A-63 EXHIBIT 4 TO KASNER AFFIRMATION DHCR OPERATIONAL BULLETIN 95-3, DATED DECEMBER 18, 1995 [A-63-A-80] NEW YORK STATE: DIVISION OF HOUSING AND COMMUNITY RENEWAL DHCR OFFIC2 OF RENT ADMINISTRATION GERTZ PLAV.J 92-31 UNION HALL ST. JAMAICA. NY.11433 GEORGE E. PA TAKI, GOVERNOR JOSc?H H. HOU.AND, COMMISSIONffi OPERATIONAL BULLETIN 95-3 (Replaces Operational Bulletin No. 94-1) - Implementing - RENT REGULATION REFORM ACT OF 1993 NEW YORK CITY.LOCAL LAW 1994, No. 4 - affecting - New York City Rent Stabilization Law (RSL) Emergency Tenant Protection Act of 1974 {ETPA) New York City Rent and Rehabilitation Law (City Rent Control Law or CRCL). Emergency ffousing Rent Control Law (State Rent Control Law or SRCL) This Opera~~onal Bulletin, which replaces Operational aulletin 9~-1 issued on January 3, 1994, is issued_puysuant to sect.ion 2327.11 of the Rent Stabilization Code; ti:e C:mergency Te~ant ?rotection Regulations adopted under the ~~ergency Tenant ?rotect:ion Act:; section 2209. a of the Cit:y Rent a:ld Eviction Regulations; and section 2l09.8 of the State Ren: a~d Eviction Regulations. Both the. Rent Regulation Reform Act of l.993 (?3.RJl.), Chapter 253 of the Laws of 1993, effective July 7, l993, and New York City Local Law 1994, No. 4 (Local Law 4) I effective ·April l, 1994 provide for deregulation of high rent housing accommodations. The RRR.~ applies to all four of the above Rent Laws. Local Law 4 applies solely ta the RSL and CRCL. As discussed below, under both the RRRA and Local Law 4, deregulation of a high rent housing accommodation may occur: The RRRi\ al so: A. Upon vacancy; er B. As a result of occupancy by a high income t.enant. A-64 c I. II. III. Establishes conditions for rent increases oaseci upon. individual apartment improvements. Provides for deregulation of _vacant rent regulated housing accommodations located in·ETPA-locality. cooperatives and condominiums, and if occupied, provides Eor deregulation upon vacancy. Modifies penalties for failure to register rent stabilized hqusing accommodations subject to the RSL anc;l ETP.h.. . I. High Rent· Deregulation Under all four systems of rent regulation, there is ·provision for high rent deregulation, with.some variation among the syst·ems. All references are to the RS'L or ETP.ll., 'unless either the CRCL or SRCL is indicated in brackets. In this section, in.::or.d:er: to":::i:efiect. LocaLlLaw· 4, housing accommodations.· regi+1at,ed,. to·.·ehe RSL or. CRCL. will .. be referredtoas-N'ew' · Y~5~Y,.~~t:Y'.:,!NYC) ·housing a_c~c:~rn'?j~t:~ons. / pursuant· A. Deregulation upon vacancy The RRRA added.section 25-504.2 to the RSL and paragraph 13 to section Sa of the ETPA (and added subparagra:r;ih k to . . paragraph 2 of subdivisi.on e of section 26-403 of the C9.CL, · and paragraph (n) to subdivision 2 of section 2 of the SRCL] , providing for deregulation of vacant high rent housing accommodations, and if occupied, for deregulacion upon their· .vacancy". · Local Law 4 subsequently amended such sections of the RSL and CRCL. · l. Con.ditions for deregulation a. Housing accommodations subject to the ETPA or SRCL (outside New York City} i. The housing accommodation must have had a· legal regulated rent or maximum rent of $2,000 or more per month at any time between July 7, 1993 and October l, 1993. The legal regulated rents on July 7, 1993 and on October 1, 1993 are included1 and ii. The housing accommodation must have been or became vacant on or after July 7, 1993. b. Housing accolll!llodations subject to the RSL or CRCL (New York City) i. The housing accommodation must hav"! a legal regUl.a·c~d rent or maximum rent of $2, 000. 00 or mere.per monch; and 2 c A-65 c ii. c. T~e housing accommodation must nave been or became ... vacant··on.or.