June 2014: This post originally appeared on the LandlordsNY blog, where Michelle Maratto Itkowitz is the legal expert.
Hi, Michelle here. I am the LandlordsNY Legal Expert. My goal is to post in the blog all of the questions I get from LandlordsNY members and my answers thereto, when I think that such questions and answers would be of interest to other people. This is the second such post. Let me know if this is helpful.
Question: MCI filing question; I have a number of different MCI improvements I would like to do in the building in the next couple of years - two of which are different but very imminent. I have to replace the water tank and washer dryers in the laundry room. When I file for the MCI, can I bundle these two separate improvement costs into one MCI or do I have to file separate MCIs? (one for the water tank and one for the laundry room). Also, does installing new water duplex pumps count on its own as an MCI, or does that have to be associated work with the water tank?
Answer: I was unable to find any concrete authority to answer your very interesting question. I would, however, offer you this advice – File the water tank MCI application separate from the washer and dryer MCI application, but in each application attach a short addendum that lets DHCR know that the other application exists and generally what it is about.
I say separate the applications for two reasons. First, because in order to qualify for an MCI, an improvement or installation must:
1. be depreciable pursuant to the Internal Revenue Code, other than for ordinary repairs;
2. be for the operation, preservation and maintenance of the building;
3. directly or indirectly benefit all tenants; and,
4. meet the requirements set forth in the useful life schedule contained in the applicable Rent Regulations. (See DHCR fact sheet #24 Major Capital Improvements (MCI) Questions and Answers; http://www.nyshcr.org/Rent/FactSheets/orafac24.pdf.)
DHCR Fact Sheet #33, "Useful Life Schedule" includes a partial list of installations that qualify for MCI rent adjustments.
A water tank and laundry equipment might be evaluated differently against these standards. Is the depreciation on laundry equipment the same as on a hot water tank? DHCR Fact Sheet #33 lists a useful life for a metal water tank of 25 years. The fact sheet does not mention laundry equipment. I think it clouds the issue for DHCR and will slow down your application process if they have to engage in multiple analyses for one application.
The second reason that I would separate the applications is that DHCR can consider tenant responses...READ MORE...