HCR-28-12-00004-P Regulations Govern the Implementation of the Emergency Tenant Protection Act

7/11/12 N.Y. St. Reg. HCR-28-12-00004-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 28

July 11, 2012

RULE MAKING ACTIVITIES

DIVISION OF HOUSING AND COMMUNITY RENEWAL

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. HCR-28-12-00004-P

Regulations Govern the Implementation of the Emergency Tenant Protection Act

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of sections 2500.9(l)(1)(i)(a)(3)(i), (d)(1), (m), (n), 2502.4(a)(4), 2502.7(a), 2506.2(c), 2511.2, 2511.3, 2511.4 and 2511.5 of Title 9 NYCRR.

Statutory authority:

Emergency Tenant Protection Act of 1974, L. 1974, ch. 576, section 10a; and L. 2011, ch. 97, part B, section 44

Subject:

Regulations govern the implementation of the Emergency Tenant Protection Act.

Purpose:

To comply with the Laws of 2011, ch. 97, part B and the Laws of 2009, ch. 480.

Text of proposed rule:

9 NYCRR § 2500.9(l)(1)(i)(a)(3)(i) is amended to read as follows:

(i) where the rent, as agreed upon by the parties and paid by the tenant [is $2,000 or more per month,] equals or exceeds the applicable amount qualifying for deregulation, pursuant to subdivision (m) of this section, such accommodation and the rent therefor shall not revert to regulation under this Subchapter;

9 NYCRR § 2500.9(l)(1)(i)(d)(1) is amended to read as follows:

(1) Where it determines that the owner taking title at deconversion caused, in whole or in part, the deconversion to occur, the initial legal regulated rent shall be established by the division pursuant to sections 2502.3(b) and 2502.6 of this Title. In such cases, [if the rent so established and paid is $ 2,000 or more per month,] subdivision (m) of this section shall not apply.

9 NYCRR § 2500.9(m)(2) is amended to read as follows and paragraphs (3), (4), (5), (6), (7), and (8) are renumbered (5), (6), (7), (8), (9), and (10) and new paragraphs (3) and (4) are added and renumbered paragraphs (7), (8), (9) and (10) are further amended to read as follows:

(2) became or become vacant on or after June 19, 1997 but before June 24, 2011, with a legal regulated rent of $2,000 or more per month;

(3) became or become vacant on or after June 24, 2011, with a legal regulated rent of $2,500 or more per month;

(4) exemption pursuant to this subdivision shall apply regardless of whether the next tenant in occupancy or any subsequent tenant in occupancy is charged or pays less than the applicable amount qualifying for deregulation as provided in this subdivision;

[(3)] (5) [renumbered only - the text remains the same]

[(4)] (6) [renumbered only - the text remains the same]

[(5)] (7) during the period of effectiveness of an order issued pursuant to section 2503.4 of this Title for failure to maintain essential services, which lowers the legal regulated rent below [$2,000 per month] the applicable amount qualifying for deregulation as provided in this subdivision, during the time period specified in this subdivision, a vacancy shall not qualify the housing accommodation for exemption under this subdivision;

[(6)] (8) where an owner installs new equipment or makes improvements to the individual housing accommodation qualifying for a rent increase pursuant to subparagraph (i) of paragraph (3) of subdivision (a) of section 2502.4 of this Title, while such housing accommodation is vacant, and where the legal regulated rent is raised on the basis of such rent increase, or as a result of any rent increase permitted upon vacancy or succession as provided in section 2502.7 of this Title, or by a combination of rent increases, as applicable, [to a level of $2,000 per month or more], the applicable amount qualifying for deregulation as provided in this subdivision, whether or not the next tenant in occupancy actually is charged or pays [$2,000 per month or more] the applicable amount qualifying for deregulation as provided in this subdivision, for rental of the housing accommodation, the housing accommodation will qualify for exemption under this subdivision;

