Provides that upon sale or other conveyance of a limited-profit housing company project to an entity other than a new limited-profit housing company, reserve and surplus funds must be held in escrow by the new owner and dedicated solely to defraying the costs of major capital improvements; further provides that no rental may be increased to cover the cost of a major capital improvement until such reserve and surplus funds have been exhausted.
TITLE OF BILL: An act to amend the private housing finance law, in relation to the sale of limited-profit housing projects
PURPOSE OR GENERAL IDEA OF BILL: This bill provides that upon sale of a limited-profit housing company project, reserve and surplus funds must be held in escrow and dedicated to major capital improvements.
SUMMARY OF SPECIFIC PROVISIONS: The bill amends the Private Housing Finance Law (PHFL) by adding a new section 36-b. That new section provides that if a limited profit housing company incorporated under Article II of the PHFL sells a project to any entity other than a limited-profit housing company, then all reserve and surplus funds transferred to the new owner must be held in escrow for the purpose of making major capital improvements to the project. The bill further provides that the new owner may not increase rents or other charges, based on new capital improvements, until after the reserve and surplus funds held in escrow have been exhausted.
JUSTIFICATION: The Mitchell-Lama program was established to create affordable housing and guarantee developer profits of 6% on investments. In the event of buyouts by owners of Mitchell-Lama developments, owners of limited profit housing companies might transfer reserve or surplus monies to the private sector, and those funds could - without the provisions contained in this bill- be used in a manner contrary to the spirit and purpose of the Mitchell-Lama program and the law creating it.
In order to ensure that monies which rightfully belong to residents in limited profit housing companies are used to improve those buildings, this bill would require that reserve or surplus funds be placed in an escrow account if a housing company opts to buyout of the Mitchell-Lama program, and limits the purpose for which the funds held in escrow may be used.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: This act shall take effect on the first of January next succeeding the date on which it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 3167 2013-2014 Regular Sessions IN SENATE January 31, 2013 ___________Introduced by Sen. KRUEGER -- 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 private housing finance law, in relation to the sale of limited-profit housing projects THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The private housing finance law is amended by adding a new section 36-b to read as follows: S 36-B. SALE OR OTHER CONVEYANCE OF PROJECT. NOTWITHSTANDING ANY INCONSISTENT PROVISION OF LAW, UPON THE SALE OR OTHER CONVEYANCE OF A PROJECT BY A COMPANY TO ANY ENTITY OTHER THAN A COMPANY, THE FOLLOWING REQUIREMENTS SHALL APPLY. 1. ALL RESERVE AND SURPLUS FUNDS TRANSFERRED BY THE COMPANY TO THE NEW OWNER MUST BE HELD BY SUCH NEW OWNER IN ESCROW ACCOUNTS AND MAY BE USED BY SUCH NEW OWNER SOLELY FOR THE PURPOSE OF MAKING MAJOR CAPITAL IMPROVEMENTS TO THE PROJECT. 2. NO RENTAL OR OTHER CHARGE MAY BE INCREASED BY THE NEW OWNER TO DEFRAY THE COST OF ANY MAJOR CAPITAL IMPROVEMENT UNLESS AND UNTIL ALL OF SUCH RESERVE AND SURPLUS FUNDS HAVE BEEN EXPENDED TO DEFRAY THE COST OF MAJOR CAPITAL IMPROVEMENTS. S 2. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD00805-01-3