New York State
Division of Housing and Community Renewal
Office of Rent Administration
Gertz Plaza, 92-31 Union Hall St.
Jamaica, New York 11433
Public Information: (718)739-6400

Mario M. Cuomo, Governor
Donald M. Halperin, Commissioner
Joseph A. D'Agosta, Deputy Commissioner for Rent Administration


OPERATIONAL BULLETIN NO. 84-4 (NOVEMBER 13, 1984)

MAJOR CAPITAL IMPROVEMENTS/SUBSTANTIAL
REHABILITATION/INCREASED SERVICES AND EQUIPMENT


This Operational Bulletin relates to the processing of rent
increases applications filed by landlords based upon building-
wide major capital improvements, substantial rehabilitation and
increased services and new equipment pursuant to the provisions
of Section 33.1 (9NYCRR 2202.3a and 9NYCRR 2102.3) of the Rent
and Eviction Regulations, Section 34.1 (NYCRR 2502.4) of the
Tenant Protection Regulations and Sections 41 and 20C(1) of the
Rent Stabilization Code.

The District Rent Administrator shall grant a rent adjustment
pursuant to appropriate regulations if it is determined that:

1)        a)   The landlord and tenant by mutual voluntary
          agreement, subject to approval by the Division, agree
          to a substantial increase of dwelling space or an
          increase in the services, new furniture, new
          furnishings or new equipment provided in the housing
          accommodations; which agreement may be established
          prescribed application form or by corroborative proof
          of such earlier agreement.

     b)   There has been an increase in the rental value of the
          housing accommodations as a result of a substantial
          rehabilitation of the building or housing
          accommodations therein which materially adds to the
          value of the property or appreciably prolongs its life,
          excluding ordinary repairs, maintenance and
          replacements; and that the legal regulated rent has not
          been adjusted prior to the application based in whole
          or part upon the grounds set forth in the application;
          or

     c)   There has been a major capital improvement required for
          the operation, preservation or maintenance of the
          structure; and that the legal regulated rent has not
          been adjusted prior to the application based in whole
          or part upon the grounds set forth in the application.

2)   The cost of such work has been adequately substantiated by
     submission of copies of contracts, invoices, canceled
     checks, and other pertinent documents which might be
     required; and

3)   That all other requirements for the granting of such rent
     increases have been met.

The District Rent Administrator shall determine:

     a)   That an installation constitutes a major capital
          improvement if it is (1) building-wide, (2) deemed
          depreciable under the Internal Revenue Code, (3)
          structural in nature, (4) an improvement to the
          building or to the building stock, (5) and required for
          the operation, preservation or maintenance of the
          structure.

     b)   That an installation constitutes a substantial
          rehabilitation of a building or housing accommodation
          if it will materially add to the value of the property
          or appreciably prolong its life, exclusive of ordinary
          repairs, maintenance, and replacements.

     c)   That there has been a substantial increase of dwelling
          space or an increase in services, new furniture, new
          furnishings, or new equipment provided to the housing
          accommodation on written consent of the tenant (in
          occupancy). However, the landlord. shall be entitled to
          collect the increase for new equipment when installed
          subject to the approval of the District Rent
          Administrator. Increases for improvements or new
          equipment in vacant apartments do not require prior
          approval by the District Rent Administrator, but may be
          challenged or objected to by a tenant at any time after
          occupancy.


COMPUTATION OF RENT ADJUSTMENT

A)   60 Month Period of Amortization (Building-Wide)

     The rent adjustment granted by the District Rent
     Administrator applicable to rent stabilized and rent
     controlled apartments shall be computed based upon a 5 year
     (60 months) period of amortization of the verified
     reasonable cost of the major capital improvement(s) or
     substantial rehabilitation.

B)   40 Month Period of Amortization (Apartment only)

     The rent adjustment granted by the District Rent
     Administrator applicable to rent stabilized and rent
     controlled apartments shall be computed based upon a 40
     month period of amortization of the verified reasonable
     cost, including cost of installation, for an increase in the
     services, new furniture, new furnishings, new equipment or
     improvements provided to the housing accommodation.


