Individual Apartment Improvement Rent Increases: New Guidelines
In the early months of this year, Governor Kathy Hochul enacted “chapter amendments” to previously passed alterations to the Rent Stabilization Law and Emergency Tenant Protection Act. Such changes, effective starting on October 17th, are in regards to rules surrounding rent payments on rent stabilized apartments for Individual Apartment Improvements, also known as IAI’s.
IAI’s, in summary, are upgrades made to apartments usually taking place during vacancies. Examples include: installing new appliances such as stoves, security alarms, or making upgrades to flooring. In order to pay for such projects, owners may be entitled to certain rent increases.
The new chapter amendments lay out the following provisions for rent stabilized apartments in 2 methods.
Method #1:
Owners may recover up to $30,000 of IAI-eligible services over a period of 15 years, an increase from the previous $15,000 cap.
The rent increases, which have now been made permanent, to pay for the IAI work, are calculated as follows:
In buildings with 35 apartments or fewer, the allowed rent increases are 1/168th of the total cost to the owner.
For example, if the owner seeks to recover the full $30,000, they may increase the rent by 1/168 x 30,000, or $178.57.
In buildings with greater than 35 apartments, the allowed rent increases are equal to 1/180th of the total improvement cost.
Using the same method in the previous example, an owner seeking to recover the full $30,000 in this type of building may increase the rent by $166.67.
Method #2:
This method establishes a recovery cap of $50,000 under the following eligibility requirements:
The vacant apartments were registered as vacant with the Division of Housing and Community Renewal (DHCR) in a timely manner for the years 2022, 2023, and 2024, OR
The apartment became vacant and the existing tenant immediately prior resided there for at least 25 years.
The rent increases for this method use the following amortization rates for calculation:
1/144th of total cost to the owner in buildings with 35 or fewer units.
$347.22 at full cost.
1/156th of total cost to the owner in buildings with greater than 35 units.
$320.51 at full cost.
In order for this method to be considered valid, the following terms must be met:
DHCR must provide prior certification for eligibility.
Prior to performing the improvements, owners must show the DHCR evidence that the work was needed because of poor conditions or expiration of devices.
Photos of the condition and required permits for the work are key sources of documentation.
The applying owner must be clear of findings of Harassment or Willful Rent Overcharge in the previous 5 years for all buildings they own that are rent regulated.
Once the improvement is complete, an owner fee of 1 percent of the IAI cost must be paid, and photos of the work, itemized receipts, and payment must be submitted to the DHCR.
In essence, these amendments make it such that owners may recover certain funds used for apartment improvements while also providing measures to ensure compliance with the rules. These changes aim to provide both the landlord and future tenants with reasonable terms in order to make much needed repairs in a fair manner.
For assistance with navigating the array of newly enacted amendments to New York State property law, do not hesitate to contact our team of legal professionals at the Law Office of Marc Scolnick, PC. Call us at (718) 554-7445 to schedule a FREE consultation!
Sources:
JRNL_SeptOct19_NYHousingTenantProtectionAct.pdf (nysba.org)
https://hcr.ny.gov/system/files/documents/2023/11/fact-sheet-26-11-2023.pdf
Changes to NYS Housing Laws Enacted in the FY24 Budget | Homes and Community Renewal
https://hcr.ny.gov/apartment-iai-and-building-mci-improvements
This blog post is intended to provide information generally and to identify general legal requirements. It is not intended as a form of, or as a substitute for legal advice. Such advice should always come from in-house or retained counsel. Moreover, if this post in any way seems to contradict the advice of counsel’s opinion, counsel should control over anything written herein. No attorney-client relationship is implied by this blog.