Determination of Feasibility and Conditions Precedent to Making a Loan.
28 RCNY § 2-04
in effect§ 2-04 Determination of Feasibility and Conditions Precedent to Making a Loan.
(a) Low income tenancy and rent increases.
(1) Covenant on low income tenancy. No loan shall be made unless the owner covenants in writing that so long as any part of the loan shall remain unpaid:
(i) Upon vacancy, each dwelling unit in the multiple dwelling shall be available solely for occupancy by persons or families of low income; and
(ii) No person living in the multiple dwelling at the time the loan is made shall be required to move because of the rehabilitation or improvement financed by the loan, other than temporarily during the course of construction.
(2) Rent increases.
(i) The Department, in its sole discretion, shall have the option to adjust the rent for each rental unit within the multiple dwelling pursuant to authority granted by subdivision 7 of § 452 of the Private Housing Finance Law of the State of New York. The total rental adjustment shall be in an amount not in excess of the debt service (both principal and interest) calculated on that portion of the loan which the Department attributes to the financing of the rehabilitation of the rental units as if such loan were to be repaid over a self-amortizing term to be determined by HPD which shall be not less than ten (10) years for loans averaging five thousand ($5,000) dollars or less per dwelling unit, and not less than fifteen (15) years for loans exceeding five thousand ($5,000) dollars per dwelling unit. The initial rental adjustment for each rental dwelling unit will be calculated by dividing the total rental adjustment by the total number of rental rooms. Such adjustment shall be applied equally on a per room per month basis, except that a greater adjustment may be allowed for vacant units. For loans which closed prior to the effective date of these regulations, unequal adjustments may be allowed if HPD sends notification of such rent adjustment to the tenants prior to the closing of the loan. For rents to be adjusted under the provisions of this subparagraph, the owner(s) of the premises must agree to waive any and all increases which are attributable to the completed rehabilitation work financed by the 8A loan or required pursuant to the Housing Repair and Maintenance Agreement to which he might be entitled under the Administrative Code Chapters 4 and/or 5 of Title 26. Rental adjustments under this subparagraph shall have no effect upon the status of
(A) rent stabilized units which will remain stabilized with the rental adjustment added to the then current rent and subject to continuing lease increases granted by the appropriate governmental authority, or
(B) rent controlled units which will remain controlled with the rental adjustment added to the then current maximum base rent and maximum collectible rent and subject to continuing increases in the maximum base rent and maximum collectible rent granted by the appropriate governmental authority. Nothing contained in this subparagraph (2)(i) shall affect the time period for the repayment of the loan as determined by the Department under 28 RCNY § 2-02(d).
(ii) As an alternative to the rental adjustment provided under the preceding subparagraph (2)(i) the Department may in appropriate circumstances restructure the rents under § 33.9 of the New York City Rent and Eviction Regulations provided the rents as restructured do not exceed the average rent prevailing in local projects of municipally-aided limited- profit housing companies aided under Article II of the Private Housing Finance Law of the State of New York, the occupancy of which commenced on or after May 18, 1970, or in the case of a single room occupancy housing, seventy-five (75%) percent of the Moderate Rehabilitation Fair Market Rent, as defined in these regulations, for 0-bedroom units.
(3) Status of apartments. Loans may be made irrespective of the current status of control, stabilization or decontrol of dwelling units and shall not have any effect upon such present or future status of the units.
(4) Tenant notification. Prior to final approval of the loan, the owner shall be required to give tenants residing in the multiple dwelling written notification of the proposed rehabilitation or improvement and the possibility of rent increases, in form specified or approved by the Department. The owner shall submit an affidavit to the Department certifying that such written notification has been given to the tenants. The Department shall notify the tenants in writing no later than twenty-eight (28) calendar days prior to the loan closing of the nature of the proposed rehabilitation or improvement and any projected rent increases. The tenants may forward their comments or objections regarding the proposed loan to the Department for consideration of all relevant issues. The Department, in its discretion, may hold or require the owner to hold at least one public meeting with the tenants or their representatives to discuss the proposed rehabilitation or improvement and any projected rent increases. The Department may, as an alternative to its twenty-eight day notification, hold a tenant meeting if at least three (3) business days before the meeting a copy of the Department's notification letter is sent by ordinary mail to all tenants. If rents are to be adjusted pursuant to 28 RCNY § 2-04(a)(2)(i), the Department shall send by ordinary mail a written notice of the approximate expected rent increase after the completion of the rehabilitation or improvement and prior to the establishment of the rental adjustments. After this notification, tenants may again forward their comments or objections to the Department for consideration. The Department shall consider any comments or objections that it considers to be relevant to the rent increases and which are received within ten (10) days after the date of mailing (by deposit in a general or branch post office or other official depository of the United States Postal Service) of the Department's notification.
