New York State
Division of Housing and Community Renewal
Office of Rent Administration
Gertz Plaza, 92-31 Union Hall St.
Jamaica, New York 11433
Public Information: (718)739-6400
Mario M. Cuomo, Governor
Donald M. Halperin, Commissioner
Joseph A. D'Agosta, Deputy Commissioner for Rent Administration
New York City Rent Stabilization Code
New York City Rent and Eviction Regulations
OPERATIONAL BULLETIN 85-2 (SEPTEMBER 9, 1985)
RENT INCREASES FOR RENT STABILIZED
HOUSING ACCOMMODATIONS BASED UPON
OWNER HARDSHIP-GUIDELINES AND PROCEDURES.
INTRODUCTION
This Operational Bulletin relates to increases in the legal
regulated rents of rent stabilized housing accommodations located
inside and outside New York City which may be available to owners
who file hardship applications with the New York State Division
Of Housing and Community Renewal (DHCR). The DHCR may grant such
increases pursuant to the Emergency Tenant Protection Act of 1974
(ETPA), or Title YY of the New York City Administrative Code,
which constitutes the New York City Rent Stabilization Law (RSL).
A) Definition of Hardship
The ETPA and RSL provide a mechanism for adjusting rents pursuant
to orders issued by the Local Rent Guidelines Boards, which
determine, on an annual basis, the rent increase, if any, to
which an owner is entitled upon execution of new or renewal
leases. Both the ETPA and RSL also provide, in the unusual
situation, where the guidelines rent adjustments are insufficient
to per nit a particular property to keep up with increased
operating costs, that the owner can file with the DHCR, an
application for building-wide rent increases based upon a
hardship. Both the ETPA and RSL contain provisions for a
"comparative hardship" pursuant to which an owner may obtain a
rent increase sufficient to maintain the same position with
respect to certain income and operating expenses as it
experienced in defined base years. The precise statutory formulas
are markedly different inside, as opposed to outside, New York
City. The procedures for processing these applications are of
long standing and have been established through usage and
practice.
Chapter 403 of the Laws of 1983, which amended both the ETPA and
RSL, provides an alternative method for determining a hardship
increase based essentially on an owner's maintaining certain
gross rent income, as later defined, at a level which exceeds
reasonable operating expenses by five percent.
B) Comparative Hardship Outside of New York City
The comparative hardship formula is stated in Section 6(4) of the
ETPA.
It essentially provides that: (1) an owner must establish, by
application, the existence of a hardship as further defined, and
(2) the DHCR must determine whether additional rent increases are
needed to maintain approximately the same average ratio (as
defined by usage and upheld by applicable appellate case law)
between operating expenses and gross rents for the preceding five
year period. The criteria for determining such an application are
detailed in Section 34(c), [2502.4(c)], of the Tenant Protection
Regulations, Tenant Protection Bulletin No. 20 and Supplement 1
thereto.
C) Comparative Hardship Inside New York City
Inside New York City the comparative hardship formula is set
forth in Section YY51-6.0c(6) of the Administrative Code of the
City of New York, and is administered primarily through the Rent
Stabilization Code. Pursuant thereto DHCR will, in essence, grant
an appropriate rent adjustment where:
1) The owner has not maintained the same average net income in
a current three year period when compared with the average
net income during a three year base period, generally
defined as 1968 through 1970;
2) The circumstances and accuracy of the information provided
in the owner's application has been adequately substantiated
by submission of copies of certified financial statements or
federal income tax returns and other pertinent documents
which might be required; and
3) All other requirements of the granting of such rent
increases have been met.
To restore the owner's average net income in the current period
to the average net income in the base period, the rent adjustment
granted by the DHCR. in order to conform with the Rent
Stabilization Code, is computed as follows:
1) Subtract the average net income in the current period from
the average net income in the base period (after
adjustments).
2) The result represents the dollar amount of annual gross rent
adjustment.
3) To convert the dollar amount into a percentage rent
increase, divide the dollar amount by the annual gross rent
roll of the stabilized apartments submitted with the
application. (The rent roll should be dated within two (2)
months of the date of the filing of the application).
