Substantial Win in Our Lawsuit: Capping Rent Increases from Major Capital Improvements

The TA won a significant part of our lawsuit challenging the Reasonable Cost Schedule of New York State’s Division of Housing and Community Renewal. We filed the suit in 2021.

The cost schedule lists amounts that landlords can recoup from Major Capital Improvements, building-wide improvements such as boilers and roofs. Those costs are passed on to tenants—even mid-lease—in rent increases that become part of the base rent for 30 years and compound with lease renewals.

On Tuesday, October 22, 2024, at a session of the NYS First Appellate Division, TA attorney Seth Miller of Collins, Dobkin & Miller argued our case. The panel of judges (one of whom recused herself) questioned the agency’s lawyer closely regarding waivers: if the state legislature set a price ceiling, how could there also be waivers to allow higher costs? The hearing took about 20 minutes and can be viewed starting at 1:49 at https://www.youtube.com/watch?v=1vHlzAWRN08.

In its decision, the Court held that any cost not mentioned in the schedule cannot be the basis of an MCI. Although the state legislature was clear in the Housing Stability and Tenant Protection Act of 2019 that there should be a cap on costs, DHCR promulgated rules that allowed for waivers, meaning that owners could recoup costs higher than those in the Reasonable Cost Schedule.

The decision means there can be no waivers, and it means no increases for the category of “related costs” that are not on the schedule.

The Court was clear, however, about allowing “related costs” if they are now on the schedule, or put there at the relevant time.

Initially, the lawsuit included challenges to the reasonableness of the agency’s cost data, the failure to provide a summary of their determinations as required by law, the non-depreciable items (e.g., power washing or architectural fees) attached to an MCI, and the issue of waivers.

The Court issued its decision on November 14, 2024. In the end, it found in our favor only for the part of the lawsuit regarding waivers, but this is a significant victory.

We thank our members, whose dues enabled us to bring this important lawsuit. We look forward to this decision benefiting our neighbors in Stuyvesant Town and Peter Cooper Village and rent-stabilized tenants throughout New York State.

Read more:

Future of MCI Costs: How High Can They Go? Update on the Hearing of Sept. 9, 2020

TA Lawsuit Challenges Costs for MCI Rent Increases (6/7/21)

Two TA Lawsuits to Save Tenants Money (3/8/24)

Posted 11/21/24