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



TenantNet Home | TenantNet Forum | New York Tenant Information
DHCR Information | DHCR Decisions | Housing Court Decisions | New York Rent Laws
Disclaimer | Privacy Policy | Contact Us

Subscribe to our Mailing List!
Your Email      Full Name