required to pay the temporary 46 increase. An approval for a temporary major capital improvement increase 47 shall not include retroactive payments. The collection of any increase 48 shall not exceed two percent in any year from the effective date of the 49 order granting the increase over the rent set forth in the schedule of 50 gross rents, with collectability of any dollar excess above said sum to 51 be spread forward in similar increments and added to the rent as estab- 52 lished or set in future years. Upon vacancy, the landlord may add any 53 remaining balance of the temporary major capital improvement increase to 54 the legal regulated rent. Notwithstanding any other provision of the 55 law, the collection of any rent increases for any renewal lease commenc- 56 ing on or after June 14, 2019, due to any major capital improvements 
 S. 1656 7 1 approved on or after June 16, 2012 and before June 16, 2019 shall not 2 exceed two percent in any year for any tenant in occupancy on the date 3 the major capital improvement was approved]; provided that the commis- 4 sioner first finds that such improvements are deemed depreciable under 5 the internal revenue code and such improvements are required for the 6 operation or preservation of the structure. However, no major capital 7 improvement rent increase will be approved by the division of housing 8 and community renewal unless the work performed is an enhancement or 9 upgrade to a housing accommodation or service therein; or is an addition 10 to such housing accommodation and otherwise eligible according to the 11 prerequisites for major capital improvement rent increases. Any repair 12 or replacement intended to maintain an existing service shall not be 13 eligible for a major capital improvement rent increase. No application 14 for a major capital improvement rent increase may be approved if there 15 exist any outstanding hazardous violations at the time of the consider- 16 ation of such application, as determined pursuant to regulations of the 17 division of housing and community renewal or any agency administering 18 and enforcing a building code in the jurisdiction in which the property 19 is located, unless it is determined by the division of housing and 20 community renewal that such work is essential to the alleviation of the 21 violations and such approval is consistent with the provisions of this 22 section. Except in the case of emergency or good cause, the owner of the 23 property shall file, not less than thirty days before the commencement 24 of the improvement, with the division of housing and community renewal a 25 statement containing information outlining the scope of work, expected 26 date of completion for such work and an affidavit setting forth the 27 following information: (a) every owner of record and owner of a substan- 28 tial interest in the property or entity owning the property or sponsor- 29 ing the improvement; and (b) a statement that none of such persons had, 30 within the five years prior to the improvement, been found to have 31 harassed or unlawfully evicted tenants by judgment or determination of a 32 court or agency under the penal law, any state or local law regulating 33 rents or any state or local law relating to harassment of tenants or 34 unlawful eviction. Upon receipt of the scope of work and affidavit 35 provided for herein, the division of housing and community renewal shall 36 provide the tenants in occupancy in such buildings with such informa- 37 tion. The division of housing and community renewal shall, in addition, 38 implement procedures including, but not limited to, eliciting tenant 39 comments to determine whether major capital improvement rehabilitation 40 work has been satisfactorily completed. No major capital improvement 41 rent increase shall become effective until any defective or deficient 42 rehabilitation work has been cured. The increase permitted for such 43 capital improvement shall be collected as a monthly surcharge to the 44 legal regulated rent. It shall be separately designated and billed as 45 such and shall not be compounded by any annual rent adjustment author- 46 ized by the rent guidelines board under this act. The surcharge alloca- 47 ble to each apartment shall be an amount equal to the cost of the 48 improvement divided by eighty-four, divided by the number of rooms in 49 the building, and then multiplied by the number of rooms in such apart- 50 ment; provided that the surcharge allocable to any apartment in any one 51 year may not exceed an amount equal to six percent of the monthly rent 52 collected by the owner for such apartment as set forth in the schedule 53 of gross rents. Any excess above said six percent shall be carried 54 forward and collected in future years as a further surcharge not to 55 exceed an additional six percent in any one year period until the total 
