MCI Costs Can Include Labor Costs for Landlord's Contracting Company

Landlord applied for MCI rent hikes based on installation of a new roof, front stoop/concrete yard improvements, new siding and trim, and a new front door and transom. The DRA ruled for landlord in part, but disallowed all expenses related to landlord's labor costs, profit and overhead, iron fence/rail/gate improvements, and installation of a new canopy.

Landlord appealed and won, in part. The DHCR added back landlord's labor costs, totalling $6,120. Landlord had responded to the DRA's request for additional information and provided a detailed breakdown for work done with proof of payment for materials and labor costs. The fact that landlord's contracting company and landlord himself performed some of the work didn't exclude the documented labor costs.

But the DRA properly disallowed the contractor's profit and overhead costs because these total costs amounted to more than one-third of the total claimed MCI cost. The markup was about 60 percent above the total costs of labor, materials, and other construction expenses. The DRA also properly disallowed canopy installation costs because a canopy is cosmetic in nature and doesn't qualify as an MCI. The installation of fences, gates, and railings alone also aren't required for the operation, preservation, and maintenance of a structure and don't qualify as an MCI. 

Stutman: DHCR Adm. Rev. Docket No. FM210001RO (2/19/20) [3-pg. doc.]