STATE OF NEW YORK ________________________________________________________________________ 2276--A 2023-2024 Regular Sessions IN SENATE January 19, 2023 ___________ Introduced by Sens. KAVANAGH, CLEARE, FELDER, GOUNARDES, HOYLMAN-SIGAL, SEPULVEDA -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- committee discharged and said bill committed to the Committee on Housing, Construction and Community Development -- reported favorably from said committee and committed to the Committee on Finance -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said commit- tee AN ACT to amend the multiple dwelling law and the private housing finance law, in relation to establishing a program to address the legalization of specified basements and cellars and the conversion of other specified basements and cellars in a city with a population of one million or more The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The multiple dwelling law is amended by adding a new arti- 2 cle 7-D to read as follows: 3 ARTICLE 7-D 4 LEGALIZATION AND CONVERSION OF BASEMENTS AND CELLARS 5 Section 288. Definitions. 6 289. Basement and cellar local laws and regulations. 7 290. Tenant protections in inhabited basements and cellars. 8 § 288. Definitions. As used in this article, unless the context or 9 subject matter requires otherwise, the following terms shall have the 10 following meanings: 11 1. The term "inhabited basement or cellar" means a basement or cellar 12 unlawfully occupied as a residence by one or more tenants on or prior to 13 the effective date of this article; 14 2. The term "rented" means leased, let, or hired out, with or without 15 a written agreement; and EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD03476-02-3
S. 2276--A 2 1 3. The term "tenant" means an individual to whom an inhabited basement 2 or cellar dwelling unit is rented. 3 § 289. Basement and cellar local laws and regulations. 1. Notwith- 4 standing any other provision of state or local law to the contrary, in a 5 city with a population of one million or more, the local legislative 6 body may, by local law, establish a program to address, provided that 7 health and safety are protected, (a) the legalization of specified 8 inhabited basements and cellars in existence prior to the effective date 9 of this article through conversion to legal dwelling units, and (b) the 10 conversion of other specified basements and cellars in existence prior 11 to the effective date of this article to legal dwelling units. The local 12 law authorized by this section, and any rules or regulations promulgated 13 thereunder, shall not be subject to environmental review, including, but 14 not limited to, environmental review conducted pursuant to article eight 15 of the environmental conservation law and any state and local regu- 16 lations promulgated thereunder. 17 2. The program established by such local law may provide to an owner 18 who converts a basement or cellar in accordance with a local law author- 19 ized by this article or who otherwise abates the illegal occupancy of a 20 basement or cellar: (a) amnesty from any civil or administrative liabil- 21 ity, citations, fines, penalties or any other enforcement of or prose- 22 cution for civil violations of this chapter, other state law or local 23 law or rules, and the zoning resolution of such city, and (b) relief 24 from any outstanding civil judgments issued in connection with any such 25 violation of such laws, rules or zoning resolution issued before the 26 effective date of this article; provided, however, that such local law 27 shall require that such amnesty or relief shall be available only to an 28 owner that has submitted an application for a conversion by a date 29 certain subsequent to the effective date of such local law and that such 30 date shall not be later than ten years after the effective date of such 31 local law. 32 3. (a) Such local law may supercede any provision of local law or rule 33 to facilitate the conversion of a specified inhabited basement or cellar 34 or other specified basement or cellar in existence prior to the effec- 35 tive date of this article into a lawful dwelling unit. For the purposes 36 of this program, the local law adopted by the legislative body of such 37 municipality shall be no less stringent than the relevant standards or 38 specifications of the uniform fire prevention and building code and 39 state energy conservation construction code applicable to the conversion 40 of basements and cellars to habitable dwelling units in municipalities 41 other than a city with a population of one million or more, unless such 42 legislative body determines that the application of such standards or 43 specifications would present practical difficulties that impede the 44 purposes of this article and includes in such local law an alternative 45 standard or specification that such legislative body determines to be 46 sufficient to protect public safety. 47 (b) Such local law may supersede the following provisions of this 48 chapter: sections twenty-six, twenty-eight, thirty, thirty-one, thirty- 49 two, thirty-three, thirty-four, thirty-five, thirty-six, thirty-seven, 50 fifty, fifty-a, fifty-one, fifty-two, fifty-four, fifty-six, sixty-one, 51 sixty-two, sixty-three, sixty-four, sixty-five, sixty-eight, and seven- 52 ty-six, and articles four, five and six. 53 (c) Any amendment of the zoning resolution necessary to enact such 54 program shall be subject to a public hearing at the planning commission 55 of such locality, and approval by such commission and the legislative 56 body of such local government, provided, however, that it shall not
