Tenants do not have to pay the increased rent until DHCR issues an order approving the landlord's application. But rent stabilized tenants in New York City will be liable for a retroactive rent increase going back to the date 30 days after the landlord submitted the application. This retroactive increase is paid back gradually over time. Rent controlled tenants and rent stabilized tenants outside New York City do not have to pay retroactive rent.
When a landlord submits an MCI rent increase application to DHCR, the agency notifies the tenants and gives them 30 days to submit objections. Turn to Part 5, "How to fight an MCI" for information on what to do when this happens to you.
At the end of the 30-day period (which can be and often is extended), DHCR reviews the tenants' objections and then issues an order that may grant the entire rent increase sought by the landlord, grant only part of the increase, or deny the application altogether. It usually takes DHCR at least a few months to process an MCI application. The landlord may not charge or collect any increase until DHCR issues this order.
In New York City, most rent stabilized tenants start paying the MCI rent increase with the first rent payment 30 days after DHCR issues of the order - regardless of when the tenants' leases come up for renewal. Technically, the landlord may charge the increase during the term of an existing lease only if the lease contains a clause specifically authorizing the landlord to do so - but almost all leases do include such a clause.
For rent controlled tenants and rent stabilized tenants outside New York City, the increase becomes effective on the date of the order.
The number of rooms in each apartment is based on the layout shown in the official plans for the building, which is sometimes different from the number of rooms physically present in the apartment. The following do not count as rooms: bathrooms, windowless kitchens of less than 59 square feet, enclosed areas with a window of less than 60 square feet, and enclosed areas without a window of less than 80 square feet.
DHCR calculates the amount of the rent increase per month per room by determining the amount of money the landlord actually spent on allowable improvements, dividing that by 84, and the dividing again by the number of rooms in the building. Financing costs are excluded; in other words, the interest that the landlord must pay on any loan he took out to finance the MCI is not included in the rent increase.
This normally means that after 84 months (seven years), the entire improvement is paid for. But the increase does not end after seven years. It is permanent. The rent laws do not always allow a landlord to apply the full amount of an MCI increase right away, however. Instead, large increases must be phased in. The New York City rent stabilization law allows MCIs of up to 6 percent of the tenant's rent on the date 30 days after the landlord applied for the MCI. So if you were paying $1,000 per month on that date for your rent-stabilized apartment, and your MCI is higher than $60 per month, the increase will be phased in over a period of years in $60 installments, until the entire amount is added to your rent. If the total MCI was $250, you will pay four $60 increases, followed by a $10 increase.
The New York City rent control law and the rent stabilization law for areas outside New York City allow MCIs of up to 15 percent of the rent on the date 30 days after the landlord applied for the MCI. So if you were paying $1,000 per month for your rent-controlled apartment on that date, and your MCI is higher than $150 per month, the increase will be phased in over a period of years in $150 installments, until the entire amount is added to your rent. If the total MCI was $250, you will pay first a $150 increase and then a $100 increase.
Don't forget that you will also be charged the usual lease renewal increases in addition to the MCI increase - and the MCI will be included in the base rent used to calculate the amount of your lease renewal increase.
If you are a rent stabilized tenant in New York City and your landlord's application for an MCI is approved, you will probably end up owing some retroactive rent. The MCI rent increase takes effect 30 days after the landlord's application was served on you by DHCR. Therefore, you owe the landlord the difference between the old rent and the current rent for the period from that date to the date of DHCR's order. You don't have to pay this retroactive rent all at once. Instead, you pay it gradually in monthly installments, each of which is equal to 6 percent of your old rent. This is in addition to the MCI increase itself, but it is only a surcharge for a limited period of time.
If you are a rent controlled tenant or a rent stabilized tenant outside New York City, you do not owe any retroactive rent.
A few special cases - A tenant may move into a building after the landlord has applied for an MCI but before DHCR issues any order. In that case, the tenant does not have to pay the increase unless the landlord included a special provision in the lease. The provision must refer to the specific MCI in question - not just to MCIs in general.