~-lS'94. !?lease note ""'that· .9r.ior to .U.pril i, l994:, t:-ie effective date cf Local Law ~. New York City housing accommodations regulated pursuant to the RSL or CRCL were subjecc to deragulation under.the ~RRA, according to the conditions set forth in section IA(ll (a), above: Definition of "maximum rent" For the CRCL, maximum rent is the maximum collectible ren~ (MCR) ; for the SRCL, maximum rent is the rent authorized by DHCR pursuant to a oeriodic increase process based upon owner application: · 2. Examples illustrating conditions for dereg\.llation a. The legal regulated rent is $2,050 per month on August l, 1993. The tena~t in occupancy on August 1, 1993 vacates, and the next t:enant:· execut:es a lease that commences Seotember l, 1993 for a ·lower monthly rental of Sl,95~. The new tenancy is not subject to reP.t regulat.ion. As long as the legal regulaced rent was $2,000 or more per month at any time during the applicable .· period, between July 7, 1993 and Octcber l, 1993, a subse'quent reduction in the legal regulate.cl rent below $2, 000 per month does not pr<:!vem: high rent Vacancy deregulation. b. The legal regulated rent is set.at $2,050 per month ?Ursuant to a lease ~hat c=mmenced January l, 1992 and expired December 31, · 199J. On May l, 1993, DHCR issued a final order reducing the rent to a level below $2,000 per month based upon a finding that the owner has failed to maintain required services. The owner filed an application to restore the rent on October 15, 1993. !n a decision issued March 1, 1994, DECR restored the rent to $2,050 per month, effective November 1, 199]. ET?A: Where the tenant in occupancy vacates on or after July 7, 1993, the housing accommodation is not deregulated because the legal regulated .rent was not $2,000 or more per month between July 7, 1993 and October l, 1993. Although the reduced rent was later restored, .for the oeriod of effectiveness of the rent reduction order, which in this example covered the entire period between July 7, 1993 and October 1, 1993, the reduced rent was below $2,000 per month. · J A-66 ~SL: For vacancies occurr~ng prior to April l, 1994, the ~esult would be the same as above. However, a vacancy on or after l\nril l, 199.4 wou1d ~esult in deregulation under Local Law 4 because the legal requlated rent has been restored to $2,000 or more per month. c. Under both the.RSL, prior to its amendment by Local Law 4, and the .ETPA, where· prior to October 2, .1993, an owner installed new equipment in a vacant housing accommodation that had a monthly maximum or legal ·regulated rent of less than $2, 000, and· where· such installation results in an increase in the monthly r~ntal amount to at least $2,000, the lawful monthly maximum o~ legal regulated rent will be deemed as having been $2,000 or more between July 7, 1993 and October 1, 1993, provided that the next tenant in occupancy actually rents the housing accommodation for at. least $2,000 per month. This is so, notwithstanding that the housing ~ccommociation was not acttially occupied .by- and rented to a tenant at that amount prior t.o October 2, 1993. In NYC, pursuant to Local Law 4, the result will be the same if the owner installs the new equipment: in a housing accommodation which is a·r becomes vacant on .or ·a.ft.er April l., 1994 . .1\s evidence t·hat the subject housing accommodation ·was de!:'egulated upon vacancy, owners should maintain all 'records from the date of filing of the lase registration statement applicable td the housir.g accommoda.tion. · d. Where an owner substantially alters the out.er dimensions 0£ a vacant, rent-stabilized housing accommodation wh~ch qualifies for a "first rent 0 and executed a vacancy lease that commenced between July 7, 1993 and October 1, 1993 (for a NYC housing accommodation, the vacancy lease must also have commenced between July 7, 1993 and October l, 1993, or on or after April 1, 1994), proviciing for a monthly rent of $2,000 or more, the new tenancy is not subject to rent regulation. e. Where a tenant in occupancy under a