The collection of any increase in the stabilized rent for any
apartment cannot exceed six (6) 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. The collectibility of
any dollar excess above said sum is spread forward in similar
increments and added to the stabilized rents as established or
set in future years. No more than one order adjusting any
stabilization rent because of hardship may be issued in any
thirty-six (36) month period.
D) Alternative Hardship
Rent increase applications may be filed by owners based upon
alternative hardship applications pursuant to Section 6(5) of the
Emergency Tenant Protection Act, (ETPA) and Section YY51-6.0c.(6-
a) of the New York City Administrative Code. Section 6(5) of the
ETPA is directly implemented by Section 34(d), [2502.4(d)], of
the Tenant Protection Regulations. The alternative hardship
enables an owner of a building not owned as a cooperative or
condominium, acquired by the same owner or a related entity three
years prior to any application, to receive an appropriate rent
adjustment where the DHCR finds (subject to the definitions and
restrictions stated in the regulations) that such an increase is
necessary because the annual operating expenses are not less than
95 percent. The nature and source of the annual gross rent income
is set forth in Section 34(d)(1)(a), [2502.4(d)(1)(i)] of the
Tenant Protection Regulations. The instructions and application
forms previously issued by the DHCR reflect these regulations.
ALTERNATIVE HARDSHIP FORMS AND PROCEDURES
The following is designed to give further guidance as to the DHCR
policy and procedure in processing these applications after the
forms are completed by owners in accordance with the instructions
and the applicable Regulations. Instructions which accompany the
forms referred to in this operational bulletin, provide further
details.
The DHCR has broad discretion under the applicable regulations
to, inter alia, accept or reject applications, extend time for
filing, hold hearings, and require production of documents. See
Sections 85 and 86, [2507.5], [2507.6], of the Tenant Protection
Regulations. In the absence of a Rent Stabilization Code
containing Alternative Hardship Provisions, the DHCR has
authority and discretion in accordance with Chapter 403 of the
Laws of 1983 to utilize reasonable procedures in carrying out its
statutory mandate. Nothing herein should be construed as a waiver
of that discretion. This bulletin advises on how that discretion
will ordinarily be exercised.
A) APPLICABLE FORMS
RTP45, RTP45A-G Owner's Application for Rent Increase Based
on Alternative Hardship
RTP 45.1 Notice to Tenant of Commencement of
Proceeding for Rent Increase Based on an
Alternative Hardship
RTP 45.2 Instructions for filing an owner's
Application for Rent Increase Based on
Alternative Hardship
RTP 45.3 Owner's Certification of Service of Notice to
Tenant; Re Commencement of Proceeding for
Rent Increase based on Alternative Hardship
RTP 45.4
RTP 45.4 Instruction for Notifying the tenants that a
Proceeding for a Rent Increase based on an
Alternative Hardship has been commenced.
RTP 3 Tenant's Answer
RAR 1, RAR 2 Petition for Administrative Review (PAR)
B) PROCEDURE
I. Docketing
An owner shall file three copies of the application form
including appropriate schedules (RTP45, RTP45A through (G)
with the District Rent Office (DRO) in the-district in which
the building is located. The DRO will assign the application
a docket number.
II. Preliminary Review
The DHCR will then perform a preliminary review of the
application to determine whether the application on its face
indicates eligibility for an alternative hardship increase.
To affirmatively pass such review:
(1) the building, as evidenced by the application, must be
experiencing a hardship as defined in Section 34(d)(1),
[2502.4(d)(1)], of the Tenant Protection Regulations.
(See RTP45D of the application forms);
(2) the owner must answer a series of threshold questions
which further determine if the owner has met all the
requirements which otherwise may bar the owner from
filing or receiving increase (See Section 34(d)(2),
[2502.4(d)(2)], of the Tenant Protection Regulations
entitled Restrictions; see also RTP 45A, B, and C of
the application forms); and
(3) all the forms must be completed and all relevant
supporting schedules attached.
