Tenants are not fans of Major Capital Improvements. Yes, they appreciate the improvements to the building, but they do not enjoy the resultant hikes in rent. Consequently, there have been numerous cases that have attempted to employ dubious legal tactics to void these hikes.
Most recently, a group of tenants appealed the amount of the increase because, among other things, the commercial tenants had not seen their rents raised at the same level as the building’s residential tenants. The residential tenants argued that this, consequently, was an improper calculation of the MCI by DHCR. The costs associated with making building-wide improvements need to be shared by all members of the building.
The tenants’ petition was dismissed, and the Rent Administrator ruled in favor of the landlord.
The tenants filed a Petition for Administrative Review, claiming that the RA’s ruling was in error. The Rent Commissioner, however, found no such error in judgment:
“The claim that the commercial allocation of the cost of the MCi item was improper is contrary to the record which shows that the commercial portion of the cost of all the approved MCI items except the intercom, was apportioned to the commercial tenants of the building. As for the intercom, the record, including the contract for the installation shows that the intercom was exclusively installed for only the 120 residential apartments in the building. Thus, the commercial tenants did not benefit from the intercom installation and commercial allocation of the cost was not warranted.”
The tenants’ PAR was dismissed by the Rent Commissioner on January 23, 2019.
What to take away: If an MCI pertains exclusively to the residential tenants of a building, your commercial tenants do not have to pay for it.