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What is an MCI?
When a landlord spends money to do work on a building that benefits all of the tenants, he or she may apply to DHCR for permission to raise rents on rent controlled and rent stabilized apartments in that building. These rent increases - MCIs - are based on the actual, verified cost of the work done. This means that landlords must submit documents proving how much they spent on the work. Tenants do not have to give any permission for MCIs to be approved. Tenants' permission is required for rent increases based on improvements to individual apartments, but not for MCIs.
Not all work done on a building qualifies as an MCI. There are four basic categories of work on a building that are eligible:

. Improvements that meet all of the following conditions:
a. The work is not a repair, but something that can be depreciated on tax forms.
b. The work "is for the operation, preservation and maintenance of the structure."
c. It directly or indirectly benefits all of the tenants in the buildings. The same work must be applied to "all similar components of the building or building complex" unless the landlord can prove that some components didn't need the work.
d. If the item being replaced (for example, the old boiler or the old roof) is included in the table on page XX, it meets the requirements set forth in the table, which comes from the MCI law and is known as the "useful life schedule."
. Necessary work performed in conjunction with improvements that meet the above conditions and which does "improve, restore, or preserve the quality of a structure." This would include, for example, structural repairs that are carried out in conjunction with installation of a new roof.
. An increase in services that is necessary to comply with law. But this cannot be a mere repair.
. Improvements or increased services that have been made with the express consent of 75 percent of the tenants and the approval of DHCR.

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.

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.

It was completed more than two years before the landlord applied for the increase.
It was not for the 'operation, preservation and maintenance of the building' and would not be 'depreciable under the Internal Revenue Code.'
It includes routine repairs or cosmetic improvements not directly related to the MCI.
It doesn't benefit all of the tenants and or is not building-wide (example: the landlord only replaced windows on the north side of the building).
It was done by members of the landlord's family, by a business that the landlord has a financial interest in, or by the landlord's own employees, including the superintendent. (In that case, the DHCR will disallow any rent increases to cover the cost of labor.)
It is not building-wide - that is, if it benefits only some of the tenants.
The improvement doesn't work or was never finished. Does the new roof leak? Can you use the new mailboxes? Does the buzzer system work for all of the apartments?
Check on the "useful life" of any equipment or systems that have been replaced. For example, a boiler is generally considered to have a useful life of about 30 years; if the last boiler was installed only 5 years ago, then you can raise some serious questions as to whether another replacement is now appropriate.
Check the cost of the work done against "industry standards". Even though DHCR has not developed a cost schedule for MCIs, you can still make a case that part of the landlord's request should be disallowed if his costs exceed the average charged by other contractors who do similar work.
Check on how the MCI was financed; if the building has gone through a co-op or condo conversion, any portion of the MCI that was paid for by the co-op or condo reserve fund will be disallowed.
Also, the landlord will not be granted an increase for any MCIs that were financed through fire insurance payments.
Are there copies of all bills and canceled checks for the work? Are there copies of required work and operation permits? Does the landlord have a signed affidavit from all contractors saying that they did the work?
The information contained in the landlord's application is incorrect or false.
The tenants failed to receive notification of the landlord's application from DHCR.

An order from DHCR reducing the tenant's rent based on rent-impairing conditions or a lack of services, issued prior to approval of the landlord's application for an MCI, could "stay" the MCI increase for that tenant and/or other tenants. Any conditions in the tenant's apartment that require repair which have been neglected by the landlord should be reported right away to DHCR.
One more important part of your first step: if there are violations in your building, file a complaint of decrease in services form with the DHCR, Be sure to file a form for building-wide complaints as well as individual (each tenant in the association), and request a rent decrease. Make sure you first complain to the landlord in writing. You must furnish proof to DHCR that you have complained of the violation to the landlord. DHCR might Send an inspector (the agency has very few) to confirm your complaint. If you get a rent reduction order for violations, the landlord's MCI application will be rejected or delayed. Although the landlord can re-file, the delay will save you money by putting off the payment date.
Are there serious violations in the building? DHCR will prevent the landlord from getting an increase for improvements until the violations are removed. Be sure to get these violations put on the record by filing a Reduction in Services complaint form with the DHCR. If you cannot get DHCR to inspect the violations, then try to get inspection reports from other agencies to show that they exist.
If the building is not registered with DHCR the MCI increase will be delayed until the landlord registers the building. In general, if the landlord doesn't register your apartment every year, there can be no rent increase of any kind. Be sure that you get your annual apartment registration and that the building is registered with the agency.
If the landlord has been harassing tenants, file a harassment complaint with DHCR. Also tell DHCR if the there has been a finding of harassment against the landlord in the past. These can hold off MCI increases.
If new evidence comes to light during this period, you may add it to your file by writing to the agency under your docket number.

You must file the PAR within 35 days of the date when DHCR issued the order granting the MCI rent increase. The DHCR order should include a full set of instructions on how to file the PAR along with the form you need.
To succeed with your PAR, you must convince a DHCR administrator that the agency has ignored your original answer to the MCI application or interpreted it unfairly. You cannot raise any new objections to the MCI unless they are based on new information that was not available to you at the time that you filed your challenge. You may not introduce a new argument just because you forgot to include it in your original challenge to the landlord's application. Examples of legitimate PAR arguments would be that you found out that the landlord's brother-in-law was a silent partner in the company that installed your building's new intercom system, or the intercom system was no longer working properly 6 months after it was installed.
You will have to begin paying your increased base rent while DHCR considers your PAR. But you will not have to pay any retroactive portion of the MCI increase if your PAR is properly filed until DHCR makes a final ruling on your appeal.

Under Article 78 of the NYS Civil Practice Law and Rules, you can file a Petition for Judicial Review in NYS Supreme Court. Under Article 78, you can appeal any decision of any City, State, or other local government agency for review by the Court.
You must file your Article 78 petition within 60 days of DHCR's ruling on your PAR. However, you can also file an Article 78 petition within 90 days after you have properly filed your PAR; this helps to speed up the appeals process, especially if you have reason to believe that the Commissioner may rule against your PAR. If you wish to file an Article 78 petition, it would be wise to obtain the help of an attorney.