 S. 1656 8 1 surcharge equals the amount it would have been if the aforementioned six 2 percent limitation did not apply, or 3 § 6. The second undesignated paragraph of paragraph (a) of subdivision 4 4 of section 4 of chapter 274 of the laws of 1946, constituting the 5 emergency housing rent control law, as amended by section 25 of part B 6 of chapter 97 of the laws of 2011, subparagraph 5 as amended by section 7 7 of part FF of chapter 56 of the laws of 2024, subparagraph 7 as sepa- 8 rately amended by section 25 of part Q of chapter 39 and section 14 of 9 part K of chapter 36 of the laws of 2019 and subparagraph 8 as amended 10 by section 8 of part K of chapter 36 of the laws of 2019, is amended to 11 read as follows: 12 No application for adjustment of maximum rent based upon a sales price 13 valuation shall be filed by the landlord under this subparagraph prior 14 to six months from the date of such sale of the property. In addition, 15 no adjustment ordered by the commission based upon such sales price 16 valuation shall be effective prior to one year from the date of such 17 sale. Where, however, the assessed valuation of the land exceeds four 18 times the assessed valuation of the buildings thereon, the commission 19 may determine a valuation of the property equal to five times the equal- 20 ized assessed valuation of the buildings, for the purposes of this 21 subparagraph. The commission may make a determination that the valuation 22 of the property is an amount different from such equalized assessed 23 valuation where there is a request for a reduction in such assessed 24 valuation currently pending; or where there has been a reduction in the 25 assessed valuation for the year next preceding the effective date of the 26 current assessed valuation in effect at the time of the filing of the 27 application. Net annual return shall be the amount by which the earned 28 income exceeds the operating expenses of the property, excluding mort- 29 gage interest and amortization, and excluding allowances for obsoles- 30 cence and reserves, but including an allowance for depreciation of two 31 per centum of the value of the buildings exclusive of the land, or the 32 amount shown for depreciation of the buildings in the latest required 33 federal income tax return, whichever is lower; provided, however, that 34 (1) no allowance for depreciation of the buildings shall be included 35 where the buildings have been fully depreciated for federal income tax 36 purposes or on the books of the owner; or (2) the landlord who owns no 37 more than four rental units within the state has not been fully compen- 38 sated by increases in rental income sufficient to offset unavoidable 39 increases in property taxes, fuel, utilities, insurance and repairs and 40 maintenance, excluding mortgage interest and amortization, and excluding 41 allowances for depreciation, obsolescence and reserves, which have 42 occurred since the federal date determining the maximum rent or the date 43 the property was acquired by the present owner, whichever is later; or 44 (3) the landlord operates a hotel or rooming house or owns a cooperative 45 apartment and has not been fully compensated by increases in rental 46 income from the controlled housing accommodations sufficient to offset 47 unavoidable increases in property taxes and other costs as are allocable 48 to such controlled housing accommodations, including costs of operation 49 of such hotel or rooming house, but excluding mortgage interest and 50 amortization, and excluding allowances for depreciation, obsolescence 51 and reserves, which have occurred since the federal date determining the 52 maximum rent or the date the landlord commenced the operation of the 53 property, whichever is later; or (4) the landlord and tenant voluntarily 54 enter into a valid written lease in good faith with respect to any hous- 55 ing accommodation, which lease provides for an increase in the maximum 56 rent not in excess of fifteen per centum and for a term of not less than 
 S. 1656 9 1 two years, except that where such lease provides for an increase in 2 excess of fifteen per centum, the increase shall be automatically 3 reduced to fifteen per centum; or (5) the landlord and tenant by mutual 4 voluntary written informed agreement agree to a substantial increase or 5 decrease in dwelling space, furniture, furnishings or equipment provided 6 in the housing accommodations; provided that an owner shall be entitled 7 to a rent increase where there has been a substantial modification or 8 increase of dwelling space, or installation of new equipment or improve- 9 ments or new furniture or furnishings provided in or to a tenant's hous- 10 ing accommodation. The increase in the maximum rent for the affected 11 housing accommodation shall be one-one hundred sixty-eighth, in the case 12 of a building with thirty-five or fewer housing accommodations, or one- 13 one hundred eightieth, in the case of a building with more than thirty- 14 five housing accommodations where such increase takes effect on or after 15 the effective date of the chapter of the laws of two thousand nineteen 16 that amended this subparagraph, of the total actual cost incurred by the 17 landlord up to thirty thousand dollars in providing such reasonable and 18 verifiable modification or increase in dwelling space, furniture, 19 furnishings, or equipment, including the cost of installation but 20 excluding finance charges and any costs that exceed reasonable costs 21 established by rules and regulations promulgated by the division of 