New York State
Division of Housing and Community Renewal
Rent Administration - Operational Bulletins
New York City Rent Stabilization Code
New York City Rent and Eviction Regulations
Operational Bulletin 95-2 (December 15, 1995)
SUBSTANTIAL REHABILITATION
This Operational Bulletin is issued pursuant to the Emergency Tenant Protection
Regulations (TPR) adopted under the Emergency Tenant Protection Act (ETPA) section
10, and section 2527.11 of the Rent Stabilization Code (RSC). It sets forth the
position of the Division of Housing and Community Renewal (DHCR) regarding the
circumstances under which the agency will find that a building has been
substantially rehabilitated within the meaning of TPR section 2500.9(e) and RSC
section 2520.11(e).
It is being issued at this time to clarify the procedures the agency will use to
determine issues of exemption from rent regulation due to substantial rehabilitation.
The agency has not previously issued any formal directive or clarification on this
subject and the lack of such guidance has made it difficult for applicants to have
an understanding of how an application for exemption will be treated. Also, potential
applicants have indicated that uncertainty about our procedures could contribute to
an unwillingness to undertake substantial rehabilitation projects in deteriorated
buildings. Accordingly, lack of clear procedures works to prevent use of this
mechanism as intended in law and regulation.
Also, this Operational Bulletin takes into account court decisions related to
substantial rehabilitation exemptions. In particular, it recognizes a recent court
decision wherein it was found that a building did not have to be completely vacant
to qualify for the exemption, and wherein it was ruled that the agency could not
interpret "substantial" to mean total reconstruction of the building.
ETPA section 5(a) (5) provides as follows:
Housing Accommodations Subject to Regulation
A. A declaration of emergency may be made pursuant to section three
as to all or any class or classes of housing accommodations in a
municipality, except:
(5) housing accommodations in buildings completed or
buildings substantially rehabilitated as family units on
or after January first, nineteen hundred seventy-four;
These provisions of section 5(a) (5) were incorporated into both TPR section 2500.9(e)
and RSC section 2520.1l(e).
I. Criteria
DHCR will find that a building has been substantially rehabilitated within the
meaning of TPR section 2500.9(e) and RSC section 2520.1l(e), and is therefore
exempt from coverage under the ETPA or the RSL, for rent stabilized properties
where the owner demonstrates, based upon the totality of the circumstances, that
the following criteria have been met:
A. At least 75% of the building-wide and apartment systems contained
on the following list must each have been completely replaced with
new systems. Additionally, all ceilings, flooring and plasterboard
or wall surfaces in common areas must have been replaced; and
ceiling, wall, and floor surfaces in apartments, if not replaced,
must have been made as new as determined by DHCR.
List of Building-wide and Apartment Systems:
Plumbing
Heating
Gas supply
Electrical wiring
Intercoms
Windows
Roof
Elevators
Incinerators or waste compactors
Fire escapes
Interior stairways
Kitchens
Bathrooms
Floors
Ceilings and wall surfaces
Pointing or exterior surface repair as needed
All doors and frames including the replacement of non-fire-rated
items with fire-rated ones
However, for good cause shown, on a case-by-case basis, limited exceptions
to the stated criteria regarding the extent of the rehabilitation work to be
effectuated building-wide or as to individual housing accommodations may be
granted where the owner demonstrates that a particular component of the
building or system has recently been installed or upgraded so that it is
structurally sound and does not require replacement, or that the preservation
of a particular component is desirable or required by law due to its aesthetic
or historic merit.
B. The rehabilitation was commenced in a building that was in a
substandard or seriously deteriorated condition. The extent to
which the building was vacant of residential tenants when the
rehabilitation was commenced shall, in addition to the items
described in III "Documentation", constitute evidence of whether
the building was in fact in such condition. Where the
rehabilitation was commenced in a building that was at least 80%
vacant of residential tenants, there shall be a presumption that
the building was substandard or seriously deteriorated at that time.
Space converted from nonresidential use to residential use need not
meet this standard.
C. DHCR will not find the building to have been substantially
rehabilitated if it can be established that the owner has attempted
to secure a vacancy by an act of arson resulting in criminal
conviction of the owner or the owner's agent, and/or DHCR has made
an outstanding finding of harassment, as defined pursuant to any
applicable rent regulatory law, code or regulation.
D. All building systems comply with all applicable building codes and
requirements, and the owner has submitted copies of the building's
certificate of occupancy before and after the rehabilitation.
E. The Substantial Rehabilitation provision is intended to encourage
the creation of new or rehabilitated housing. Accordingly, in making
a determination as to the eligibility of a building for this exemption,
DHCR will consider all facts that support this policy.
F. Where occupied, rent regulated units have not been rehabilitated,
such units shall remain regulated for the duration of occupancy by
the regulated tenants, notwithstanding a finding that the remainder
of the building has been substantially rehabilitated and qualifies
for exemption from regulation.
