APPENDIX
P: Excerpts from J-51 & 421-a regulations
J-51
Regulations
Section
2.6 Rent Regulatory Requirements
(1)
Rent Regulation Generally Mandatory. In order to be eligible to receive
tax benefits under the Act and for at least so long as a building is receiving
the benefits of the Act, except for dwelling units which are exempt from
such requirement pursuant to paragraph (2) below, all dwelling units in
buildings or structures converted, altered or improved shall be subject
to rent regulation pursuant to:
(i) the
City Rent and Rehabilitation Law (§26-401 et seq. of the Administrative
Code); or
(ii) the Rent Stabilization Law of 1969 (§26-501 et seq. of the Administrative
Code); or
(iii) the Private Housing Finance Law; or
(iv) any federal law providing for rent supervision or regulation by HUD
or any other federal agency; or
(v) the Emergency Tenant Protection Act of 1974.
(2) (i)
Exemption from Rent Regulation. Notwithstanding paragraph (1) above, dwelling
units in multiple dwellings which are owned as cooperatives or condominiums
and which are not regulated pursuant to any of such laws shall not be required
to be subject to rent regulation.
(ii)
Newly created dwelling units in a building for which a prospectus for condominium
or cooperative formation has been submitted to the Attorney General at
the time of application for benefits to the Office shall not be required
to registered with DHCR, unless a plan of cooperative or condominium ownership
has not been declared effective within fifteen (15) months of the date
of the acceptance for filing of the plan of coopera- tive or condominium
ownership with the Attorney General.
(3)
Deregulation of units.
(i) With
respect to a dwelling unit in any building receiving benefits under the
Act,
(A)
such unit shall remain subject to rent regulation until the occur- rence
of the first vacancy after tax benefits are no longer being received
for the building at which time the unit shall be deregulated, unless
the unit is otherwise subject to rent regulation; or
(B) if each lease and renewal thereof for such unit for the tenant in residence
at the time of the expiration of the tax benefits has included a notice
in at least twelve-point type informing such tenant that the unit shall
become subject to deregulation upon the expiration of the tax benefits
and stating the approximate date on which tax benefits are to expire, such
dwelling unit shall be deregulated after tax benefits are no longer being
received for the building, unless the unit is otherwise subject to rent
regulation.
(ii) Rent
regulation shall not be terminated by the waiver or revocation of tax
benefits.
(iii) Rent
regulation of dwelling units shall not be exempted or terminated other
than as set forth in this subdivision (f) as long as benefits are in
force.
(4)
Permanent residential use. All dwelling units must be leased for permanent
residential purposes for a term of not less than one year so long as tax
benefits are in effect. Permanent residential use shall not include use
as a hotel, dormitory, employee residence or facility, fraternity or sorority
house, resort housing or any similar type of non-permanent housing. For
purposes of this subdivision (f) a "hotel" shall be any building
containing any units registered with DHCR as hotel units or any building
not exclusively utilized for permanent residential use. Notwithstanding
the foregoing, benefits may be pro-rated by deducting out work attributable
to Class B units in a building containing both Class A and Class B units,
provided that all units in a building are registered with DHCR as rent
stabilized or rent controlled units, and are utilized for permanent residential
use. Additionally, in projects receiving substantial governmental assistance,
HPD may permit a portion of the units to be utilized on a transient basis
for special needs groups.
(5)
Escalation clauses in leases. Except for the notice referred to in subparagraph
(i)(B) above, no lease for dwelling units which are registered with DHCR
shall contain escalation clauses for real estate taxes or any other provisions
for increasing the rent set forth in the lease, other than permitting an
increase in rent pursuant to an order of DHCR or the Rent Guidelines Board.
(6)
Partial waiver of rent adjustments attributable to major capital improvements.