22 housing and community renewal. Such rules and regulations shall include: 23 (i) requirements for work to be done by licensed contractors and a 24 prohibition on common ownership between the landlord and the contractor 25 or vendor; and (ii) a requirement that the owner resolve within the 26 dwelling space all outstanding hazardous or immediately hazardous 27 violations of the uniform fire prevention and building code (Uniform 28 Code), New York city fire code, or New York city building and housing 29 maintenance codes, if applicable. Provided further that an owner who is 30 entitled to a rent increase pursuant to this clause shall not be enti- 31 tled to a further rent increase based upon the installation of similar 32 equipment, or new furniture or furnishings within the useful life of 33 such new equipment, or new furniture or furnishings. Provided further 34 that the recoverable costs incurred by the landlord, pursuant to this 35 subparagraph, shall be limited to an aggregate cost of thirty thousand 36 dollars in a fifteen year period beginning with the first individual 37 apartment improvement on or after June fourteenth, two thousand nine- 38 teen. The owner shall give written notice to the commission of any such 39 adjustment pursuant to this clause; or (6) there has been, since March 40 first, nineteen hundred fifty, an increase in the rental value of the 41 housing accommodations as a result of a substantial rehabilitation of 42 the building or housing accommodation therein which materially adds to 43 the value of the property or appreciably prolongs its life, excluding 44 ordinary repairs, maintenance and replacements; or (7) (i) collection of 45 surcharges to the maximum rent authorized pursuant to item (ii) of this 46 clause shall cease when the owner has recovered the cost of the major 47 capital improvement; (ii) there has been since March first, nineteen 48 hundred fifty, a major capital improvement [essential for the preserva- 49 tion, energy efficiency, functionality, or infrastructure of the entire 50 building, improvement of the structure including heating, windows, 51 plumbing and roofing, but shall not be for operational costs or unneces- 52 sary cosmetic improvements; which for any order of the commissioner 53 issued after the effective date of the chapter of the laws of two thou- 54 sand nineteen that amended this paragraph the cost of such improvement 55 shall be amortized over a twelve-year period for buildings with thirty- 56 five or fewer units or a twelve and one-half year period for buildings 
 S. 1656 10 1 with more than thirty-five units, and shall be removed from the legal 2 regulated rent thirty years from the date the increase became effective 3 inclusive of any increases granted by the applicable rent guidelines 4 board. Temporary major capital improvement increases shall be collect- 5 ible prospectively on the first day of the first month beginning sixty 6 days from the date of mailing notice of approval to the tenant. Such 7 notice shall disclose the total monthly increase in rent and the first 8 month in which the tenant would be required to pay the temporary 9 increase. An approval for a temporary major capital improvement increase 10 shall not include retroactive payments. The collection of any increase 11 shall not exceed two percent in any year from the effective date of the 12 order granting the increase over the rent set forth in the schedule of 13 gross rents, with collectability of any dollar excess above said sum to 14 be spread forward in similar increments and added to the rent as estab- 15 lished or set in future years. Upon vacancy, the landlord may add any 16 remaining balance of the temporary major capital improvement increase to 17 the legal regulated rent. Notwithstanding any other provision of the 18 law, for any renewal lease commencing on or after June 14, 2019, the 19 collection of any rent increases due to any major capital improvements 20 approved on or after June 16, 2012 and before June 16, 2019 shall not 21 exceed two percent in any year for any tenant in occupancy on the date 22 the major capital improvement was approved; provided, however, where an 23 application for a temporary major capital improvement increase has been 24 filed, a tenant shall have sixty days from the date of mailing of a 25 notice of a proceeding in which to answer or reply. The state division 26 of housing and community renewal shall provide any responding tenant 27 with the reasons for the division's approval or denial of such applica- 28 tion]; provided that the commissioner first finds that such improvements 29 are deemed depreciable under the internal revenue code and such improve- 30 ments are required for the operation or preservation of the structure. 