II. Prior Opinion
DHCR recognizes the very significant financial commitment that a substantial
rehabilitation necessitates. Accordingly, an owner may apply to DHCR for an
advisory prior opinion that the building qualifies for the exemption, based upon
the owner's rehabilitation plan, which as evidenced by contracts, applications
for building permits, blueprints, etc., meets the scope of work necessary to
constitute substantial rehabilitation. Although they may do so at any time prior
to commencement of the rehabilitation, owners are encouraged to apply for an
advisory prior opinion at or about the time that they seek appropriate governmental
approval for the rehabilitation work.
III. Documentation
The following documentation will be required from owners in support of a claim of
substantial rehabilitation.
Records demonstrating the scope of the work actually performed in the building.
These may include an itemized description of replacements and installations,
copies of approved building plans, architect's or general contractor's statements,
contracts for work performed, appropriate government approvals, and photographs of
conditions before, during, and after the work was performed. Proof of payment by
the owner for the rehabilitation work may be required; owners are advised to
maintain records related to the rehabilitation. For rehabilitation projects
completed before issuance of the Operational Bulletin, where undue hardship or
prejudice would otherwise result, consideration will be given to the documentation
which may be required.
IV. "Constructive Occupancy" by Rent Stabilized Tenants in
Substantially Rehabilitated Buildings
In certain cases, because of the existence of hazardous conditions in their rent
stabilized housing accommodations, e.g., fire damage, some rent stabilized tenants
may be ordered by a governmental agency to vacate the housing accommodation. Such
vacate order may create a "constructive occupancy," providing for payment by the
tenant of a nominal rental amount such as $1.00 per month, while the vacate order
is in effect, and permitting the tenant to resume occupancy without interruption
of his or her rent stabilized status, upon restoration of the housing accommodation
to a habitable condition. Where the building has been substantially rehabilitated,
constructive occupancy will have the effect of excepting the housing accommodation
from exemption from rent regulation based upon such rehabilitation.
However, the exemption from rent regulation based upon substantial rehabilitation
will apply to all housing accommodations in the building which are not
"constructively occupied" or actually occupied by a previously rent regulated tenant.
In addition, the exemption will also apply to a constructively occupied housing]
accommodation if the returning tenant subsequently vacates, or if the tenant who
is entitled to return pursuant to court or DHCR order chooses not to do so.
V. Individual Apartment Improvements, Major Capital Improvements,
and First Rents Distinguished from
Substantial Rehabilitation
Where the work performed fails to meet the criteria set forth above for exemption
from coverage under the ETPA or RSL on the basis of substantial rehabilitation,
the owner may still qualify for rent increases based upon work performed on
building-wide systems or in individual apartments.
In the event a substantial rehabilitation exemption is not found, the
improvements will be considered for an MCI order provided the substantial
rehabilitation application was made within two years of the completion of the work,
and all MCI filing criteria are met.
It should be noted that the term "substantial rehabilitation" as utilized in TPR
sections 2502.4(a) (1) and 2502.(a) (2) (ii), refers to work that is in the nature
of an individual apartment improvement or a major capital improvement, which are
discussed below, and not to that type of substantial rehabilitation which results
in the exemption of an entire building from rent stabilization. It is the latter
which is the subject of this Operational Bulletin.
Individual Apartment Improvements: TPR section 2502.4(a) and RSC section
2522.4(a) (1) provide for an increase in the rent of an individual housing
accommodation where there has been a substantial increase in dwelling space, or an
increase in the services, or the installation of new equipment or improvements, or
new furniture or furnishings provided in or to such individual housing
accommodation.
Major Capital Improvements: TPR section 2502.4(a) and RSC section 2522.4(a) (2)
permit owners to apply for an increase in legal regulated rents, based upon the
proven costs of building-wide major capital improvements.
First Rents: Where an owner significantly changes the perimeter and dimensions of
an existing housing accommodation, or creates a housing accommodation in space
previously used for nonresidential purposes, the DHCR may find that the resultant
housing accommodation was not in existence on the applicable base date. Such a
finding may entitle the owner to charge a market "first rent," subject to
guidelines limitations for future rent adjustments.
VI. Binding Determination
Where, after completion of the work, DHCR issues a final order determining that
the building is exempt from rent regulation on the basis of substantial
rehabilitation, that order will be a binding determination on a building-wide
basis, not withstanding occupancy by subsequent tenants. DHCR will not
thereafter entertain challenges by subsequent tenants except upon showing that
the determination was obtained as a result of fraud by the owner or the owner's
agent.
Paul A. Roldan
Deputy Commissioner for Rent Administration
Reissued 3/96
Last updated: 09/16/96
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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.
Every attempt has been made to conform to the original Operational
Bulletins as issued by DHCR; TenantNet makes no
representation the enclosed material is current or will be
applied as written. The reader is advised that DHCR often fails
to properly apply, interpret or enforce housing laws. Since
housing laws are complex and often contradictory, it is
recommended the reader obtain competent legal advice from a
tenant attorney or counseling from a tenant association or
community group. (rev. 3/13/96) DHCR documents
are public documents; the electronic version of such documents
have been developed by TenantNet and any added value, enhancements
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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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