DHCR FACT SHEET #11
Division of Housing and Community Renewal

RENT INCREASES FOR MAJOR CAPITAL IMPROVEMENTS (MCI)

When owners make improvements or installations to a building
subject to the rent stabilization or rent control laws, they may
be permitted to increase the rent based on the actual, verified
cost of the improvement.

To qualify as an MCI, the improvement or installation must:

1.  meet depreciation standards of the Internal Revenue Code
    other than for ordinary repairs;

2.  be for the operation, preservation and maintenance of the
    building;

3.  directly or indirectly benefit all tenants; and,

4.  meet the requirements set forth in the Division of Housing
    and Community Renewal's (DHCR) useful life schedule.

To be eligible for a rent increase, the MCI must be a new
installation and not a repair to old equipment. For example, an
owner may receive an MCI increase for a new boiler or a new roof
but not for a repaired or rebuilt one. Some procedures qualify as
MCI's as well, such as "pointing" and "waterproofing." The NYC
Rent Stabilization Code includes a partial list of installations
that qualify for MCI rent increases. The RSC also stipulates that
applications for MCI rent increases must be filed within two
years of the installation. The two year statute of limitations
does not apply to applications filed prior to implementation of
the RSC, on May 1, 1987.

When the owner submits an MCI rent increase application to the
DHCR, the Division notifies the tenants and gives them an
opportunity to submit objections to the application. The owner
may either keep a copy of the application with supporting
documentation on the premises so that tenants can examine it or,
a copy with supporting documentation will be available at DHCR
for tenant review. The tenants' responses are considered prior to
a final determination.

The DHCR will issue an order either granting an increase in whole
or in part or denying the increase. DHCR computes the rent
increase for a rent stabilized or rent controlled apartment based
upon a five-year period of amortization of the verified costs of
the MCI. The rent increase is a permanent addition to the legal
regulated rent and does not drop off after the five-year period.
The tenant's increase is based upon a per room amount. As a
result of recent legislation, installations beginning or
contracts entered into on or after June 29, 1990 will be
amortized over a seven year period.

No increase may be charged or collected unless and until DHCR
issues an order approving the Increase.

In addition, an owner cannot collect an MCI increase from a
tenant for whom DHCR has determined that "required services" are
not being maintained; or from a tenant who has a rent reduction
order in place. No MCI rent increase will be approved while a
building-wide service reduction order is in effect. Also, if DHCR
has an outstanding finding of harassment, the Division will not
grant an increase for the affected apartment(s) and/or
building(s) .

For rent stabilized apartments in NYC, the rent increase
collectible in any one year may not exceed 6% of the tenant's
rent, as listed on the schedule of monthly rental income filed
with the owner's application, for the permanent prospective
increase and another 6% of that listed for the temporary
retroactive portion. The temporary retroactive increase covers
the time period between the tenant's date of notification an the
agency's approval order. Increases above the 6% cap can be spread
forward to future years. For all rent controlled apartments and
for stabilized apartments outside NYC, the permanent increase
collectible in any one year may not exceed 15% of the tenant's
rent as of the issue date of the order. There is no retroactive
portion.

For rent stabilized apartments in NYC, the MCI rent increase is
generally effective as of the first rent payment date 30 days
after the tenants are served with the owner's application.

For all other regulated apartments, the increase takes effect on
the first rent payment date after the issuance of the order
granting the increase.

If the NYC apartment owner receives a tax abatement (J-51) for
the major capital improvement, the rent increase is offset by a
portion of the value of the tax abatement. For rent controlled
apartments in buildings receiving these benefits, the MCI
increase is off set by 2/3 for the length of the tax benefit. For
rent stabilized apartments where work began after June 28, 1988,
the increase is offset 50% for the length of the tax benefit.

A senior citizen with a valid Senior Citizen Rent Increase
Exemption (SCRIE) is exempt from paying any portion of the MCI
increase that would raise their total rent to over 1/3 of their
total disposable income. However, if the owner requests it, any
increase in the security deposit resulting from the MCI rent
increase must be paid by SCRIE participants.

If an apartment(s) is vacant or becomes vacant while the MCI
application is pending, the owner must notify any incoming tenant
that their rent will increase if the MCI application is approved.
Failure to indicate this anticipated rent increase on the vacancy
lease will result in no MCI increase being approved for this
apartment until the lease is renewed. If an owner charges the
increased rent without this proper notification, they risk
overcharge penalties.

A satisfactory vacancy lease clause is one which provides,

  "application for a major capital improvement rent increase has
  been filed, or will be filed shortly, with DHCR based upon the
  following work: ___________________________ Docket #__________

  Should DHCR issue an order granting the rent increase, the rent
  quoted in this lease will be increased."

If DHCR approves an application for a rent increase based on a
major capital improvement, the owner may charge the increase
during the term of an existing renewal lease only if the lease
contains a clause specifically authorizing the owner to do so. A
satisfactory lease clause would provide, "The rent established in
this renewal lease may be increased or decreased following an
order of DHCR or the Rent Guidelines Board."

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DHCR Fact Sheets (series of thirty) are issued by the New York
State Division of Housing and Community Renewal (DHCR) as plain-
english informational publications.  For official agency
policies, see DHCR Policy Statements, Advisory Opinions and
Operational Bulletins. Also refer to the Rent Stabilization Code,
the Rent Stabilization Law and various Rent Control Statutes.

Electronic versions of these 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 may obtain true copies of these documents from
DHCR.

Every attempt has been made to conform to the original Fact
Sheets 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
and/or proprietary features are copyright 1994, 1995 and 1996 by
TenantNet. These documents may be freely distributed provided they
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informational banner referencing TenantNet as the original provider.
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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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