DHCR Added Certain Courtyard Amenity Costs to Previously Approved MCIs

Landlord applied for MCI rent hikes based on reconstruction of the Lefrak City building complex's center and east courtyards. The DRA ruled for landlord in part but disallowed the costs of certain items deemed ineligible to be included. The DRA also disallowed the entire amount claimed as "sidewalks" work because the submitted invoices didn't describe the installation of any new sidewalks. The DRA also disallowed the entire amount claimed as "ramps" because prior MCI increases had been granted for new ramps at the complex and their useful lives hadn't expired.

Landlord appealed and won, in part. Before beginning the MCI work, landlord had applied for and received permission from the DHCR to modify required services by replacing the pre-existing courtyard features with those included as part of the claimed MCI. While landlord grouped portions of the work in its application under the designations of either "courtyard," "sidewalks," "related to sidewalks," and "ramps," the DRA found that the work as described on the invoices often didn't correlate with the category of work under which the invoices were grouped. The DHCR agreed that any mislabeling, by itself, wasn't grounds to deny an MCI increase, referred to the work instead more generally as "courtyard reconstruction" or "courtyard work," and found that certain costs submitted as sidewalk or ramp work were eligible for inclusion as MCIs. For example, the $460,500 cost of "lighting fixtures," previously disallowed, was shown to refer to new exterior lighting installed in the center and east courtyards and was eligible to be in included in the courtyard work. The $870,570 cost of installing new recreational amenities in the courtyard also should be included in the MCI since the DHCR had approved these in its service modification approval order. Courtyard amenities also restored as MCI eligible on appeal included the installation of wiring for emergency phones, installation of a new playground, and electrical work in connection with a new swimming pool. 

The DHCR therefore added $2,664,000 in MCI costs to the $8,765,000 previously approved by the DRA. This raised the total MCI cost to a level above what was actually paid to the landlord's contractor. So, the maximum approved MCI amount could be no more than $11,000,000.

London Leasing LP: DHCR Adm. Rev. Docket No. JN110009RO (11/16/23)[9-pg. document]