S. 2276--A 3 1 require environmental review, including, not limited to, environmental 2 review conducted pursuant to article eight of the environmental conser- 3 vation law and any state and local regulations promulgated thereunder, 4 or any additional land use review. 5 § 290. Tenant protections in inhabited basements and cellars. 1. The 6 program authorized by this article shall require an application to make 7 alterations to legalize an inhabited basement or cellar be accompanied 8 by a certification indicating whether such unit was rented to a tenant 9 on the effective date of this article, notwithstanding whether the occu- 10 pancy of such unit was authorized by law. An agency or office of a city 11 where the program has been established may not use such certification as 12 the basis for an enforcement action for illegal occupancy of such unit, 13 provided that nothing contained in this article shall be construed to 14 limit any agency or office from issuing a vacate order for hazardous 15 conditions. 16 2. The local law authorized by this article shall provide that a 17 tenant in occupancy at the time of the effective date of this article 18 who is evicted or otherwise removed from such unit as a result of an 19 alteration necessary to bring an inhabited basement or cellar into 20 compliance with the standards established by the local law authorized by 21 this article, shall have a right of first refusal to return to such unit 22 as a tenant upon its first lawful occupancy as a legal dwelling unit, 23 notwithstanding whether the occupancy at the time of the effective date 24 of this article was authorized by law. Such local law shall specify how 25 to determine priority when multiple tenants may claim such right. 26 3. A tenant unlawfully denied a right of first refusal to return to a 27 legal dwelling unit, as provided pursuant to the local law authorized by 28 this article, shall have a cause of action against the owner of such 29 dwelling unit in any court of competent jurisdiction for compensatory 30 damages or declaratory and injunctive relief as the court deems neces- 31 sary in the interests of justice, provided that such compensatory relief 32 shall not exceed the annual rental charges for such legal dwelling unit. 33 4. Notwithstanding the local emergency housing rent control act of 34 1962 as amended, the local law authorized by this article shall include 35 protections against eviction and limitations on rent increases for base- 36 ment or cellar dwelling units that undergo legalization, including limi- 37 tations on rent increases for tenants returning to such units pursuant 38 to the provisions of subdivision two of this section. 39 § 2. The private housing finance law is amended by adding a new arti- 40 cle 8-C to read as follows: 41 ARTICLE VIII-C 42 LOANS TO OWNERS OF ONE TO FOUR UNIT PRIVATE AND MULTIPLE DWELLINGS 43 Section 480. Policy and purposes of article. 44 481. Definitions. 45 482. Loans to owners. 46 483. Conditions precedent to making loans to owners. 47 484. Servicing of loans by banking institutions and loan servic- 48 ing companies. 49 485. Interest reduction subsidies. 50 486. Mortgage recording tax exemption. 51 487. Rules and regulations. 52 488. Source of funds. 53 § 480. Policy and purposes of article. It is hereby declared and found 54 that there exists in cities with a population of one million or more a 55 seriously inadequate supply of safe and sanitary dwelling units, partic- 56 ularly for persons of low and moderate income. It further is found that
S. 2276--A 4 1 there exists in such cities many basements and cellars in one to four 2 unit dwellings, some of which are inhabited unlawfully, that could be 3 converted into safe and sanitary lawful dwelling units. It further is 4 found that such conversion and any associated rehabilitation or improve- 5 ment of such dwellings cannot be readily accomplished without public aid 6 in the form of low interest loans or grants to owners of such dwellings. 7 The creation of lawful and habitable dwelling units in basements and 8 cellars of one to four unit dwellings is hereby declared a public 9 purpose and a municipal purpose for which public monies may be loaned or 10 granted. In order to further such purpose, it is hereby declared that 11 additional provisions should be made to provide public monies for inter- 12 est reduction subsidies for private loans made by private investors for 13 such rehabilitation. The necessity in the public interest for the 14 provisions of this article is hereby declared as a matter of legislative 15 determination. 