[(7)] (9) where, pursuant to section 2501.2 of this Title, a legal regulated rent is established by record within four years prior thereto, and a rent lower than such legal regulated rent is charged and paid by the tenant, and where, pursuant to such section, upon the vacancy of such tenant, a legal regulated rent previously established by record within four years prior thereto, as lawfully adjusted pursuant to the act or this Subchapter, may be charged, and where such previously established legal regulated rent, as so adjusted, [is $2,000 or more per month] equals or exceeds the applicable amount qualifying for deregulation as provided in this subdivision, such vacancy shall qualify the housing accommodation for exemption under this subdivision;

[(8)] (10) where an owner substantially alters the outer dimensions of a vacant housing accommodation which qualifies for a first rent [of $2,000 or more per month] equal to or exceeding the applicable amount qualifying for deregulation as provided in this subdivision, exemption pursuant to this subdivision shall apply.

9 NYCRR § 2500.9(n)(1) is amended to read as follows, paragraphs (2) and (3) are renumbered (3) and (4) and a new paragraph (2) is added:

(1) have a legal regulated rent of $2,000 or more per month as of October 1, 1993, or as of any date on or after June 19, 1997 and which are occupied by persons who had a total annual income in excess of $250,000 per annum for each of the two preceding calendar years, where the first of such two preceding calendar years is 1992 through 1995 inclusive, and in excess of $175,000, where the first of such two preceding calendar years is 1996 [or later] through 2009 inclusive, with total annual income being defined in and subject to the limitations and process set forth in Part 2511 of this Title;

(2) have a legal regulated rent of $2,500 or more per month as of July 1, 2011 or after, and which are occupied by persons who had a total annual income in excess of $200,000 per annum for each of the two preceding calendar years, where the first of such two preceding calendar years is 2010 or later, with total annual income being defined in and subject to the limitations and process set forth in Part 2511 of this Title;

[(2)] (3) [renumbered only - text remains the same]

[(3)] (4) in determining whether the legal regulated rent for a housing accommodation is [$2,000 per month or more] the applicable amount qualifying for deregulation, the standards set forth in subdivision (m) shall be applicable; to be eligible for exemption under this subdivision, the legal regulated rent must continuously be [$2,000 or more per month] the applicable amount qualifying for deregulation pursuant to subdivision (m), from the owner's service of the income certification form provided for in section 2511.2 of this Title upon the tenant to the issuance of an order deregulating the housing accommodation.

9 NYCRR § 2502.4(a)(4) is amended to read as follows:

(4) An owner is entitled to a rent increase without the prior approval of the division where the owner and tenant by mutual voluntary agreement, agree to a substantial increase of dwelling space or an increase in the services, furniture, furnishings or equipment provided in or to a tenant's housing accommodation, on written tenant consent to the rent increase. In the case of a vacant housing accommodation, tenant consent shall not be required. In calculating [T]the permanent increase in the legal regulated rent for the affected housing accommodation [shall be in 1/40th of] the total cost incurred by the owner in providing such increase in dwelling space, services, furniture, furnishings or equipment, including the cost of installation, but excluding finance charges shall be considered. Prior to September 24, 2011, the increase shall be 1/40th of the cost. On or after September 24,2011, the increase shall be 1/40th of the cost for buildings or complexes with 35 or fewer housing accommodations and 1/60th of the cost for buildings or complexes containing more than 35 housing accommodations. Provided further that an owner who is entitled to a rent increase pursuant to this paragraph shall not be entitled to a further rent increase based upon the installation of similar equipment, or new furniture or furnishings within the useful life of such new equipment, or new furniture or furnishings.

9 NYCRR § 2502.7(a) is amended by adding a subparagraph (3) as follows:

(3) Effective June 24, 2011, the increase authorized in this paragraph may not be implemented more than one time in any calendar year, notwithstanding the number of vacancy leases entered into in such year.

