George E. Pataki, Governor                     Joseph H. Holland, Commissioner

                     A publication of New York State
                Division of Housing and Community Renewal
                      Office of Rent Administration

            Fact Sheet #24 - Major Capital Improvements (MCI)
                   (Questions and Answers for Owners)
                             [Revised 9/95]

 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
     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  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,

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 loan or an installment
agreement, that documentation must be included in the application. DHCR will
return incomplete applications prior to docketing.

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 filed for a restoration
and DHCR issued a positive determination.

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 filed
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.

How  does an owner apply for an MCI and what kind of documentation is needed?

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 file the application no later than two years after the
completion of the installation or improvement.

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 affadavit, 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.

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.

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.

How much of an MCI rent increase over base rent can you expect?

     For rent stabilized apartment 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 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

     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

     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.

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 2/3 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.

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.]

For more information or assistance, call the DHCR Rent InfoLine,
(718) 739-6400, or visit your Borough Rent Office.

92-31 Union Hall Street
4th Floor
Jamaica, NY 11433
(718) 739-6400

250 Schermerhorn Street
3rd 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

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

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