Work Funded by Special Assessment Qualified for MCI Rent Hikes

Landlord applied for MCI rent hikes based on exterior restoration with related engineering services. Tenant appealed and lost. Tenant claimed that the landlord cooperative corporation paid for the MCI out of the co-op reserve fund, that some of the work was ordinary repairs, and that the work wasn't done on a building-wide basis.

But it's the DHCR's established position that any bar to granting an MCI rent increase paid for by a co-op or condo reserve fund applies only to the statutory reserve set up by the sponsor as part of the co-op/condo conversion process. Funds like the ones here, deposited into a co-op account after the conversion process was completed, and based on a special assessment charged to co-op shareholders, are a permissible source of payment for work eligible for MCI rent increases.

As to the extent of the work done, exterior restoration work qualifies as an MCI even though all elements of the work weren't performed on every part of the exterior, as long as the work was done as necessary on all exposed sides of the building. Landlord's architect verified that this was done. And the parapet replacement done as part of the work was needed to ensure complete weathertightness of the building. This was other necessary work directly related to the MCI-qualifying facade restoration.

Kossoff: DHCR Adm. Rev. Docket No. FO430015RT (8/24/20) [2-pg. doc.]