Note: MCIs are now prorated over eighty-four months instead of
sixty months. In a decision in **Bryant Avenue v. Koch**, the NYS
Court of Appeals determined on December 8, 1994 that the combined
retroactive and prospective MCI rent increases cannot exceed 6%.
This decision is available in the TenantNet Court of Appeals section.
------------------------------------------------------------


DHCR FACT SHEET #24
Division of Housing and Community Renewal

MAJOR CAPITAL IMPROVEMENTS (MCI)
QUESTIONS AND ANSWERS FOR OWNERS


Q. WHAT IS AN 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
MCIs as well, such as "pointing" and "waterproofing" a building.
The NYC Rent Stabilization Code (RSC) 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.

Q. WHO MAY APPLY FOR A MCI RENT INCREASE?

Owners of rent regulated buildings may apply for an increase upon
completion and payment for the installation or improvement and
application or procurement of all required approvals and/or
certificates of operation. No increase will be issued until final
approvals are received.

In the event that payment is not complete at the time of filing
due to a ban or an installment agreement, that documentation must
be included in the application. DHCR will return incomplete
applications prior to docketing.

Q. WILL VIOLATIONS AFFECT THE GRANTING OF AN MCI?

DHCR will not grant an owner an increase, in whole or in part, if
the owner is not maintaining all required services, or if any
immediately hazardous violations are outstanding from any
municipality, county, State or Federal law relating to the
maintenance of such services. (Certain tenant-caused violations
may be excepted.) DHCR may grant an application upon condition
that such services will be restored within a reasonable time. No
MCI rent increase will be approved if there is an outstanding
building-wide service reduction order in effect, unless the owner
tiled for a restoration and DHCR issued a positive determination.

Q. WHO SHOULD FILE FOR COOPERATIVES/CONDOMINIUMS?

If a cooperative/condominium corporation has rent regulated
tenants and is eligible to file for an MCI increase, the
application must be filed by the managing agent of the
corporation and all proprietary lessees (shareholders) who have
rent regulated tenants including the sponsors, or it must be
tiled by a proprietary lessee on behalf of and with the written
consent of all proprietary lessees with rent regulated tenants.
Applications will not be accepted from individual apartment
owners on their own behalf.

Q. HOW DOES AN OWNER APPLY FOR AN MCI AND WHAT KIND OF
DOCUMENTATION IS NEEDED?

An owner must file an OWNER'S APPLICATION FOR RENT INCREASE BASED
ON MAJOR CAPITAL IMPROVEMENTS (DHCR form RA-79) available from
DHCR Borough Offices or from the main office in Gertz Plaza, 92-
31 Union Hall St. Jamaica, NY 11433.

The completed application must contain:

1.  an itemized list of the work performed;

2.  a certification of the cost of the work;

3.  proof of payment of the certified work;

4.  a sworn affidavit that all the work certified was performed
    in compliance with all building, zoning, and safety laws;

5.  copies of all necessary approvals from applicable government
    agencies for the work done;

6.  an affirmation of maintenance of services and a schedule of
    monthly rents.

An owner must tile the application no later than two years after
the completion of the installation or improvement.

Q. HOW SHOULD THE COST RECORDS FOR THE MCI BE KEPT?

In order to speed processing, owners are strongly urged to pay
for all MCI costs by check. If cash payments are made for
allowable MCI expenses, they must be supported by adequate
documentation. Evidence would include: signed paid receipts, a
contractor's affidavit, bank records, itemized IRS tax returns,
financial books and records for the building, and original
estimates, bids or contracts. Where the owner fails to submit any
evidence of payment, the claimed cost of the item will be
disallowed.

Q. HOW DOES DHCR PROCESS AN MCI APPLICATION?

After DHCR dockets an application, they notify the tenants of the
rent increase request and give them an opportunity to comment.
The owner must either keep a copy of the application on the
premises so that tenants can examine it, or a copy of the
application with all supporting documentation will be available
at DHCR for tenant review. DHCR will review the application,
consider the comments by tenants and may request additional
documentation or schedule an inspection of the building if deemed
necessary. When tenants provide comments, they are instructed to
comment on building and apartment problems pertaining to the MCI
as specifically as possible.

In the event that 75% of the tenants in occupancy agree in
writing to the owner's request for the MCI increase, DHCR will
process the application on an expedited basis.

Expedited applications are usually processed within 90 days,
unless any tenant raises relevant objections requiring an
investigation.

When processing is complete, DHCR will issue an order either
granting an increase for the total amount or a partial amount, or
denying the request. Tenants will be notified by DHCR of the
amount of the increase per room and the terms and conditions of
the increase.

Q. WHEN DOES AN MCI RENT INCREASE BECOME EFFECTIVE?

For rent stabilized apartments in NYC, the MCI rent increase
granted is generally effective as of the first rent payment date
30 days after the tenant is notified by DHCR that a complete
application was filed. For all other regulated apartments, the
increase takes effect on the first rent payment date after the
issuance of the order granting the increase.

Q. HOW MUCH OF AN MCI RENT INCREASE OVER BASE RENT CAN YOU
EXPECT?

For rent stabilized apartment in NYC, the rent increase 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 owners
application, for the permanent prospective increase, and another
6% of that listed rent for the temporary retroactive portion. The
tenant is not required to pay the retroactive portion in a lump
sum but can pay it in equal monthly installments.

Retroactive payments are those amounts owed between the effective
date and the issue date of the DHCR order granting the MCI. They
apply only to rent stabilized tenants and represent a temporary
increase until the full amount is paid.

Prospective payments are those amounts owed as of the first rent
payment date after the order is issued. These payments reflect a
permanent rent increase now a part of the base rent. Both
retroactive and prospective increase are based on the increase
per room as listed on the MCI application.

For all rent controlled apartments and 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.

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, any increase in the security deposit resulting from the
MCI rent increase must be paid by SCRIE participants.

Q. CAN AN OWNER GET AN MCI IF THEY HAVE ALREADY RECEIVED A J-51
FROM THE CITY OF NEW YORK?

If the owner of apartments in New York City receives a tax
abatement (J-51 ) for the MCI, the rent increase is offset by a
portion of the value of the tax abatement. For rent controlled
apartments in these buildings the MCI increase is offset by 213
for the length of the tax benefit. For work begun after June 28,
1988 in rent stabilized apartments, the rent increase is offset
50% for the length of the tax benefit.

Q. HOW DO TENANTS AND OWNERS CHALLENGE OR REQUEST A REVIEW OF THE
MCI ORDER?

After receipt of DHCR's order regarding the MCI application,
parties are entitled to file a Petition for Administrative Review
(PAR) requesting that further consideration be given to
additional facts related to the order Until DHCR issues the PAR
order, all prospective rental increases can be collected as
calculated in the MCI order. Generally, all retroactive rental
increases will be stayed automatically until completion of the
review by DHCR. PARs must be filed on PETITION FOR ADMINISTRATIVE
REVIEW (DHCR form RAR-2). PARs must be filed within 33 days
outside of New York City and for rent control cases statewide .
For rent stabilization cases in NYC, PARs must be filed within 35
days. [See Fact Sheet on Petition for Administrative Review.]

------------------------------------------------------------
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
remain intact as herein presented, including this and the top
informational banner referencing TenantNet as the original provider.
------------------------------------------------------------

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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