9 NYCRR 2506.2(c) is amended as follows and subparagrpahs (c)(2)(i) and (ii) are repealed:

(c) If a landlord is found by the division:

(1) to have violated an order of the division, the division may impose by administrative order after hearing, a civil penalty in the amount of $ [250] 1,000 for the first such offense and $ [1]2,000 for each subsequent offense; or

(2) to have harassed a tenant to obtain vacancy of a housing accommodation, the division may impose by administrative order after hearing, a civil penalty in the amount of [:] $2,000 for the first such offense and up to $10,000 for each subsequent offense or for a violation consisting of conduct directed at the tenant of more than one housing accommodation.

9 NYCRR § 2511.2 intro paragraph and (a)(2) is amended to read as follows:

On or before the first day in May in each calendar year, commencing with May 1, 1994 through May 1, 2011, the owner of each housing accommodation for which the legal regulated rent is $2,000 or more per month or commencing with May 1, 2012, for which the legal regulated rent is $2,500 or more per month may provide the tenant or tenants residing therein with an income certification form (ICF) prepared by the division on which such tenant or tenants shall identify all persons referred to in subdivision (b) of section 2511.1 of this Part and shall certify whether the total annual income is in excess of $250,000 in each of the two preceding calendar years, where the first of such two preceding calendar years is 1992 through 1995 inclusive, [and] $175,000 where the first of such two preceding calendar years is 1996 [or later] through 2009 inclusive, and $200,000, where the first of such two preceding calendar years is 2010 or later. Such ICF shall not require disclosure of any income information other than whether the aforementioned threshold has been exceeded.

(2) only tenants residing in housing accommodations which have a legal regulated rent [of $2,000 or more per month] equal to or exceeding the applicable amount qualifying for deregulation, as provided in this section are required to complete the certification form;

9 NYCRR § 2511.3 is amended to read as follows:

In the event that the total annual income as certified is in excess of $250,000, [or] $175,000, or $200,000 in each such year, whichever applies, as provided in section 2511.2 of this Part, the owner may file an owner's petition for deregulation (OPD), accompanied by the ICF, with the division on or before June 30 of such year. [the rest remains the same]

9 NYCRR § 2511.4 is amended to read as follows:

(a) In the event that the tenant or tenants either fail to return the completed ICF to the owner on or before the date required by subdivision (d) of section 2511.2 of this Part or the owner disputes the certification returned by the tenant or tenants, the landlord may, on or before June 30 of such year, file an owner's petition for deregulation (OPD) which petitions the division to verify, pursuant to section 171-b of the Tax Law, whether the total annual income exceeds $250,000, [or] $175,000, or $200,000 in each of the two preceding calendar years, whichever applies, as provided in section 2511.2 of this Part.

(b) Within 20 days after the filing of such request with the division, the division shall notify the tenant or tenants named on the lease that such tenant or tenants must provide the division with such information as the division and the DTF shall require to verify whether the total annual income exceeds $250,000, [or] $175,000, or $250,000 whichever applies, in each such year.

9 NYCRR § 2511.5 is amended to read as follows:

If the DTF determines that the total annual income is in excess of $250,000, [or] $175,000, or $200,000 in each of the two preceding calendar years, whichever applies as provided in section 2511.2 of this Part, the division shall, on or before November 15 of the year in which DTF makes such determination, notify the landlord and tenants of the results of such verification. [the rest remains the same]

Text of proposed rule and any required statements and analyses may be obtained from:

Gary R. Connor, General Counsel, Division of Housing and Community Renewal, 25 Beaver Street, 7th Floor, New York, New York 10004, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

This action was not under consideration at the time this agency's regulatory agenda was submitted.

Regulatory Impact Statement

1. STATUTORY AUTHORITY

The Emergency Tenant Protection Act of 1974 (ETPA), Laws of 1974 Chap. 576, section 10a provides authority to the Division of Housing and Community Renewal (DHCR) to amend the Tenant Protection Regulations (TPR) and Section 44 of Chap. 97, Part B of the Laws of 2011 enables DHCR to promulgate rules and regulations to implement and enforce all provisions of such law and any law renewed or continued by that act which includes the ETPA which is implemented through the TPR.