If the application is not complete, the DHCR will reject it
and return two copies of the submission to the owner. Such a
rejection is a Final Order subject to review by the
Commissioner. (PAR) (See Sections 131-142, [2510 et seq.],
of the Tenant Protection Regulations, and Part XI of this
Operational Bulletin) However, the rejection is without
prejudice to refiling a completed application with the DRO,
as a new application with a new filing date, provided the
owner is still eligible to use the same test year as defined
in Section 34(d)(1)(g), [2502.4(d)(1)(vii)], of the Tenant
Protection Regulations. For good cause shown, the DHCR may,
in exceptional cases, provide a reasonable cure period in
its rejection which would enable an owner to preserve his
right to use a particular test year. See Section 85(d),
[2507.5(d)], of the Tenant Protection Regulations. If the
application passes preliminary review the owner shall be
notified on Form RTP45.4, that he may thereafter notify the
affected tenants that an alternative hardship proceeding has
been commenced.
III. Restrictions
The restrictions against filing or receiving an alternative
hardship increase are fully set forth in Section 34(d)(2),
[2502.4(d)(2)] of the Tenant Protection Regulations. They
are listed below, with further explanations where
appropriate.
a) Maintenance of Services
Section 34(d)(2)(b), [2502.4(d)(2)(ii)], of the Tenant
Protection Regulations sets forth the DHCR's broad
discretionary authority with respect to alternative hardship
and the requirement of maintenance of services. That
discretion is limited by sec. YY51-6.0.3 which specifically
bars an owner from applying for or collecting further rent
increases upon a determination by the DHCR that an owner has
failed to maintain services as defined therein. Thus, where
the DHCR has issued an order determining that an owner has
failed to maintain services as defined in the applicable law
and regulations, the DHCR may not grant an alternative
hardship application pending service complaints or tenant
answers which raise lack of maintenance of services as an
issue do not, in and of themselves, bar the hardship
application or the granting of an increase. The DHCR will
act with respect to those applications in accordance with
its discretionary authority and may issue an order granting
the increase conditioned on the removal of violations or
conditions affecting services.
b) Pending Tax Certiorari Proceedings or Objections
Section 34(d)(2)(a)(v), [2502.4(d)(2)(i)(e)], of the Tenant
Protection Regulations provides for the resolution of legal
objections to real estate taxes and water and sewer charges
for the test year. This restriction is derived from the
requirement that the applicable increase be based on-
expenses that are both actual and reasonable, as well as the
DHCR's authority to safeguard tenants from practices which
would otherwise subvert the levels of rent adjustment as
provided by the applicable law. In lieu of an absolute bar,
the DHCR as a reasonable alternative, will accept submission
by an owner, of applicable proof of taxes based upon the
proposed assessed value (as set forth in its certiorari
petition or duly filed objection to such tax), together with
proof of actual payment in accordance with applicable law.
If after such tax objection is resolved, the owner's actual
and reasonable tax expense allocable to the test year
exceeds the amount the DHCR used in determining the
application, an additional increase may be granted
prospectively, if warranted. Similar reasonable alternatives
will be entertained as to unresolved water and sewer
charges.
c) Ownership by the Same or Related Entity for 36 Months
Section 34(d)(2)(a)(ii), [2502.4(d)(2)(i)(b)], of the Tenant
Protection Regulations sets forth the requirement that an
owner or an entity related to the owner must have acquired
the building at least 36 months prior to the date of the
application in order to be eligible for alternative hardship
increases. A cooperative corporation or the Board of
Managers of a condominium will not be considered the owner
of the building, nor are individual shareholders or unit
owners building owners for the purpose of eligibility for
the alternative hardship, and as such will be unable to file
alternative hardship applications.
d) Five Percent Equity in the Property
Owner's equity is defined in Section 34(d)(1)(e),
(2502.4(d)(1)(v)], of the Tenant Protection Regulations.
That equity must exceed five percent of the sum of the
amounts listed in Section 34(d)(2)(a)(iii),
[2502.4(d)(2)(i)(c)] of the Tenant Protection Regulations.
(See Form RTP 45B.) Owners will generally satisfy this
requirement and avoid the more complex statutory
calculations required, if the arms length purchase price of
their property, less the unrepaid principal of any loan or
mortgage used to finance the purchase of the property
exceeds five percent of the arms length purchase price. (The
precise formulation is set forth in Form RTP 45A, question 5
through 9 and the applicable instruction therefore).
e) The Grant of a Previous Hardship Increase
Section 34(d)(2)(a)(iv), [2502.4(d)(2)(i)(d)], of the Tenant
Protection Regulations has the effect of prohibiting the
filing or granting of an application where the building had
been granted a hardship increase within 36 months of the
effective date of the issuance of a previous hardship
application order, or if a six percent increase is still in
effect based on a prior application.