(i) As a
requirement for claiming or receiving any tax abatement attributable
to a major capital improvement, the owner of the property shall file
with the Office, on the date any application for benefits is made, a
declaration stating that in consideration of any tax abatement benefits
which may be received pursuant to such application for alterations or
improvements constituting a major capital improvement, such owner agrees
to waive the collection of a portion of the total annual amount of any
rent adjustment attributable to such major capital improvement which
may be granted by DHCR pursuant to the rent stabilization code equal
to one-half of the total annual amount of the tax abatement benefits
which the property receives pursuant to such application with respect
to such alterations or improvements. For example, an owner receiving
a total rent adjustment over eighty-four months equal to $100,000 for
a major capital improvement along with tax abatement of $100,000 for
the same improvement would waive collection of $50,000 during such period.
Such waiver shall commence on the date of the first collection of such
rent adjustment, provided that, in the event that such tax abatement
benefits were received prior to such first collection, the amount waived
shall be increased to account for such tax abatement benefits so received.
The entire amount shall be applied against the first annual rent adjustment,
including any retroactive rent adjustments which maybe granted by the
applicable DHCR order, unless the amount exceeds such adjustments, in
which event the excess shall be carried forward. The calculation of the
amount attributable to the waiver shall be against the total rent adjustment
for the eighty-four-month period prior to the application of any annual
percentage limitation applied by DHCR to defer collection of the total
rent adjustment. In calculating rental adjustments pursuant to Rent Guidelines
Board orders, the amount of the waived rent shall not be included in
the base rent. Following the expiration of a tax abatement for alterations
or improvements constituting a major capital improvement for which a
rent adjustment has been grant ed by DHCR, the owner may collect the
full amount of annual rent per- mitted pursuant to such rent adjustment.
A copy of such declaration shall be filed simultaneously with DHCR. Such
declaration shall be binding upon such owner and his or her successors
and assigns.
The provisions
of subparagraph (i) shall not apply to substantial rehabilitation of
buildings vacant when alterations or improvements are commenced or to
buildings rehabilitated with substantial governmental assistance.
421-a
Regulations
Section
2.7 Rent Regulatory Requirements
To
be eligible for partial tax exemption the land upon which the eligible
project is located must meet the following letting, rental and occupancy
requirements:
(1)
If a building which, on December 31, 1974, contained more than twenty-five
occupied dwelling units administered under the City Rent and Rehabilitation
Law, the Rent Stabilization Law of nineteen hundred sixty-nine, or the
Emergency Tenant Protection Act of nineteen hundred seventy-four, is displaced,
or any unit therein is displaced, the new multiple dwelling will be eligible
for partial tax exemption only if a Certificate of Eviction was issued
for at least one dwelling unit in the displaced building. If only one unit
is displaced as the result of eligible construction, the Certificate of
Eviction must pertain to that displaced unit. Notwithstanding the foregoing,
the sale, transfer or utilization of air rights over residential buildings
which were not demolished shall not be construed as a displacement within
the purview of this subdivision (g).
(2)
Notwithstanding the provisions of any local law for the stabilization of
rents in multiple dwellings or the Emergency Tenant Protection Act of 1974,
the rents of a unit shall be fully subject to regulation under such local
law or such Act, unless exempt under such local law or such act from regulation
by reason of the cooperative or condominium status of the unit, for the
entire period during which the property is receiving tax benefits pursuant
to the Act, or for the period any such applicable local law or such Act
is in effect, whichever is shorter. Thereafter, such rents shall continue
to be subject to such regulation to the same extent and in the same manner
as if this subdivision (g) had never applied thereto, except that for dwelling
units in buildings completed, as that term is defined herein, on or after
January 1, 1974, such rents shall be deregulated if:
(i) with
respect to dwelling units located in multiple dwellings completed after
January 1, 1974 such unit becomes vacant after the expiration of the
lease for the unit in effect when such benefit period or applicable law
or Act expires, provided, however, such unit shall not be deregulated
if the Commissioner of the New York State Division of Housing and Community
Renewal or a court of competent jurisdiction finds the unit became vacant
because the owner thereof or any person acting on his or her behalf engaged
in any course of conduct, including but not limited to, interruption
or discontinuance of essential services which interfered with or disturbed
or was intended to interfere with or disturb the comfort, repose, peace
or quiet of the tenant in his use or occupancy of such unit, and that
upon such finding in addition to being subject to any other penalties
or remedies permitted by law, the owner of such unit shall be barred
from collecting rent for such unit in excess of that charged to the tenant,
if the tenant so desires, in which case the rent of such tenant shall
be established as if such tenant had not vacated such unit, or compliance
with such other remedy, including, but not limited to, all remedies pro-
vided for by the emergency tenant protection act of nineteen seventy-four
for rent overcharge or failure to comply with any order of the Commissioner
of the New York State Division of Housing and Community Renewal, as shall
be determined by said Commissioner to be appropriate; provided, however,
that if a tenant fails to accept any such offer of restoration of possession,
such unit shall return to rent stabiliza- tion at the previously regulated
rent.
