Improvement Paid for by Co-op Reserve Fund

Landlord applied for MCI rent hikes based on the installation of a boiler/burner. The DRA ruled against landlord because the MCI was paid for with reserve funds deposited with the cooperative building by the sponsor. Landlord appealed and lost. Landlord claimed, on the one hand, that the MCI wasn't paid for by reserve funds and that, at any rate, the ETPA didn't bar use of the reserve funds for MCIs. Landlord was incorrect. According to DHCR Operational Bulletin 84-4, reserve funds can't be used to get MCI rent hikes unless the funds were contributed by the sponsor before the co-op conversion, were obtained by a special assessment to the shareholders, or the reserve fund was replenished. Landlord admitted in its application that $140,000 was taken from the building's reserve fund and hadn't been restored to the fund.

Musso: DHCR Adm. Rev. Docket No. YD710051RO (8/12/11) [4-pg. doc.]