16 § 481. Definitions. 1. "Agency" shall mean the department of housing 17 preservation and development of the city of New York or any successor 18 thereto. 19 2. "Banking organization" shall mean any corporation, association or 20 organization organized under the banking laws of New York state or the 21 United States which is authorized to transact business in this state. 22 3. "Basement" shall have the same meaning as provided in subdivision 23 thirty-eight of section four of the multiple dwelling law. 24 4. "Cellar" shall have the same meaning as provided in subdivision 25 thirty-seven of section four of the multiple dwelling law. 26 5. "City" shall mean a city with a population of one million or more. 27 6. "Climate resiliency improvements" shall mean improvements for the 28 purpose of protecting land or any structures thereon from damage result- 29 ing from or which may result from changes in climate, including, but not 30 limited to, extreme weather events, abnormal temperatures, and sea level 31 rise, or of reducing the impact of the operation of such structures on 32 climate change, including, but not limited to, improvements that reduce 33 energy consumption or promote the efficient use of natural resources. 34 7. "Existing multiple dwelling" shall mean a multiple dwelling as 35 defined in section four of the multiple dwelling law that is in exist- 36 ence on the date upon which an application for a loan pursuant to this 37 article is received by the agency. 38 8. "Existing private dwelling" shall mean a private dwelling as 39 defined in section four of the multiple dwelling law that is in exist- 40 ence on the date upon which an application for a loan pursuant to this 41 article is received by the agency. 42 9. "Federal grant funds" shall mean any grants received from the 43 federal government for community development activities or for the reha- 44 bilitation or conservation of private or multiple dwellings. 45 10. "Loan" shall mean a loan or a grant made by the city pursuant to 46 section four hundred eighty-two of this article, provided, however, that 47 provisions of this article concerning the repayment or forgiveness of, 48 or security for, a loan shall not apply to any grant made pursuant to 49 this article. 50 11. "Owner" shall mean an individual, a partnership, a corporation or 51 other entity, including, but not limited to, a trust, or a joint tenan- 52 cy, tenancy in common or tenancy by the entirety holding record or bene- 53 ficial title in fee simple to an existing private or multiple dwelling 54 and the real property upon which it is situated, or the lessee thereof 55 under a lease having an unexpired term of at least thirty years. "Owner"
S. 2276--A 5 1 shall be deemed to also include a cooperative corporation or a condomin- 2 ium association. 3 12. "Private investor" shall mean a banking organization, foundation, 4 public benefit corporation, labor union, credit union, employers' asso- 5 ciation, veterans' organization, college, university, educational insti- 6 tution, child care institution, hospital, medical research institute, 7 insurance company, trustee or fiduciary, trustees of a pension and 8 retirement fund or system, corporation, partnership, individual or other 9 entity or any combination of the foregoing, and shall include the United 10 States of America and any of its agencies and departments. 11 13. "Rehabilitation" shall mean the installation, replacement, or 12 repair of heating, plumbing, electrical and related systems or the elim- 13 ination of conditions dangerous to human life or detrimental to health, 14 including nuisances as defined in local housing or health codes or as 15 defined in section three hundred nine of the multiple dwelling law, or 16 other rehabilitation or general property and energy conservation 17 improvements. 18 14. "State grant funds" shall mean any grant received from the state 19 or any public benefit corporation for community development activities 20 or for the rehabilitation or conservation of private or multiple dwell- 21 ings. 22 § 482. Loans to owners. 1. Notwithstanding the provisions of any 23 general, special or local law, the city, acting through the agency, is 24 authorized: 25 (a) to make, or contract to make, loans to owners of one to four unit 26 existing private or multiple dwellings, subject to the limitation of 27 subdivisions two through seven of this section, in such amounts as shall 28 be required for the conversion of a basement or cellar in a one to four 29 unit private or multiple dwelling to a safe and sanitary lawful dwelling 30 unit and other rehabilitation of or improvements to such private or 31 multiple dwelling, including, but not limited to, climate resiliency 32 improvements, that the agency may determine are needed in such dwelling; 33 (b) to make temporary loans or advances to owners of one to four unit 34 existing private or multiple dwellings in anticipation of permanent 35 loans to such owners for the purposes described in paragraph (a) of this 36 subdivision; and 37 (c) to make