The Basics of Major Capital Improvement Increases in New York

Residential property owners renting units in New York can benefit from an understanding of Major Capital Improvement increases.

New York City is known for its many positive offerings, from art studios and museums to Broadway shows and gourmet dining. However, the city that never sleeps is also known for its high cost of living. Various regulations and laws are in place in an effort to help control these costs, including rent control and rent stabilization laws. These laws can be broad. The New York City Rent Guidelines Board estimates over one million apartments throughout the city are covered by rent stabilization laws alone. These laws are designed to protect tenants from sharp increases in rent, but the laws can also make it difficult for those who own residential buildings that contain apartments to update their buildings. However, relief is available through Major Capital Improvement increases.

Major Capital Improvements and New York law

Not only do laws and regulations allow for an increase in rent in apartments that are covered by rent control and rent stabilization laws through the use of Major Capital Improvement (MCI) increases, but New York State’s Division of Housing and Community Renewal notes that courts generally uphold these increases when they are challenged. The division further states that MCIs are important as they encourage property owners to improve the quality of the housing options available in the state.

Moving forward with a MCI

Although these improvements are encouraged, property owners must follow strict criteria to qualify. An MCI must be approved by the Division of Housing and Community Renewal.

To qualify as an MCI, the improvement or installation must meet the following criteria:

• Be depreciable pursuant to the Internal Revenue Code, other than for ordinary repairs;
• Be for the operation, preservation and maintenance of the building;
• Directly or indirectly benefit all tenants; and
• Meet the requirements set forth in the useful life schedule contained in the applicable Rent Regulations

Examples of qualifying replacements or improvements generally include boilers, windows, roofs, rewiring, intercom systems, mailboxes, plumbing, elevators, lobby and vestibule, bathroom upgrades, kitchen upgrades, courtyard work, solar heating systems and increases in security like the use of television security system. If the landlord completes a MCI that is not included on the division’s list of acceptable changes, the landlord can apply for a waiver. However, it is important to note that waivers that are granted do not always translate to an approved MCI. Once the waiver is received, the property owner still need to put together a successful MCI application.

Legal counsel can help

These are just a few of the requirements that owners need to be aware of when attempting to increase rent in a residential building that falls within rent stabilization and control laws. As a result, it is wise to seek the counsel of experienced New York Major Capital Improvement rent increase attorneys. These legal professionals can guide you through the process, working to better ensure your interests are protected.