2. LEGISLATIVE OBJECTIVES

The ETPA requires, because of a serious public emergency, the regulation of residential rents and evictions to prevent the exaction of unreasonable rents and rent increases and to forestall other disruptive practices to produce threats to public health, safety and general welfare. The ETPA is further designed to assure that any transition from regulation to normal market bargaining with respect to such landlords and tenants is administered with due regard to these emergency conditions. See ETPA § 8622. DHCR is specifically authorized to promulgate regulations by McKinney's Unconsol. Laws 8630, and by Chapter 97 of the Laws of 2011 was further empowered to promulgate regulations to implement and enforce provisions of that chapter and any law continued or renewed by that chapter. The proposed rule making is to implement those changes specifically mandated by Chapter 97, Part B of the Laws of 2011: the raising of the threshold amount for deregulation based on vacancies, as well as raising of the thresholds for high rent/high income deregulation (both monthly rental amounts and household annual income); the modification of the apartment improvement increase formula for all buildings except those with 35 or fewer units; and permitting only one allowable vacancy rent increase per year. The proposed rule making further implements those changes specifically mandated by Chapter 480 of the Laws of 2009: increasing the fines for harassment and violations of orders of DHCR.

3. NEEDS AND BENEFITS

The rule making will implement provisions of Chapters 97 and 480 mentioned above. Specifically, the TPR amendments reflect the raising of the threshold amount for deregulation based on vacancies, as well as raising of the thresholds for high rent/high income deregulation (both monthly rental amounts and household annual income) that were increased by that law. As set forth in the legislative memorandum (McKinney's Session Laws 2011 A-111 through A-116), the thresholds for deregulation have not increased in seventeen years although basic stabilized rents increase each year. In addition, in accord with legislative directive, the apartment improvement increase formula has been modified for all buildings except those with 35 or fewer units. Additionally, permitting only one allowable vacancy rent increase per year as also set forth in the memorandum in support, is consistent with assuring fair compensation to owners without overcompensating them for fortuitous vacancies not already contemplated by the rent regulatory system. Chapter 480 of the Laws of 2009 increased the fines for harassment and violations of orders of DHCR, and the provisions in the regulations regarding DHCR's fining authority are to be amended consistent therewith.

4. COSTS

The regulated parties are residential tenants and the owners of the rent stabilized housing accommodations in which such tenants reside. The amended regulations do not impose any new program, service, duty or responsibility upon any state agency or instrumentality thereof, local government or business, and therefore impose no costs on those entities which are not already required through the enactment of the ETPA generally or through these amended statutory provisions referenced above. For the owners of regulated housing accommodations, who may need to be initially more vigilant to assure their compliance with these new statutory requirements, costs should be relatively minimal. In fact, compliance costs are already a generally-accepted expense of owning regulated housing. The increased administrative fines are based on lack of compliance and are not an additional compliance cost. In addition, the fines are mandated and consistent with statutory amendments. Similarly, tenants will not incur any additional costs through implementation of the proposed regulations but would be best served by being aware of these changes.

5. LOCAL GOVERNMENT MANDATES

The proposed rule making will not impose any new program, service, duty or responsibility upon any level of local government.

6. PAPERWORK

The amendments will not increase the paperwork burden on either regulated parties or the agency as the statutory amendments implemented here simply change substantive thresholds for existing applications and methodologies for increasing rent.

7. DUPLICATION

The amendments do not add any provisions that duplicate any known State or federal requirements except to the extent required by law. There are instances where a rent stabilized property participates in another State, city or federal housing program. In those instances there may be a need to comply with the Rent Stabilization Code requirements as well as the mandates of that city, state or federal program.

8. ALTERNATIVES

The proposed amendments implement statutory provisions not yet reflected in the regulations. An area that may facially seem to provide a choice of alternative is that the maintenance of the present apartment improvement compensation formula for smaller properties is defined both in terms of complexes as well as buildings. However a distinction based on both is simply a recognition of what constitutes a "building" for rent regulation purposes. In part through statute, and in part through long term usage, as upheld judicially, rent regulation treats ostensibly separate structures as a single building where the common factors that unite them into a single entity, outweigh those that divide them. Applying this same standard here is the only reasonable alternative in keeping with the statutory distinction for using a different apartment improvement compensation formula that is in fact based on the number of units.

