If rent stabilized tenants in your building are facing a Major Capital Improvement (MCI) rent increase because of façade repair, this State Supreme Court decision might help you.
The state law requires that to qualify as an MCI, work must "depreciable" under the federal Internal Revenue Code. The court ruled that façade repair is no exception - despite what the regulations say. So the state's Division of Housing and Community Renewal must first determine whether the work done would be depreciable under the IRC. Regular repair work is NOT depreciable. To be depreciable, the work must
- be performed for the first time
- create something entirely new, and
- be of significant scale (for example affecting at least 80% of the building).
The Stuyvesant Town-Peter Cooper Village Tenant Association and its lawyers, Collins Dobkin & Miller, won this case - although it might be appealed. This is from the Stuyvesant Town-Peter Cooper Village Tenant Association newsletter:
Tenants get money back— court agrees with TA challenges to 19 façade MCIs
The court issued a very favorable Order and Decision on the TA’s objections to DHCR’s granting of 19 individual Major Capital Improvement rent increases related to Local Law 11 façade work. As you know, we challenged all approved MCIs in a filing called an Article 78, which comes before the court.
We prevailed on the two key issues: failure to file in time and failure to consider depreciability as an IRS standard for work to qualify as an MCI.