or contract to make grants to any owner described in para- 38 graph (a) of this subdivision, on the same terms as permitted under such 39 paragraph for a loan. 40 2. Each loan shall be evidenced by a note executed by the owner of the 41 existing dwelling. Repayment of each such note shall be within a period 42 of forty years, provided that such period may be extended as the agency 43 may determine necessary to ensure the continued affordability or econom- 44 ic viability of the existing dwelling. The repayment shall be made in 45 such manner as may be provided in such note and contract, if any, in 46 connection with such loan, and may authorize such owner, with the 47 consent of the agency, to prepay the principal of the loan subject to 48 such terms and conditions as therein provided. In order to make any such 49 loan affordable to the owner, the agency may provide in such note and 50 contract that all of the outstanding principal of said loan may be self- 51 liquidated over a period of not less than fifteen years of continuous 52 compliance by the owner with a regulatory agreement or restrictive 53 covenant with or approved by the agency and upon the satisfaction of any 54 additional conditions specified therein. Such note and contract may 55 contain such other terms and provisions not inconsistent with the 56 provisions of this article as the agency may deem necessary or desirable
S. 2276--A 6 1 to secure repayment of the loan, the interest thereon, if any, and other 2 charges in connection therewith, and to carry out the purposes and 3 provisions of this article, including, but not limited to, providing 4 that the lien created by the note and mortgage, and, if applicable, any 5 regulatory agreement executed by such owner and agency or restrictive 6 covenant approved by such agency, may be recorded in an equal or subor- 7 dinate position, or subsequently made equal or subordinate, to a lien 8 recorded by any private investor against such existing dwelling. 9 3. The agency in its discretion may require that the owner execute, 10 acknowledge and deliver a uniform commercial code financing statement 11 for the real property improvement to be in such form as the agency shall 12 specify and in accordance with the requirements of section 9--502 of the 13 uniform commercial code of the state of New York. Said financing state- 14 ment shall be filed or recorded without charge in accordance with the 15 provisions of paragraph one of subsection (a) of section 9--501 of the 16 uniform commercial code, and from the date of such filing the city shall 17 have a lien against said real property improvement for the amount 18 advanced or so much thereof as remains unpaid together with the interest 19 thereon. Upon payment of all sums advanced by the city and interest 20 thereon, and upon demand of the then record owner of the real property, 21 the agency shall deliver a copy of the financing statement with an 22 endorsement thereon that the lien is satisfied. Upon filing of such copy 23 in the office where the financing statement was filed and upon payment 24 of the proper fee therefor, the lien of such financing statement shall 25 be discharged. 26 4. The agency may require the owner to execute a mortgage as security 27 for a loan in lieu of or in addition to a financing statement as 28 provided in subdivision three of this section. Such mortgage shall 29 contain such terms and provisions not inconsistent with the provisions 30 of this article as the agency shall deem necessary or desirable to 31 secure repayment of the loan. 32 5. Loans may be made with respect to a one to four unit private or 33 multiple dwelling encumbered by mortgages, provided no mortgage is in 34 default, except if such default shall be remedied by the proposed reha- 35 bilitation or improvement. 36 6. The agency may require the payment of charges by an owner of such 37 existing private or multiple dwelling in consideration for the financ- 38 ing, regulation, supervision and audit of such loan. Such charges shall 39 be paid into the treasury of the city requiring the charges and shall be 40 paid and deposited in the general fund of such city. 41 7. In making a loan under this article, the agency shall have the 42 power to participate in a loan made by any private investor. The agency 43 may enter into an agreement with a private investor to deposit funds 44 with such private investor to cover the agency's participation in loans 45 to owners of one to four unit existing private and multiple dwellings 46 with such funds advanced by such private investor to owners of such 47 existing dwellings. The portion of the loan funded by the agency may be 48 equal to or subordinate in lien to the portion of the loan funded by the 49 private investor and the note and contract may contain such terms with 50 respect to interest rate, if any, and time of payment of principal and 51 interest as determined by the agency. The agency may make provision, 52 either in the mortgage or mortgages or by separate agreement, for the 53 performance by the private investor of such services as are generally 54 performed by a banking institution which itself holds a mortgage, 55 including, without limitation, construction loan advances, construction 56 supervision, initiation of foreclosure proceedings, procurement of