9. FEDERAL STANDARDS

The proposed amendments do not exceed any known minimum federal standards.

10. COMPLIANCE SCHEDULE

It is not anticipated that regulated parties will require any significant additional time to comply with the proposed rules.

Regulatory Flexibility Analysis

1. EFFECT OF RULE

The Emergency Tenant Protection Regulations (TPR) apply only to rent stabilized housing units located in those communities in Westchester, Rockland and Nassau Counties that are subject to the Emergency Tenant Protection Act. The class of small businesses affected by these proposed amendments would be limited to small building owners, those who own small numbers of rent stabilized units. The amended regulations are expected to have no burdensome impact on such small businesses. These amendments to the TPR apply only in the aforementioned communities, and are expected to have no impact on the local governments thereof.

2. COMPLIANCE REQUIREMENTS

The proposed amendments would not require small business that own regulated residential housing units to perform any additional recordkeeping or reporting. Such businesses will continue to need to keep records of rent increases and improvements made to the properties in order to qualify for rent increases authorized under the proposed changes. Fines for harassment and violations of orders have been increased as a requirement of statutory amendments; but these are not considered compliance costs. With respect to recognizing curative activity undertaken by a small business, these fines are already by law imposed only after a proceeding that would either give such owner a formal hearing, or written notice and an opportunity to be heard. There is also an investigation by DHCR prior to such proceeding where DHCR often looks to resolve these matters through requiring certain remedial steps. In any case, an owner is given the opportunity to interpose such defenses and mitigating circumstances as appropriate including any claim of a cure of the conduct or condition that led to the administrative proceeding. DHCR will take such remedial action into account in most circumstances. However since these fines involve violations of prior DHCR orders or harassment, creating a mandatory cure period by regulation could endanger the public health, safety and welfare of those affected by such conduct.

3. PROFESSIONAL SERVICES

The proposed amendments do not require small business to obtain any new or additional professional services.

4. COMPLIANCE COSTS

There is no indication that the proposed amendments will impose any significant, initial costs upon small business or local governments. It is expected that the cost of compliance with the new rules will be no different than the cost of compliance with existing rules.

5. ECONOMIC AND TECHNOLOGICAL FEASIBILITY

Compliance is not anticipated to require any unusual, new or burdensome technological applications.

6. MINIMIZING ADVERSE IMPACT

These proposed amendments, required by statute, do not impair the rights of small business owners, and they have no other adverse economic impact on such parties or any local government. In fact the regulations, with respect to the modifications to the apartment improvement compensation formula, in accordance with law, create an exception that will be advantageous to small businesses. Otherwise, the statutes being implemented do not create different regulatory standards for small businesses. However, the highly individualized investigative and enforcement process leading to the statutory fines will serve to minimize impact on small businesses where it should. To the extent the approaches suggested in SAPA section 202-b are otherwise appropriate, present procedures take these into account.

7. SMALL BUSINESS AND LOCAL GOVERNMENT PARTICIPATION

Since the passage of the statutes on which these regulations are based, DHCR's Office of Rent Administration held over fifty meetings with community groups, owner and tenant advocacy organizations and local officials where the implementation of those provisions was one of the matters under discussion.

Rural Area Flexibility Analysis

The Emergency Tenant Protection Act applies only to rent stabilized housing units located in those communities in Westchester, Rockland and Nassau Counties that are subject to the Emergency Tenant Protection Act and therefore, the proposed rules will not impose any reporting, recordkeeping, or other compliance requirements on public or private entities located in any rural area pursuant to Subdivision 10 of SAPA Section 102.

Job Impact Statement

It is apparent from the text of the rules, required by statutory amendment, that there will be no adverse impact on jobs and employment opportunities by the promulgation of these regulations.