31 However, no major capital improvement rent increase will be approved by 32 the division of housing and community renewal unless the work performed 33 is an enhancement or upgrade to a housing accommodation or service ther- 34 ein; or is an addition to such housing accommodation and otherwise 35 eligible according to the prerequisites for major capital improvement 36 rent increases. Any repair or replacement intended to maintain an 37 existing service shall not be eligible for a major capital improvement 38 rent increase. No application for a major capital improvement rent 39 increase may be approved if there exist any outstanding hazardous 40 violations at the time of the consideration of such application, as 41 determined pursuant to regulations of the division of housing and commu- 42 nity renewal or any agency administering and enforcing a building code 43 in the jurisdiction in which the property is located, unless it is 44 determined by the division of housing and community renewal that such 45 work is essential to the alleviation of the violations and such approval 46 is consistent with the provisions of this section. Except in the case of 47 emergency or good cause, the owner of the property shall file, not less 48 than thirty days before the commencement of the improvement, with the 49 division of housing and community renewal a statement containing infor- 50 mation outlining the scope of work, expected date of completion for such 51 work and an affidavit setting forth the following information: (a) every 52 owner of record and owner of a substantial interest in the property or 53 entity owning the property or sponsoring the improvement; and (b) a 54 statement that none of such persons had, within the five years prior to 55 the improvement, been found to have harassed or unlawfully evicted 56 tenants by judgment or determination of a court or agency under the 
 S. 1656 11 1 penal law, any state or local law regulating rents or any state or local 2 law relating to harassment of tenants or unlawful eviction. Upon receipt 3 of the scope of work and affidavit provided for herein, the division of 4 housing and community renewal shall provide the tenants in occupancy in 5 such buildings with such information. The division of housing and commu- 6 nity renewal shall, in addition, implement procedures including, but not 7 limited to, eliciting tenant comments to determine whether major capital 8 improvement rehabilitation work has been satisfactorily completed. No 9 major capital improvement rent increase shall become effective until any 10 defective or deficient rehabilitation work has been cured. The increase 11 permitted for such capital improvement shall be collected as a monthly 12 surcharge to the maximum rent. It shall be separately designated and 13 billed as such and shall not be compounded by any other adjustment to 14 the maximum rent. The surcharge allocable to each apartment shall be an 15 amount equal to the cost of the improvement divided by eighty-four, 16 divided by the number of rooms in the building, and then multiplied by 17 the number of rooms in such apartment; provided that the surcharge allo- 18 cable to any apartment in any one year may not exceed an amount equal to 19 six percent of the monthly rent collected by the owner for such apart- 20 ment as set forth in the schedule of gross rents. Any excess above said 21 six percent shall be carried forward and collected in future years as a 22 further surcharge not to exceed an additional six percent in any one 23 year period until the total surcharge equals the amount it would have 24 been if the aforementioned six percent limitation did not apply; or (8) 25 there has been since March first, nineteen hundred fifty, in structures 26 containing more than four housing accommodations, other improvements 27 made with the express informed consent of the tenants in occupancy of at 28 least seventy-five per centum of the housing accommodations, provided, 29 however, that no adjustment granted hereunder shall exceed two per 30 centum unless the tenants have agreed to a higher percentage of 31 increase, as herein provided; (9) there has been, since March first, 32 nineteen hundred fifty, a subletting without written consent from the 33 landlord or an increase in the number of adult occupants who are not 34 members of the immediate family of the tenant, and the landlord has not 35 been compensated therefor by adjustment of the maximum rent by lease or 36 order of the commission or pursuant to the federal act; or (10) the 37 presence of unique or peculiar circumstances materially affecting the 38 maximum rent has resulted in a maximum rent which is substantially lower 39 than the rents generally prevailing in the same area for substantially 40 similar housing accommodations. 41 § 7. Paragraph 5 of subdivision d of section 6 of section 4 of chapter 42 576 of the laws of 1974, constituting the emergency tenant protection 43 act of nineteen seventy-four, as amended by chapter 102 of the laws of 44 1984, is amended and a new paragraph 6 is added to read as follows: 45 (5) as an alternative to the hardship application provided under para- 46 graph four of this subdivision, owners of buildings acquired by the same 47 owner or a related entity owned by the same principals three years prior 48 to the date of application may apply to the division for increases in 49 excess of the level of applicable guideline increases established under 50 this law based on a finding by the commissioner that such guideline 51 increases are not sufficient to enable the owner to maintain an annual 52 gross rent income for such building which exceeds the annual operating 53 expenses of such building by a sum equal to at least five percent of 54 such gross rent. For the purposes of this paragraph, operating expenses 55 shall consist of the actual, reasonable, costs of fuel, labor, utili- 56 ties, taxes, other than income or corporate franchise taxes, fees, 