IV. Owner Notification to Affected Tenants
Within twenty days of receipt of the RTP45.4, the owner must
hand deliver or mail a complete set of the application forms
submitted to the DHCR, to the affected tenants, plus a DHCR
notice of the Proceeding (RTP45.1) and 3 copies of the DHCR
answer form (RTP3).
A complete copy of the owner's submission to the DHCR
including all required schedules and all supporting
documentation plus a copy of the DHCR's Instruction Booklet
(RTP45.2) must be made available at the DRO and at the
subject building or complex in the office of the resident
manager, managing agent or superintendent during normal
working hours. If such office is not available on site,
these documents must be made available at a near-by
alternative location. If such location is not available, as
attested to by affidavit of the owner, such documents may be
inspected at the DRO.
V. Filing of the Application with the DHCR
After completing notification to the affected tenants, the
owner must then complete and file with the appropriate DRO
the DHCR's form "Owner's Certification of Service"
(RTP45.3). The date that this form is received by the
appropriate DRO will be considered the date of completion of
filing with the DHCR. The DHCR will, where necessary, take
appropriate action to verify the accuracy of the owner's
certification of service. At the time of filing the RTP-
45.3, the owner must also submit a certified rent roll as of
the date of the filing of the application.
VI. Tenant Answer
Tenants shall submit two copies of their answers, if any, to
the appropriate DRO within twenty days of receipt unless,
for good cause shown, an extension is granted by the
District Rent Office.
VII. Mortgage Interest as an Includable Expense and its
Impact on Processing
The alternative hardship, unlike the two comparative
hardship formulas, allows for the inclusion of interest on a
bona fide mortgage as an allowable expense in computing the
appropriate rent adjustment. (See Section 34(d)(1)(b), (c),
and (d), [2502.4(d)(1) (ii)(iii) and (iv)], of the Tenant
Protection Regulations; Form RTP45E and instructions
therefore.) Even where the mortgage is "bona fide", as
defined by Sections 34(d)(1)(c) and (d), [2502.4(d)(1)(iii)
and (iv)], of the Tenant Protection Regulations, the DHCR on
its own initiative where warranted, or in the face of a
meaningful tenant objection, will also ascertain whether the
claimed mortgage interest expense is reasonable, actual,
applicable to the operation and maintenance of property,
reasonably allocable to the test year and in keeping the
general legislative purposes and intent.
Because mortgage interest, as an allowable expense, is a new
feature belonging solely to this hardship, adjudication of
mortgage interest expense issues can only be further defined
by a case by case determination. Where a unique
unprecedented issue regarding claimed mortgage interest
expense is raised in a meaningful manner it will be reviewed
by a mortgage interest committee established by the DHCR to
aid the District Rent Administrator (DRA) or the Director of
processing in his determination. However, two general
examples of proposed adjudications by the DHCR are set forth
below:
Example 1
Where there has been a change in mortgage debt since the
effective date of the addition of the alternative hardship
provisions to the applicable law, the DHCR will make
appropriate adjustments to the claimed mortgage interest
expense, to disallow interest on that portion of the
principal balance of the current mortgage which exceeds the
expiring balance of the previous mortgage. This will assure
that the mortgage interest expense reflects the actual and
reasonable cost of maintenance of the property. Monies
otherwise utilized from refinancing for the operation and
maintenance of the property, to the extent compensable by
application, is covered by Operational Bulletin 844, issued
November 13, 1984, entitled Major Capital
Improvements/Substantial Rehabilitation/Increased Services
and Equipment and the applicable law, code and regulations
cited therein.
Example 2
Points and other charges payable during the test year which
represent prepayment of interest (and are therefore a non-
recurring expense) will be allocated over the term of the
mortgage, or a reasonable period, to more accurately reflect
the reasonable and actual expenses of the operation and
maintenance of the property. In addition, they will be
adjusted to reflect that portion of the mortgage expense
allowed for mortgage interest computations.
VIII. Issuance of the Order
The DRA or the Director of Processing, after taking all
necessary and appropriate action, shall issue a
determination either dismissing the application if it fails
to substantially comply with the provisions of the
Regulations, or granting the application, in whole or in
part.
