BBWG News

New Rent Laws Radically Alter MCI Filing Procedures and Rent Calculations

Aug 14, 2019

As we advised last month, the June 14, 2019 Rent Law contains many changes that directly impact property owners and managing agents of both regulated and unregulated units. One major set of changes affects the entire Major Capital Improvement (MCI) Rent Increase filing procedure and the methodology for calculating the rent increase, once an MCI Order is issued.

The new Rent Law provides the following changes –

  • DHCR must establish a schedule of “reasonable costs” for MCI’s to establish a ceiling for what can be recovered;
  • MCI Rent Increases are now temporary for thirty (30) years;
  • No MCI rent increases shall be granted in buildings with less than 35 percent rent regulated apartment units;
  • The amortization schedule is extended
    • for buildings with thirty-five (35) or fewer units, the MCI rent increases shall be based upon a twelve year (144 months) amortization schedule;
    • for buildings with more than thirty-five (35) units, the MCI rent increase shall be based upon a twelve and one-half year (150 months) amortization schedule;
  • MCI rent increases shall be collectible prospectively sixty (60) days from the date of the mailing of notice of approval to the tenants – there is no longer any retroactive rent increase;
  • Collection of MCI rent increases shall not exceed two (2) % in any year
  • The new 2% cap shall apply to any MCI approved on or after June 16, 2012; the reduced cap shall be effective upon the first renewal lease commencing on or after June 14, 2019;
  • DHCR shall inspect and audit 25% of all MCI applications to confirm that the work was completed.

There are many questions left unanswered by the 2019 Rent Law. These issues are complex and fact specific, but the failure to comply with these new requirements may result in significant penalties.

If you are currently receiving an MCI rent increase or you intend to file an MCI application in the future, we strongly urge you to reach out and contact Martin Heistein (mheistein@bbwg.com), Sherwin Belkin (sbelkin@bbwg.com) or Kara Rakowski (krakowski@bbwg.com), partners in the firm’s Administrative Department at BBWG

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