S. 2276--A 7 1 insurance, and all other matters in connection with the financing, 2 supervision, regulation and audit of any such loan. In order to make the 3 loan affordable to the owner, the agency may provide an interest 4 reduction subsidy pursuant to section four hundred eighty-five of this 5 article, or may provide that all or part of the agency's portion of the 6 outstanding principal of any such participation loan may be self-liqui- 7 dated over a period of not less than fifteen years of continuous compli- 8 ance by the owner with a regulatory agreement or restrictive covenant 9 with or approved by the agency and upon the satisfaction of any addi- 10 tional conditions specified therein. 11 § 483. Conditions precedent to making loans to owners. 1. No such loan 12 shall be made to an owner of an existing private or multiple dwelling 13 unless such owner shall covenant in writing that so long as any part of 14 such loan shall remain unpaid or any requirement imposed as a condition 15 for making such loan that survives the repayment of such loan, includ- 16 ing, but not limited to, in a regulatory agreement executed pursuant to 17 subdivision two of this section or a restrictive covenant approved by 18 such agency, remains in effect: (a) the owner or managing agent or oper- 19 ator of such dwelling shall permit the duly authorized officers, employ- 20 ees, agents or inspectors of the agency to enter in or upon and inspect 21 such dwelling at all reasonable hours; (b) the agency by such duly 22 authorized representatives as aforesaid shall have full power to inves- 23 tigate into and order the owner of such dwelling to furnish such reports 24 and information as it may require concerning the conversion of the base- 25 ment or cellar in such dwelling and all other rehabilitation or improve- 26 ments funded with such loan and shall have full power to audit the books 27 of said owner with respect to such matters; and (c) if the basement or 28 cellar to be converted is in a multiple dwelling, the owner will submit 29 to the agency annually a statement of income and expenses of such dwell- 30 ing, in such form as shall be approved by the agency. 31 2. No such loan shall be made to an owner of an existing private or 32 multiple dwelling unless the agency and such owner shall have executed a 33 regulatory agreement that includes protections against eviction and 34 limitations on rent increases applicable to each basement or cellar 35 dwelling unit for which the loan is to be made. 36 3. The agency shall have the power to impose additional terms and 37 conditions precedent to make such loans. 38 § 484. Servicing of loans by banking institutions and loan servicing 39 companies. 1. The agency may make provision in the note and loan agree- 40 ment or by separate agreement for the performance by one or more banking 41 institutions of such services as are generally performed by any such 42 bank itself owning and holding such a loan and as may be approved by the 43 superintendent of financial services for which services a bank may make 44 and collect such service charges as the superintendent shall prescribe 45 or approve. 46 2. The agency may make provision in the note and loan agreement or by 47 separate agreement for the servicing of such loans by a loan servicing 48 company or other qualified entity, as determined by the agency, and such 49 services may include, but not be limited to, the collection of the debt 50 services on such loans and the establishment, administration, and 51 distribution of an escrow account for the payment of the owner's real 52 estate taxes, sewer and water rents and fire insurance. 53 § 485. Interest reduction subsidies. Notwithstanding the provisions of 54 any general, special or local law, the city, acting through the agency, 55 is authorized to provide, or contract to provide, interest reduction 56 subsidies for loans made by private investors to owners of one to four
S. 2276--A 8 1 unit existing private or multiple dwellings pursuant to paragraph (a) of 2 subdivision one of section four hundred eighty-two of this article, if 3 such owners would have been eligible under the provisions of this arti- 4 cle for a loan made by the city pursuant to this article. 5 § 486. Mortgage recording tax exemption. Notwithstanding any incon- 6 sistent provision of law, mortgages to secure a loan made pursuant to 7 the provisions of this article shall be exempt from the mortgage record- 8 ing taxes imposed by article eleven of the tax law. 9 § 487. Rules and regulations. The agency may promulgate rules and 10 regulations to carry out the provisions of this article. 11 § 488. Source of funds. The city may utilize federal grant funds, 12 state grant funds or any municipal funds to make loans and to provide 13 interest reduction subsidies pursuant to this article. 14 § 3. This act shall take effect immediately.