renewal lease sublet a housing accommodation nursuant to a sublease effective between July'?, 1993 and Ocr:ober 1, 1993 (or, for a NYC housing . accommodation,pursuant to a sublease effective between July 7, 1993 and October l, 1993, or a sublease effective on or after April l., 1994), for which a sublet: allowance would apply; the housing A-67 accommodation haci a monthly legal requlateci z:-ent of less than $2,000 at the ~ime cf tie subletting; and the collection by the owne~ of a sublet vacancy allowance results in an i~crease in the monthly rental amount to at least $2,000; the housing accommodation will c;:uali=y for deregulation based upon the monthly legal regulated rent having been $2,000 or more between Julv 7, 1993 and October l, 1993 (or, for a NYC housing accommodation, between July 7, 1993 and October l, l993 or on or.~fter A9ril l, 1994). However, if the monthly rental amount for sue~ oeriod would not have other-Wise reached at le~st-$2,000 were it not for .a ten percent. surcharge payable to the tenant if the housing accommodation is sublet fully furnished, the mont:hl,Y legal :-egulated rent will not be regarded as hav~ng been $2,000 or more for such period~. £. A NYC housing accommodation is cccupieci at a rental of $1,950 from July 7, 1993 through October 1, 1993. On November l, 1993, a new t:enant moves in and pays a legal regulated rent: of S2,0SO. Based upon a subsequent finding oE a diminution of services, the.legal regulated rent is reduced to $1,900, .effective February l, 1994. On May l, . 1994, with the rent reduction st:ill in effect, th~ tenant vacaced and another t~nant moved in at: the reduced rent of $1,900.00 oer month. The housing accamrr~dation is not vacancy deregulated pursuant to the RRRA or Local Law 4 of 199~. During neither the period from July 7, ~793 through October l, 1993, nor the period commencing April 1, 1994, was the legal regulated rent $2,000 or more per mar.th .. 3 . Exceptions a. h housing accommodation found by DHCR to have become vacant due to an owner's haras·s;nent: will not be deregulated. b. · Where a member of the household has acquired the right to be named on a renewal lease (for t:he CRCL and SRCL, th~ right to continue in occupancy as a statutory tenant! by "succession," as a "family member" (traditional or nom:raditional) under DHCR regulations, the housing accommodation will not be considered as having become vacar:t. c. These deregulation provisions shall not apply to housing accommodations whic':1 are subject to rent: regulation ~y virtue of receivinq tax benefits 5 I A-68 c (/ B. pursuant to .sections 421-a or 489 of the Real Property Tax Law, until the expiration of the tax abatement period. Deregulation of high rent .housing accommodations. occupied by: high income tenants The RR.~~ added sections 26-504.1 and 25-504.3 to the RSL, and following renumbering, paragraph 12 to.subdivision a .of section 5, and a new section 5-a, to the ETPA (and added a new subparagraph (j) to paragraph 2 of. subdivision e of section 26-403 of the CRCL; added a new section 26-403.l to the CRCL, added paragraph Cm) to subdivision 2 of section 2 of the SRCL, and added a new section 2-a to the SRCLJ, providing for deregulation of housing accommodations occupied by certain "high income" teni'UltS. Local Law 4 subsequently amended such sections of the RSL and CRCL. l. The RRRA and Local Law 4 provide for deregulation under the following conditions: a:. For housing accommodations ~d'~~orl<:'ctty; the legal 'regulated or maximum rent of the housing a: tioxr,lllust:; have been ·$2 ,·OQ.O ·or more per., mo . oi;;()ci::ober l., . I 9 9 3 , whlcfi means· on' ; oc.tobe~l:;:-71993> and.not earlier. or-: i·ater,i. ·For rric....-.-hou:Hng ·a.c.commodations, the legal regulated o.