When the tenant renews his or her lease, however, the landlord can then apply the MCI rent increase. If a landlord charges the increased rent without this proper notification, the landlord risks overcharge penalties.
If a rent stabilized tenant moves out of his apartment before the retroactive portion of the MCI increase is paid off, that tenant - not any new tenant who may move in afterwards - immediately becomes responsible for paying off the balance of the retroactive MCI. If the vacating tenant fails to pay the balance, the landlord can legally keep part or all of the tenant's security deposit.
If you are the first rent stabilized tenant to move into an apartment that was previously rent controlled, you will not have to pay any MCI increases that may have been approved.
If you have a Senior Citizen Rent Increase Exemption (SCRIE), you are exempt from the MCI rent increase.
If you are low-income senior citizen, the MCI increase may make you eligible for SCRIE, even if you previously were not eligible. In that case, you may be exempt from having to pay the MCI increase as well as rent increases. Contact the New York City Department of Aging.
If you are a rent controlled tenant whose landlord has received J-51 tax abatement benefits for the rehabilitation of your building, you are entitled to have part of your MCI rent increase "offset" - that is, reduced - by a portion of the value of tax abatement. For rent controlled apartments in J-51 buildings, the MCI increase is offset by 66.7 percent for the length of the tax benefit. For rent stabilized apartments in J-51 buildings, the increase is offset 50 percent for the length of the tax benefit. Call the City Department of Housing Preservation and Development to find out if your building is a J-51.
It is best for as many tenants as possible to work together in fighting an MCI. There are several reasons for this. First, DHCR may take objections to the MCI more seriously if they come from a large group. Second, a larger group of tenants may be able to discover more problems with the landlord's application. And third, tenants often have to spend money on lawyers, engineers, or other expenses in fighting an MCI. It is best to share these expenses among as many tenants as possible.
If there is a tenant association in your building, it should meet to discuss the MCI. If there is not a tenants association, you should organize one - or at least hold a tenants' meeting to discuss the situation. Tenants & Neighbors can provide assistance in doing this.
Get as many tenants as possible involved in putting together your response to the MCI. Tenants can work together to file a single challenge and then sign onto it by using a supplemental signature sheet that can be obtained from DHCR.
In most cases, tenants should respond to an MCI immediately by requesting an extension of the deadline to file a response. It takes more than 30 days to respond effectively to an MCI application. Tenants often request more than one extension, but extensions after the first one are granted only for good reasons.
Whenever you write to DHCR on any matter related to the MCI, include your case's docket number and either use certified mail with return receipt requested or deliver your materials in person at the DHCR office. In the latter case, get the agency to time-stamp a copy so you have proof that it was received. The next step for tenants is to obtain a copy of the landlord's full application, including supporting documents. The notice that tenants receive from DHCR does not contain nearly enough information to respond effectively. The complete application should be available from the superintendent (if he or she lives in the building) or at the landlord's or the managing agent's office. Most tenants, however, file a Freedom of Information Law application with DHCR to obtain these documents. This is the best way to be sure you are responding to exactly what the landlord has sent to DHCR.
In order to file a FOIL request, you need to get a form (FOIL Form FS-1) from DHCR's office at Gertz Plaza in Queens. If DHCR does not supply the requested information quickly (and they generally don't), you will need another extension of time to reply to the MCI. Tell DHCR that you can't reply until you have studied the landlord's full application. Be sure to include the completed FOIL request form as part of your application for an extension. The full application should include copies of invoices, cancelled checks, building permits, and other papers submitted by the landlord to DHCR. You have the opportunity to challenge anything in the application. You can challenge the kind of work done, the way it was done, the way it was paid for, and any other problems you see with the application. You must make your challenges in writing in a document called your "answer" to the landlord's application. Use the checklist below to look for problems with your landlord's application. Remember that the more tenants review the application, the more likely it is that someone will notice a problem. This is especially true if it is an issue whether the landlord ever really did the work. Find the breakdown of the landlord's expenses and make sure that every one is backed up with the appropriate invoices, canceled checks, work permits, and affidavits - and make sure that each of these items is only used once.