(b) Real estate taxes, assessments, water and meter charges and sewer rents. The owner shall make full and timely payment of current real estate taxes, assessments, water and meter charges and sewer rents during the term of the loan. At the time of the loan closing real estate taxes, assessments, water and meter charges or sewer rents may, with the consent of the Department, be in arrears, provided all such arrears, including any interest and penalties thereon, shall be discharged by the owner subsequent to the loan closing pursuant to arrangements satisfactory to the Department. The Department may require under terms and provisions as it shall prescribe, that the owner place money in escrow on a monthly basis to cover any outstanding real estate taxes, assessments, water and meter charges and sewer rents, accrued interest and penalties, or payments of principal and interest on the loan and one-twelfth of the prospective annual real estate taxes, assessments, water and meter charges, sewer rents and premiums for insurance. Unless otherwise required by the Department as a condition precedent to the loan and subject to all provisions of this chapter, the owner may apply for any rent adjustment or other benefits, including tax exemption and/or tax abatement, to which he, as a result of the rehabilitation or improvement, may become entitled under the provisions of the Administrative Code and all regulations promulgated thereunder.
(c) Relationship of loan to other mortgages.
(1) Existing mortgages. Loans may be made with respect to a multiple dwelling encumbered by mortgages provided no mortgage is in default, except by reason of the deteriorated physical condition of the building, if such condition and default shall be remedied by the proposed rehabilitation or improvement.
(2) Modification agreement. A mortgage modification or extension agreement may be required from the holder of a prior mortgage against the building where such mortgage secures a loan which is not self-liquidating and matures prior to the final payment date of the proposed loan.
(3) Subordination of existing liens.
(i) An existing mortgage or other lien held by the owner or a relative of the owner, or an officer, director, stockholder or partner of the owner, or a relative of such persons, or a party which is associated or affiliated with or a subsidiary of the owner shall be subordinated to the lien of the mortgage given to secure the City loan.
(ii) A secured loan made by a private non-institutional lender, if made in conjunction with a loan made by the City for the partial financing of the rehabilitation, shall be subordinated to the lien of the mortgage given to secure the City loan.
(d) Removal of violations and management.
(1) Removal of violations. All multiple dwellings assisted under this Program shall be brought into substantial compliance with the Multiple Dwelling Law and the Housing Maintenance Code within a period of time to be determined by the Department but in no event later than one (1) year from the date set forth in the loan documents for the commencement of the payment of principal and interest on the loan.
(2) Additional work. The Department may require that the owner correct conditions and perform work in the premises in addition to that set forth in the Building Improvement Loan Agreement.
(3) Management. No loan shall be made unless the Department shall have determined that the owner has evidenced an ability to manage the building in accordance with good real estate industry practice. In appropriate cases, the Department may require a written management plan, acceptable to the Department, to ensure proper procedures for management of the property, including rent collection, supervision of building employees, payment of bills for maintenance and operation and handling tenant complaints.
(e) Agency determination of feasibility.
(1) Code compliance. No loan shall be made unless the rehabilitation or improvement will result in the elimination of a substandard or unsanitary condition(s) existing in the multiple dwelling in violation of the Multiple Dwelling Law or the Housing Maintenance Code, or will provide for the replacement and rehabilitation of the heating, plumbing, electrical and related systems or other improvements if reasonably necessary to prolong the useful life of the dwelling. In either case, the estimated useful life of the multiple dwelling after rehabilitation shall not be less than the term of the loan.
(2) Economic viability. No loan shall be approved unless after the rehabilitation or improvement and any restructuring of rents as set forth in 28 RCNY § 2-04(a), or any rent adjustment or other benefits to which the owner may otherwise become entitled under the provisions of the Administrative Code, or otherwise, as a result of the rehabilitation or improvement, the building's projected revenues are sufficient to meet all maintenance and operating expenses, real estate taxes, water rates, sewer rents, vacancy and collection losses, debt service and return on equity.
Source: City of New York, Charter, Administrative Code and Rules (American Legal Publishing XML export, codelibrary.amlegal.com)URL: https://codelibrary.amlegal.com/codes/newyorkcity/latest/NYCrules/0-0-0-53608Fetched: 10/24/2026