~ maximum rent must have been $2J;0:0.0.Q;-..OO:.or more :per/ mc;i~it=~s?dt'::':october ·1, 19 9 3 , ·~,*i~.nd.ir:ioner, whether electricity is included in the rent or not, such ap9roval is still requ~red. Permissible charges for air conditioners in New York City rent regulated housing accommodations are established annually. The latest establishment of such charges is found in t~e Tenth An.nual Update of Section B of Supplement No, l to Operational 3ullet1n·84-4, September 8, 1995. . issued . III. Vacancy Derecrulation of Coooerative and Condominium Housing Accommodations in Municipalities in Nassau, Westchester and Rockland Counties Which Have Adopted ETPA The RRR.A: amended subdivision a of Section 5 of ETPA by adding a new paragraph 14, which adds a category of housing accommodations exempt Erom ETPA. This exemption applies t:o housing accommodations located in buildings converted to co-operative or condominium ownership, which are or become vacant on or after July 7, 1993, and t.o such housing accommodations which are occupied by "nonpurchasing. tenants" (as defined by Sec. 352-eee of the General Business Law) upon the occurrence of a vaca::!.CV after Julv 7, 1993. The rent laws and the general enforcement pro;isionfu of ETPA shall also continue to apply where DHCR Einds thac a tenant has vacated because of an owner' 5 .. harassment. A-77 c This 9rovision of the R..'L'<..~ essentially bri~ss i~to conformity the status of such vacat:ed housing ac-:;ommcciaticn.s located in buildings under coo9erative or condominium forms of ownership with the exempt status of similar housing accommodations located in New York City. IV. Penalties for Failure to Recrister Rent Stabilized Housing Accommodations Subject to RSL and ETPA The RRRA amended se.ctions 26-516 and 26-517 of the RSL, and subdivision a of sect·icn 12 and subdivision e of section 12-a of ETPA, modifying the penalti~s for failure to register ~ent· stabilized housing.accommodations and modifying the procedures for determining nonregistration-related overcharges. A. Treble damages may no longer be imposed against an owner based solely. on the owner's failure to . regiscer inicially or annually. Where, however, DP.CR finds chat an owner has willfully collected an overcharge ocher t~an an overcharge atcributable to an owner's nonrecristracion, DECR will assess· treble· damages on . t:he entire ~overcha!:ge, including that portion based upon the owner'"s nonregist:rat.ioh. B.· Where rent increases were lawful but for the owner's failure to register,. and where the owner files and serves a late registration, DHCR will not thereafter find. .that the-. owner .has collected an overcharge at any time prior to the filing of th"e late registration. Furthermore, where DHCR finds that an owner has collected an overcharge other t21an ar;i overcharge attributable t:o non-registration, but the collection of such overcharge was not willful pursuant to PHC:t Policy Statement 89-2 and where the owner files and serves a late registration, DHCR shall not find that· the owner colleccad an overcharge based upon non-registration. If, however, a late registration is filed subsequent to the filing oE a _rent overcharge complaint:, DHCR will assess the owner wit:.h a late filing surcharge for each unit affected in the amount of fifty percent of . the current administrative fee for t:imely filed .registrations. The surcharge, based upon the current administrative fee, is $5.00. Where DHCR. assesses an owner with a late filing surcharge, unde::: ·the RSL, the owner must pay this surcharge to the New York City Department of Pinance, and under ·the ETPA, to the applicable locality. ~ c. Owners are not permitted to collect that portion of a temporary retroactive major capital improvement (MCI) rent increase which is applicable to a period during which the owner had not registered the housing accommodation. The RRRA has· not altered this prohibition. D. The provisions of the RRR.~ described in paragraphs A and B of t:his section apply only to proceedir.gs doc'.