Bill S1298-2011

Relates to alternative hardship applications for properties subject to the rent stabilization code

Relates to alternative hardship applications for properties subject to the rent stabilization code.

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  • Jan 4, 2012: REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
  • Jan 6, 2011: REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT

Memo

BILL NUMBER:S1298

TITLE OF BILL: An act to amend the administrative code of the city of New York and the emergency tenant protection act of nineteen seventy-four, in relation to hardship applications

PURPOSE: To extend the number of ownership years from three years to six years in respect to eligibility for an alternative hardship rent adjustment.

SUMMARY OF PROVISIONS: Section 1 of the bill amends paragraph 6-a of subdivision c of section 26-51 of the administrative code of the city of New York to revise the number of ownership years required to apply for an alternative hardship rent adjustment through the New York State Division of Housing and Community Renewal (DHCR) from three years to six years.

Section 2 of the bill amends paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974, constituting the emergency tenant protection act, to revise the number of ownership years required to apply for an alternative hardship rent adjustment through DHCR from three years to six years for building owners outside a city of one million or more.

JUSTIFICATION: Both subdivision c of section 26-511 of the administrative code of New York City and paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the emergency tenant protection act are designed to provide an alternative means by which building owners can apply to the DHCR commissioner for rent increases greater than those allowed by the applicable guideline increases prescribed. In order to be granted the hardship exemption, DHCR must find that the set rent increases will be insufficient for the owner to accrue a profit of at least five percent when considering the annual gross rent income collectible minus the annual operating expenses. Currently, building owners must have acquired the property at least three years prior to the application to file for the alternative hardship exemption. This proposed change will adjust paragraph 6-a of subdivision c of the administrative code to replicate the years of ownership required in paragraph 6 of the same subdivision in regards to applications for comparative hardship exemption. Paragraph 6 mandates that hardship be determined by comparing the annual net income of the past three years with that of either the three years prior, under the same ownership, or 1968 to 1970. Since many applicants are therefore required to have owned a property for the three base years plus the three years of comparison, the standard time of ownership required for many building owners is six years. This change would align the ownership years required in paragraph 6a with those in paragraph 6. Similarly, the alternative to the hardship application described in the emergency tenant protection act also

requires only three years of ownership whereas this bill would extend that to six.

Moreover, since three years is a short amount of time to judge an owner's equity portfolio, this extension will encourage potential building purchasers to consider their assets more comprehensively and to avoid over leveraging since the prospect of hardship relief will be contingent an an initial six-year ownership period. The bill will further provide the DHCR with a reasonable timeframe from which to understand the owner's capacity to make a sufficient profit relative to the profit anticipated when the property was first purchased.

LEGISLATIVE HISTORY: 2009: A.8668, Died in Housing 2010: S.7079, Died in Housing, A.8668, Passed Assembly

FISCAL IMPACT ON THE STATE: None.

EFFECTIVE DATE: Immediately, with provisions.