ii) with
respect to dwelling units located in multiple dwellings with became subject
to the rent stabilization provisions of the Act on or after July 1, 1984,
the lease for the unit expires after such tax benefit period expires,
provided that each lease and renewal thereof for such unit for the tenant
entitled to a lease at the time of such deregulation contained a notice
in at least twelve (12) point type informing such tenant that the unit
shall be subject to deregulation upon the expiration of such benefit
period and stated the approximate date on which such benefit period was
expected to expire. If each lease and renewal thereof has not contained
such notice, a unit covered by such lease shall be subject to subdivision
(i) above even though it became subject to the rent stabilization provisions
of the Act on or after July 1, 1984. This subdivision (ii) shall not
apply to any unit in any multiple dwelling which was subject to the rent
stabilization provi- sions of the Act prior to July 1, 1984, notwithstanding
any contrary provi- sion in any lease or renewal thereof.
(3)
Notwithstanding paragraph (2) above, dwelling units in multiple dwellings
owned as cooperatives or condominiums which are exempt from such provisions
of law shall not be required to be subject to the provisions of law set
forth in that paragraph (2) during the time period specified therein. Newly
created dwelling units in a building for which a prospectus for condominium
or cooperative formation has been submitted to the Attorney General at
the time of application for benefits to the Office, shall not be required
to be registered with the New York State Division of Housing and Community
Renewal, provided that an affidavit has been filed with the Office stating
that the sponsor will register the building and all units as they become
occupied, with the New York State Division of Housing and Community Renewal
within fifteen months from the date of issuance of a Final Certificate
of Eligibility if a cooperative or condominium plan has not been declared
effective by that time.
(4)
The offering by the owner to all tenants in rental dwelling units in the
multiple dwelling, of an initial lease of at least two years; unless the
dwelling unit's rent is regulated by local laws, such as §26-401 of
the Administrative Code, which do not provide for the offering of leases
for fixed terms. This requirement shall not preclude a shorter lease where
requested by the tenant, or where a lease of at least two years is specifically
prohibited by the terms of a Department of Housing and Urban Development
regulatory agreement for an insured subsidized project, or where, through
foreclosure, title to a building eligible for partial tax exemption pursuant
to the Act is held subsequently by the Department of Housing and Urban
Development.
(5) No lease for dwelling units subject to the Rent Stabilization Law or
Emergency Tenant Protection Act which are registered with the New York State
Division of Housing and Community Renewal shall contain escalation clauses
for real estate taxes or any other provisions for increasing the rent set
forth in the lease other than permitting an increase in rent pursuant to
an order of the New York State Division of Housing and Community Renewal
or the Rent Guidelines Board; or an increase of 2.2 percent pursuant to §6-04(b)
of this chapter.
TITLE
4: DETERMINATION OF INITIAL RENT; RENT INCREASES
§6-04
Determination of Initial Rent; Rent Increases.
(a)
Determining the initial adjusted monthly rent and the comparative adjusted
monthly rent for rental dwelling units.