 S. 1656 12 1 permits, necessary contracted services and non-capital repairs, insur- 2 ance, parts and supplies, management fees and other administrative costs 3 and mortgage interest. For the purposes of this paragraph, mortgage 4 interest shall be deemed to mean interest on a bona fide mortgage 5 including an allocable portion of charges related thereto. Criteria to 6 be considered in determining a bona fide mortgage other than an institu- 7 tional mortgage shall include[;]: condition of the property, location of 8 the property, the existing mortgage market at the time the mortgage is 9 placed, the term of the mortgage, the amortization rate, the principal 10 amount of the mortgage, security and other terms and conditions of the 11 mortgage. The commissioner shall set a rental value for any unit occu- 12 pied by the owner or a person related to the owner or unoccupied at the 13 owner's choice for more than one month at the last regulated rent plus 14 the minimum number of guidelines increases or, if no such regulated rent 15 existed or is known, the commissioner shall impute a rent consistent 16 with other rents in the building. The amount of hardship increase shall 17 be such as may be required to maintain the annual gross rent income as 18 provided by this paragraph. The division shall not grant a hardship 19 application under this paragraph or paragraph four of this subdivision 20 for a period of three years subsequent to granting a hardship applica- 21 tion under the provisions of this paragraph. The collection of any 22 increase in the rent for any housing accommodation pursuant to this 23 paragraph shall not exceed six percent in any year from the effective 24 date of the order granting the increase over the rent set forth in the 25 schedule of gross rents, with collectability of any dollar excess above 26 said sum to be spread forward in similar increments and added to the 27 rent as established or set in future years. No application shall be 28 approved unless the owner's equity in such building exceeds five percent 29 of: (i) the arms length purchase price of the property; (ii) the cost of 30 any capital improvements for which the owner has not collected a 31 surcharge; (iii) any repayment of principal of any mortgage or loan used 32 to finance the purchase of the property or any capital improvements for 33 which the owner has not collected a surcharge; and (iv) any increase in 34 the equalized assessed value of the property which occurred subsequent 35 to the first valuation of the property after purchase by the owner. For 36 the purposes of this paragraph, owner's equity shall mean the sum of (i) 37 the purchase price of the property less the principal of any mortgage or 38 loan used to finance the purchase of the property, (ii) the cost of any 39 capital improvement for which the owner has not collected a surcharge 40 less the principal of any mortgage or loan used to finance said improve- 41 ment, (iii) any repayment of the principal of any mortgage or loan used 42 to finance the purchase of the property or any capital improvement for 43 which the owner has not collected a surcharge, and (iv) any increase in 44 the equalized assessed value of the property which occurred subsequent 45 to the first valuation of the property after purchase by the owner[.]; 46 or 47 (6) notwithstanding paragraph three of this subdivision there shall be 48 no adjustment for any major capital improvement funded in any part from 49 moneys provided by the New York state energy research and development 50 authority. 51 § 8. Paragraph 1 of subdivision g of section 26-405 of the administra- 52 tive code of the city of New York is amended by adding a new subpara- 53 graph (p) to read as follows: 54 (p) Notwithstanding subparagraph (g) or (k) of this paragraph, there 55 shall be no adjustment for any major capital improvement or for any 56 other expenditures to improve, restore or preserve the quality of a 
 S. 1656 13 1 structure if such major capital improvement or such other expenditure is 2 funded in any part from moneys provided by the New York state energy 3 research and development authority. 4 § 9. This act shall take effect immediately; provided that the amend- 5 ments to section 26-405 of the city rent and rehabilitation law made by 6 sections one, two and eight of this act shall remain in full force and 7 effect only so long as the public emergency requiring the regulation and 8 control of residential rents and evictions continues, as provided in 9 subdivision 3 of section 1 of the local emergency housing rent control 10 act; and provided that the amendments to section 26-511 of the rent 11 stabilization law of nineteen hundred sixty-nine made by sections three 12 and four of this act shall expire on the same date as such law expires 13 and shall not affect the expiration of such law as provided under 14 section 26-520 of such law, as from time to time amended.