George E. Pataki, Governor
A publication of New York State
Division of Housing and Community Renewal
Office of Rent Administration
Fact Sheet #11 - Rent Increases for Major Capital Improvements (MCI)
[Revised 11/96]
When an owner makes an improvement or installation to a building subject to
the rent stabilization or rent control laws, the owner may be permitted to
increase the rent based on the actual, verified cost of the improvement or
installation.
To qualify as an MCI, the improvement or installation must:
1. be deemed depreciable under 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's) useful life schedule,
which is found in DHCR's Operational
Bulletin 90-2, "Useful Life Schedule for
Major Capital Improvements."
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 New
York City Rent Stabilization Code (RSC) provides
that applications for MCI rent increases must be
filed within two years of the installation.
When the owner submits an MCI rent
increase application to DHCR, DHCR 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.
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
seven-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
seven-year period. The tenant's increase is based upon a per
room amount. For the definition of a "room," refer to
DHCR's Policy Statement 93-2, "Definition of Room for
MCI Purposes."
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 received a rent reduction
order before the issuance of the order granting an MCI
rent increase. Where DHCR issues a rent reduction order,
an owner may continue to collect an MCI rent increase
that the owner began collecting before the rent
reduction order was issued regardless of the effective date of
the rent reduction order. For additional information,
see DHCR's Operational Bulletin 95-1, "Collectibility
of MCI/OI Increases Where the Rent is Reduced
Because of Diminution of Services."
No MCI rent increase will be approved while a
building-wide service reduction order is in effect.
Also, if there is an outstanding finding of harassment,
DHCR 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. Increases above the 6% cap can be spread forward
to future years. How this annual 6% cap affects
the collectibility of the temporary retroactive portion of the
MCI rent increase is addressed in each order granting the MCI
rent increase. For all rent controlled apartments and for
stabilized apartments outside NYC, the 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 issuance of the order granting the increase.
If the NYC apartment owner receives a "J-51" tax abatement 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 the buildings receiving a "J-51" tax benefit, the
MCI increase is offset by 2/3 for the length of the tax benefit.
For rent stabilized apartments in "J-51" buildings, 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 his or her total rent to over 1/3 of
the tenant's 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 the SCRIE tenants.
If an apartment(s) is vacant or becomes
vacant while the MCI application is pending, the owner
must notify any incoming tenant that the tenant's rent
will increase if the MCI application is approved.
Failure to indicate this anticipated rent increase in
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, the owner risks
overcharge penalties.
A vacancy lease clause that satisfactorily
notifies an incoming tenant of a pending MCI application
is one which provides, "Application for a major capital
improvement rent increase has been filed 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 an MCI, the owner may charge the
increase during the term of an existing 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 lease may be increased
or decreased by an order of DHCR or the Rent
Guidelines Board."
For more information or assistance, call the DHCR Rent InfoLine
(718) 739-6400, or visit your Borough or County Rent Office.
Central
92-31 Union Hall Street
4th Floor
Jamaica, NY 11433
(718) 739-6400
Brooklyn
55 Hanson Place
7th Floor
Brooklyn, NY 11201
Upper Manhattan
163 W. 125th Street
5th Floor
New York, NY 10027
North side of 110th St. and above
Nassau County
50 Clinton Street
6th Floor
Hempstead, NY 11550
Westchester County
55 Church Street
White Plains, NY 10601
Lower Manhattan
156 William Street
9th Floor
New York, NY 10038
South side of 110th St. and below
Bronx
1 Fordham Plaza
2nd Floor
Bronx, NY 10458
Staten Island
60 Bay Street
7th Floor
Staten Island, NY 10301
Rockland County
94-96 North Main Street
Spring Valley, NY 10977
Revised 11/96