In the event an application is granted, the collection of
any rent increase shall not exceed six percent of the legal
regulated rent in effect on the filing of the application.
The collectibility of any amount above that sum shall be
spread forward in similar increments and added to the rent
as established or set in future years. In buildings
containing residential apartment units subject to Rent
Control or otherwise exempt from regulation, adjustments for
both income and expenses will be made to calculate the
appropriate share for those apartments subject to this
application. No application may be made for any hardship
until such time as the increase based on a prior hardship
application falls below six percent for a given year. In no
event may an application for hardship be made within thirty-
six months of the effective date of the issuance of previous
hardship application order.
IX. Effective Date of the Order
In New York City, the DHCR will use the Rent Stabilization
Code to ascertain the effective dates of any order granting
an increase, with due consideration to all factors bearing
on the equities involved, as required by the Rent
stabilization Code.
The effective date of the rent increase for buildings
located outside of New York City is governed by Section 32,
[2502.2], of the Tenant Protection Regulations, which
provides that adjustments of legal regulated rents are
effective at the date of the issuance of the order unless
the order itself provides otherwise. Rent increases shall be
expressed on a percentage basis.
X. Petition for Administrative Review (PAR)
A PAR is the method of review of a DRA or Director of
Processing order and is a prerequisite in order to obtain
judicial review.
Any person aggrieved by an order of a DRA or a Director of
processing may file a PAR (Forms RAR-1 and 2) within 33 days
after the date of such order. A PAR served by mail,
postmarked not more than thirty-three days after the date of
such order, shall be deemed in compliance with this
paragraph. See Operational Bulletin 84-1 and Sections 8 and
131-143, [2500.8, et seq.], of the Tenant Protection
Regulations for the relevant procedure by the DHCR upon
administrative review.*
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* Pursuant to Chapter 888 of the Laws of 1985, the DHCR has
been authorized to amend the Rent Stabilization Code for New
York City. At such time as the amended Code is promulgated,
the DHCR will issue a supplement to this Bulletin providing
cross references for the new Code to the ETPA Regulations
contained in this Bulletin.
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DHCR Operational Bulletins are issued by the New York State
Division of Housing and Community Renewal (DHCR) and update
agency administration of the rent laws.
Electronic versions of the documents on TenantNet
are for informational purposes only and there is no guarantee
they will be accepted by any court (or even DHCR) as true copies
of DHCR policy. The reader is advised to obtain true copies of
these documents from DHCR. Also see DHCR Policy Statements,
DHCR Advisory Opinions, the Rent Stabilization Code, the Rent
Stabilization Law and various Rent Control Statutes.
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Bulletins as issued by DHCR; TenantNet makes no
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housing laws are complex and often contradictory, it is
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For more information or assistance. call the DHCR Rent Infoline
at (718) 739-6400, or visit your Borough Rent Office.
Queens Central Office
92-31 Union Hall St. 4th Fl.
Jamaica, NY 11433
(718) 739-6400
Bronx
One Fordham Plaza
Bronx, NY 10458
(718) 563-5678
Brooklyn
250 Schermerhorn St.
3rd Floor
Brooklyn, NY 11201
(718) 780-9246
Lower Manhattan
156 William Street
9th Floor
NY, NY 10038
(212) 240-6011, 6012
South side of 110th St. and below
Upper Manhattan
163 W. 125th St.
5th Floor
NY, NY 10027
(212) 961-8930
North side of 110th St. and above
Staten Island
350 St. Mark's Place
Room 105
Staten island, NY 10301
(718) 816-0277
Nassau County District Rent Office
50 Clinton Street, 6th Floor
Hempstead, NY 11550
(516) 481-9494
Westchester County District Rent Office
55 Church Street, 3rd Floor
White Plains, NY 10601
(914) 948-4434
Rockland County District Rent Office
94-96 North Main St.
Spring Valley, NY 10977
(914) 425-6575
Albany Regional Office
119 Washington Avenue
Albany, NY 12210
(518) 432-0596
Buffalo Regional Office
Ellicot Square Building
295 Main St., Room 438
Buffalo, NY 14203
(716) 856-1382
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