LIMITATION ON AMOUNT OF RENT
INCREASE COLLECTIBLE IN A 12 MONTH PERIOD

In order to carry out the mandate of the Statute, Regulations,
and Code against unreasonably high rent increases, the District
Rent Administrator shall limit the amount of building-wide rent
increases based upon major capital improvement(s) and substantial
rehabilitation to be collected in any 12 month period commencing
on the effective date of the rent increase to 15% of the rent. In
such cases as the District Rent Administrator deems appropriate,
the 15% limitation may be waived.

In a case where the appropriate rent increase determined to be an
amount greater than 15% of the rent, the District Rent
Administrator shall order the owner to collect 15% of the rent in
the first 12 month period, and defer collection of the balance to
subsequent 12 month periods depending on the amount of the rent
increase granted.

In rent stabilized apartments in New York City, as required by
Section 40 of the Rent Stabilization Code, major capital
improvement increases are retroactive to 30 days after the
completion of the filing of the application. Any arrears which
accrued as a result of the issuance of an order after the 30 day
effective period, shall be spread forward in future years so as
not to exceed the 15% limitation in any 12 month period.

Lease renewals which include the major capital improvement
increase shall be based upon the total increase granted exclusive
of arrears.

However, such lease agreement may contain language which provides
that in addition to the rent required in the lease the tenant
shall pay any arrears not to exceed 15% in any 12 month period
and when such arrears have been repaid, the rent reserved in the
lease shall be the only collectible rent. In the event that a
vacancy occurs prior to the full collection of the major capital
improvement increase, the new tenant shall pay the full amount of
the increase in addition to any vacancy or guideline increase
ordered by the New York City Rent Guidelines Board.

Installation of New Prime Windows

The installation of new prime windows (not just the addition of
storm windows). building-wide, constitutes a major capital
improvement pursuant to appropriate regulations warranting a rent
increase. In cases where the old windows were more than 25 years
old, the District Rent Administrator shall grant a rent increase
based upon the full substantiated cost of the new windows.

In those cases where the old windows were between 15 and 25 years
old, the District Rent Administrator may grant a rent increase
based upon the full substantiated cost of the new windows if the
District Rent Administrator determines that the replacement
windows were necessary; or, regardless of the age of the windows
the District Rent Administrator shall grant a rent increase based
on 50% of the substantiated cost of the new windows if the
replacements were for energy conservation purposes.

Cosmetic Improvements

The District Rent Administrator shall allow the reasonable
substantiated cost of a cosmetic improvement in the computation
of a rent increase based upon a major capital improvement only if
the cosmetic improvement was done within 6 months and was
directly related to the major capital improvement included in the
owner's application. For example, if an owner installs new
mailboxes in the inner lobby and a new intercom system in the
vestibule, then the District Rent Administrator shall allow the
substantiated cost of painting and plastering the inner lobby and
vestibule provided that the cost of such work was included in the
owner's application. As seen from this example, the major capital
improvement must be completed prior to or contemporaneous with
the commencement of the work for the cosmetic improvements.

The cosmetic improvement must:

a)   Improve, restore or preserve the quality of the structure;

b)   Represent an expenditure equal to at least 10% of the total
     operating and maintenance expenses for the most recent full
     calendar year or the most recent fiscal year or any 12
     consecutive months ending not more than 90 days prior to the
     filing of the application; and

c)   Must have been completed within 6 months of the completion
     of the major capital improvement.

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DHCR Operational Bulletins are issued by the New York State
Division of Housing and Community Renewal (DHCR) and update
agency administration of the rent laws.

Electronic versions of the 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 is advised to obtain true copies of
these documents from DHCR. Also see DHCR Policy Statements,
DHCR Advisory Opinions, the Rent Stabilization Code, the Rent
Stabilization Law and various Rent Control Statutes.

Every attempt has been made to conform to the original Operational
Bulletins 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
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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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