No
certification of eligibility shall be issued by the Department until the
Department determines the initial adjusted monthly rent to be paid by tenants
residing in rental dwelling units contained within the multiple dwelling.
Except for affordable units, the initial adjusted monthly rent is determined
in accordance with the provisions of paragraph (3) below.
(1)
The total expenses of the multiple dwelling shall be determined by the
Department in order to calculate the initial adjusted monthly rent. Total
expenses shall mean the annual total of the following:
(i)
An amount for the annual cost of operation and maintenance, as established
pursuant to the Annual Schedule of Reasonable Costs; plus,
(ii) An amount for vacancies, contingency reserves and management fees as
established pursuant to the Annual Schedule of Reasonable Costs; plus,
(iii) Projected real property taxes to be levied on the multiple dwelling
and the land on which it is situated at the time of estimated initial occupancy;
plus,
(iv) Fourteen percent of the total project cost, as determined pursuant to §6-05(b)(1)(i)
and the Annual Schedule of Reasonable Costs which amount will include debt
service; less,
(v) The estimated annual income to be derived from any Floor Area of Commercial,
Community Facilities, and Accessory Use Space in the multiple dwelling.
(2)
The adjusted monthly rent per room shall be determined by the Department
by dividing the total expenses as determined pursuant to paragraph (1)
above by twelve (12) and then dividing that amount by the Room Count as
defined herein; i.e.,
Total Expenses/ = Adjusted
Monthly
12 X Room Count Rent
Per Room
(3)
The initial adjusted monthly rent for each dwelling unit shall be determined
by the Department by multiplying the adjusted monthly rent per room to
be determined pursuant to paragraph (2) above by the Room Count, as defined
herein, of each rental dwelling unit. Adjustments to the initial adjusted
monthly rent per room to be determined pursuant to paragraph (2) above
by the Room Count, as defined herein, of each rental dwelling unit. Adjustments
to the initial adjusted monthly rent for any dwelling unit may be allowed
by the Department provided that the total of the rentals charged in the
multiple dwelling do not exceed the total expenses of such multiple dwelling,
as determined pursuant to paragraph (1) above; i.e.,
Adjusted
Monthly Rent Initial
Adjusted Monthly
Per
Room X Room Count = Rent
for Such Dwelling
Per Dwelling Unit Unit
(b)
Rent increases.
The
owner of a multiple dwelling receiving partial tax exemption may insert
in each lease to be effective during the period of gradual diminution of
tax exemption, as defined in §6-06(e) of this chapter, a provision
for an annual rent increase over the initial adjusted monthly rental at
a rate not to exceed 2.2 percent per annum on the anniversary date of the
first lease for the unit provided, however, that no increase shall be permitted
pursuant to this subdivision (b) unless specifically provided for in each
affected lease, and provided further that no more than one such increase
per unit may be charged or collected in each given year regardless of the
number of lease renewals or new leases which may pertain to that unit.
The initial 2.2 percent escalation and all subsequent escalations shall
be based solely on the actual rental amount in effect (regardless of whether
the legal regulated rent may be greater) at the commencement of the period
during which the increase may be charged and shall not be compounded from
year to year but rather shall remain constant based on said rent. In addition,
the increase shall be independent of any other escalation authorized by
the Rent Guidelines Board and shall not be considered or included when
a Rent Guidelines Board increase is effected, making the latter increase
effective upon the base rent, excluding the 2.2 percent escalation. The
maximum increase permitted by this subdivision (b) is 19.8 percent over
the actual rental amount in effect at the commencement of the period during
which the increase may be charged. The maximum increase permitted by this
subdivision (b) may be charged in each year following the expiration of
the tax benefit period, but shall not exceed 19.8 percent, or that amount
charged in the last year of the exemption period, and shall not become
part of the base rent.
(c)
Annual rent schedule.
Each
year the owner shall make available to the Office a schedule of rents for
each unit in the building.
