Preview
FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022
NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023
Operational Bulletin 95-2
Division of Housing and Community Renewal
Office of Rent Administration
Operational Bulletin 95-2 (December 15, 1995)
Substantial Rehabilitation
This Operational
Bulletin is issued pursuant to the Emergency Tenant Protection Regulations (TPR)
adopted underthe 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)
the circumstances under which the agency will find that a building has been substantially rehabilitated
regarding
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 and RSC
2500.9(e)
section 2520.11(e).
Thisdocument is being reissued for informational purposes only.
Theonginal document which contains signatures of authorization is
on ñle at DHCR's Office of Rent Administration.
Reissued9/97
FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022
NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023
I. Criteria
DHCR will find that a building has been substantially rehabilitated within the meaning of TPR section
and is therefore exempt from coverage under the ETPA or the RSL, for
2500.9(e) and RSC section 2520.11(e),
where the owner demonstrates, based upon the of the circumstances, that the
rent stabilized properties totality
criteria have been met:
following
and apartment on the following
systems contained list must each
A. At least 75% of the building-wide
replaced with new systems. Additionally, all ceilings, and plasterboard or
have been completely flooring
areas must have been replaced; and ceiling, wall, and floor surfaces in
wall surfaces in common
if not replaced, must have been made as new as determined by DHCR.
apartments,
List of Building-wide and Apartment Systems:
1. Plumbing
2. Heating
. 3. Gas supply
4. Electrical wiring
5. Intercoms
6. Windows
7. Roof
8. Elevators
9. Incinerators or waste compactors
10. Fire escapes
11. Interior stairways
* 12. Kitchens
13. Bathrooms
14. Floors
t 15. Ceilings and wall surfaces
16. Pointing or exterior surface repair as needed
17. 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 to secure a vacancy
has attempted by an act of arson in criminal conviction of the
resulting
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.
OB 95-2 Page 2 of 4
Reissued9/97
FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022
NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023
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
a finding that the remainder of the
for the duration of occupancy by the regulated tenants, notwithstanding
has been substantially rehabilitated and qualifies for exemption from regulation.
building
II. Prior Opinion
DHCR recognizes the very financial
significant commitment that a substantial rehabilitation necessitates.
Accordingly, an owner to DHCRfor an prior opinion that the building qualities for the
may apply advisory
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
owners are encouraged to apply for an
they may do so at any time prior to commencement of the rehabilitation,
prior opinion at or about the time that they seek appropriate governmental approval for the rehabilitation
advisory
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 These may include an
in the building.
itemized description of replacements and installations, copies of approved
building plans, architect's or general
contractor's statements, contracts for work performed, appropriate govemment 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 other-
wise result, consideration will be given to the documentation which may be required.
Occupancy"
IV. "Constructive 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
occupancy,"
vacate the housing accommodation. Such vacate order may create a "constructive 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 restora-
tion of the housing accommodation to a habitable condition. Where the building has been substantially rehabili-
tated, 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
occupied"
accommodations in the which are not or occupied
housing building "constructively actually by a
previously rent regulated tenant. In addition, the exemption will also to a occupied
apply constructively 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.
OB 95-2 Page 3 of 4
Reissued9/97
FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022
NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023
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.
rehabilitation"
It should be noted that the term "substantial 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 from rent stabilization. It is the latter which is the subject of this
building
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 where there has been a substantial increase in
housing accommodation
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
rent,"
applicable base date. Such a finding may entitle the owner to charge a market or"first 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 DHCR will not thereafter enter-
basis, not withstanding occupancy by subsequent tenants.
tain 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
OB 95-2 Page 4 of 4
Reissued9/97
Preview
FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022 NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023 Operational Bulletin 95-2 Division of Housing and Community Renewal Office of Rent Administration Operational Bulletin 95-2 (December 15, 1995) Substantial Rehabilitation This Operational Bulletin is issued pursuant to the Emergency Tenant Protection Regulations (TPR) adopted underthe 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) the circumstances under which the agency will find that a building has been substantially rehabilitated regarding 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 and RSC 2500.9(e) section 2520.11(e). Thisdocument is being reissued for informational purposes only. Theonginal document which contains signatures of authorization is on ñle at DHCR's Office of Rent Administration. Reissued9/97 FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022 NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023 I. Criteria DHCR will find that a building has been substantially rehabilitated within the meaning of TPR section and is therefore exempt from coverage under the ETPA or the RSL, for 2500.9(e) and RSC section 2520.11(e), where the owner demonstrates, based upon the of the circumstances, that the rent stabilized properties totality criteria have been met: following and apartment on the following systems contained list must each A. At least 75% of the building-wide replaced with new systems. Additionally, all ceilings, and plasterboard or have been completely flooring areas must have been replaced; and ceiling, wall, and floor surfaces in wall surfaces in common if not replaced, must have been made as new as determined by DHCR. apartments, List of Building-wide and Apartment Systems: 1. Plumbing 2. Heating . 3. Gas supply 4. Electrical wiring 5. Intercoms 6. Windows 7. Roof 8. Elevators 9. Incinerators or waste compactors 10. Fire escapes 11. Interior stairways * 12. Kitchens 13. Bathrooms 14. Floors t 15. Ceilings and wall surfaces 16. Pointing or exterior surface repair as needed 17. 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 to secure a vacancy has attempted by an act of arson in criminal conviction of the resulting 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. OB 95-2 Page 2 of 4 Reissued9/97 FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022 NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023 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 a finding that the remainder of the for the duration of occupancy by the regulated tenants, notwithstanding has been substantially rehabilitated and qualifies for exemption from regulation. building II. Prior Opinion DHCR recognizes the very financial significant commitment that a substantial rehabilitation necessitates. Accordingly, an owner to DHCRfor an prior opinion that the building qualities for the may apply advisory 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 owners are encouraged to apply for an they may do so at any time prior to commencement of the rehabilitation, prior opinion at or about the time that they seek appropriate governmental approval for the rehabilitation advisory 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 These may include an in the building. itemized description of replacements and installations, copies of approved building plans, architect's or general contractor's statements, contracts for work performed, appropriate govemment 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 other- wise result, consideration will be given to the documentation which may be required. Occupancy" IV. "Constructive 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 occupancy," vacate the housing accommodation. Such vacate order may create a "constructive 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 restora- tion of the housing accommodation to a habitable condition. Where the building has been substantially rehabili- tated, 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 occupied" accommodations in the which are not or occupied housing building "constructively actually by a previously rent regulated tenant. In addition, the exemption will also to a occupied apply constructively 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. OB 95-2 Page 3 of 4 Reissued9/97 FILED: NEW YORK COUNTY CLERK 08/15/2023 09:21 AM INDEX NO. 150993/2022 NYSCEF DOC. NO. 309 RECEIVED NYSCEF: 08/15/2023 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. rehabilitation" It should be noted that the term "substantial 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 from rent stabilization. It is the latter which is the subject of this building 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 where there has been a substantial increase in housing accommodation 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 rent," applicable base date. Such a finding may entitle the owner to charge a market or"first 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 DHCR will not thereafter enter- basis, not withstanding occupancy by subsequent tenants. tain 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 OB 95-2 Page 4 of 4 Reissued9/97