MCI Payment Didn't Come from Condo Conversion Reserve Fund

March 19, 2018

LVT Number: #28265

The DRA granted landlord's application for MCI rent hikes based on roof replacement. Tenants appealed and lost. Tenants claimed that landlord paid for the MCI out of a condominium reserve fund. But it was the DHCR's established position that the bar to granting MCI rent hikes based on payments from a co-op or condo reserve fund applies only to the statutory reserve fund set up by a sponsor of the co-op or condo conversion during the conversion process. Otherwise, landlord could pay for the MCI from a special assessment paid by co-op shareholders or condo owners.

The DRA granted landlord's application for MCI rent hikes based on roof replacement. Tenants appealed and lost. Tenants claimed that landlord paid for the MCI out of a condominium reserve fund. But it was the DHCR's established position that the bar to granting MCI rent hikes based on payments from a co-op or condo reserve fund applies only to the statutory reserve fund set up by a sponsor of the co-op or condo conversion during the conversion process. Otherwise, landlord could pay for the MCI from a special assessment paid by co-op shareholders or condo owners. Funds deposited into an account by the co-op corporation or condo association after the conversion process has been completed constitute a source of funding other than the statutory reserve. In this case, landlord paid for the MCI from an account set up from proceeds of commercial space rental income and other sources. 

Kips Bay Tenants Association: DHCR Adm. Rev. Docket No. AM410053RT (1/26/18) [2-pg. doc.]

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