Text

STATE OF NEW YORK ________________________________________________________________________ 1298 2011-2012 Regular Sessions IN SENATE January 6, 2011 ___________
Introduced by Sen. DUANE -- 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 and the emergency tenant protection act of nineteen seventy-four, in relation to hardship applications THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph 6-a of subdivision c of section 26-511 of the administrative code of the city of New York is amended to read as follows: (6-a) provides criteria whereby as an alternative to the hardship application provided under paragraph six of this subdivision owners of buildings acquired by the same owner or a related entity owned by the same principals [three] SIX years prior to the date of application may apply to the division for increases in excess of the level of applicable guideline increases established under this law based on a finding by the commissioner that such guideline increases are not sufficient to enable the owner to maintain an annual gross rent income for such building which exceeds the annual operating expenses of such building by a sum equal to at least five percent of such gross rent. For the purposes of this paragraph, operating expenses shall consist of the actual, reason- able, costs of fuel, labor, utilities, taxes, other than income or corporate franchise taxes, fees, permits, necessary contracted services and non-capital repairs, insurance, parts and supplies, management fees and other administrative costs and mortgage interest. For the purposes of this paragraph, mortgage interest shall be deemed to mean interest on a bona fide mortgage including an allocable portion of charges related thereto. Criteria to be considered in determining a bona fide mortgage other than an institutional mortgage shall include; condition of the property, location of the property, the existing mortgage market at the
time the mortgage is placed, the term of the mortgage, the amortization rate, the principal amount of the mortgage, security and other terms and conditions of the mortgage. The commissioner shall set a rental value for any unit occupied by the owner or a person related to the owner or unoccupied at the owner's choice for more than one month at the last regulated rent plus the minimum number of guidelines increases or, if no such regulated rent existed or is known, the commissioner shall impute a rent consistent with other rents in the building. The amount of hardship increase shall be such as may be required to maintain the annual gross rent income as provided by this paragraph. The division shall not grant a hardship application under this paragraph or paragraph six of this subdivision for a period of three years subsequent to granting a hard- ship application under the provisions of this paragraph. The collection of any increase in the rent for any housing accommodation pursuant to this paragraph shall not exceed six percent in any year from the effec- tive date of the order granting the increase over the rent set forth in the schedule of gross rents, with collectability of any dollar excess above said sum to be spread forward in similar increments and added to the rent as established or set in future years. No application shall be approved unless the owner's equity in such building exceeds five percent of: (i) the arms length purchase price of the property; (ii) the cost of any capital improvements for which the owner has not collected a surcharge; (iii) any repayment of principal of any mortgage or loan used to finance the purchase of the property or any capital improvements for which the owner has not collected a surcharge and (iv) any increase in the equalized assessed value of the property which occurred subsequent to the first valuation of the property after purchase by the owner. For the purposes of this paragraph, owner's equity shall mean the sum of (i) the purchase price of the property less the principal of any mortgage or loan used to finance the purchase of the property, (ii) the cost of any capital improvement for which the owner has not collected a surcharge less the principal of any mortgage or loan used to finance said improve- ment, (iii) any repayment of the principal of any mortgage or loan used to finance the purchase of the property or any capital improvement for which the owner has not collected a surcharge, and (iv) any increase in the equalized assessed value of the property which occurred subsequent to the first valuation of the property after purchase by the owner. S 2. Paragraph 5 of subdivision d of section 6 of section 4 of chapter 576 of the laws of 1974 enacting the emergency tenant protection act of nineteen seventy-four, as amended by chapter 102 of the laws of 1984, is amended to read as follows: (5) as an alternative to the hardship application provided under para- graph four of this subdivision, owners of buildings acquired by the same owner or a related entity owned by the same principals [three] SIX years prior to the date of application may apply to the division for increases in excess of the level of applicable guideline increases established under this law based on a finding by the commissioner that such guide- line increases are not sufficient to enable the owner to maintain an annual gross rent income for such building which exceeds the annual operating expenses of such building by a sum equal to at least five percent of such gross rent. For the purposes of this paragraph, operat- ing expenses shall consist of the actual, reasonable, costs of fuel, labor, utilities, taxes, other than income or corporate franchise taxes, fees, permits, necessary contracted services and non-capital repairs, insurance, parts and supplies, management fees and other administrative costs and mortgage interest. For the purposes of this paragraph, mort-
gage interest shall be deemed to mean interest on a bona fide mortgage including an allocable portion of charges related thereto. Criteria to be considered in determining a bona fide mortgage other than an institu- tional mortgage shall include; condition of the property, location of the property, the existing mortgage market at the time the mortgage is placed, the term of the mortgage, the amortization rate, the principal amount of the mortgage, security and other terms and conditions of the mortgage. The commissioner shall set a rental value for any unit occu- pied by the owner or a person related to the owner or unoccupied at the owner's choice for more than one month at the last regulated rent plus the minimum number of guidelines increases or, if no such regulated rent existed or is known, the commissioner shall impute a rent consistent with other rents in the building. The amount of hardship increase shall be such as may be required to maintain the annual gross rent income as provided by this paragraph. The division shall not grant a hardship application under this paragraph or paragraph four of this subdivision for a period of three years subsequent to granting a hardship applica- tion under the provisions of this paragraph. The collection of any increase in the rent for any housing accommodation pursuant to this paragraph shall not exceed six percent in any year from the effective date of the order granting the increase over the rent set forth in the schedule of gross rents, with collectability of any dollar excess above said sum to be spread forward in similar increments and added to the rent as established or set in future years. No application shall be approved unless the owner's equity in such building exceeds five percent of: (i) the arms length purchase price of the property; (ii) the cost of any capital improvements for which the owner has not collected a surcharge; (iii) any repayment of principal of any mortgage or loan used to finance the purchase of the property or any capital improvements for which the owner has not collected a surcharge; and (iv) any increase in the equalized assessed value of the property which occurred subsequent to the first valuation of the property after purchase by the owner. For the purposes of this paragraph, owner's equity shall mean the sum of (i) the purchase price of the property less the principal of any mortgage or loan used to finance the purchase of the property, (ii) the cost of any capital improvement for which the owner has not collected a surcharge less the principal of any mortgage or loan used to finance said improve- ment, (iii) any repayment of the principal of any mortgage or loan used to finance the purchase of the property or any capital improvement for which the owner has not collected a surcharge, and (iv) any increase in the equalized assessed value of the property which occurred subsequent to the first valuation of the property after purchase by the owner. S 3. This act shall take effect immediately; provided that the amend- ments to section 26-511 of chapter 4 of title 26 of the administrative code of the city of New York made by section one of this act shall expire on the same date as such law expires and shall not affect the expiration of such law as provided under section 26-520 of such law; and provided that the amendments to section 6 of the emergency tenant protection act of nineteen seventy-four made by section two of this act shall expire on the same date as such act expires and shall not affect the expiration of such act as provided in section 17 of chapter 576 of the laws of 1974.

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