Maximum Base Rent
The Maximum Base Rent (MBR) is the absolute maximum amount of rent a Landlord can charge to a Rent Controlled tenant. The MBR is increased every 2 years by a percentage determined by DHCR. (Usually just under 15%) The MBR can also be increased by Major Capital Improvements (MCI) increases.
The rent that Rent Controlled tenants actually pay is called the Maximum Collectible Rent (MCR). The MCR is usually less than the MBR. By law, the MCR cannot be increased by more than 7.5% per year (up to the MBR) for each year of the two year MBR cycle, unless there is an approved MCI increase. More and more Landlords are finding that their MCR's are close to or up to the MBR's, therefore, they only receive a 7.5% increase in the even year of the MBR cycle and a small, if any, increase in the second (odd) year of the cycle.
Every two years, in the even year (1996, 1998, 2000), Landlords with Rent Controlled tenants must file a Maximum Base Rent Increase Application. DHCR sends the Landlord the application, along with a printout of all open HPD Code Enforcement violations. In order to be eligible for increases, the Landlord must file a Violation Certification (DHCR Form VC) stating that all "Rent Impairing" violations ("C" violations) and 80% of all other violations ("A" & "B" violations) on record as of January 1 of the year preceding each two year MBR cycle, in the entire building, have been removed or will be removed. This form must be filed by June 30th for increases to be effective the following January 1st.
Next, the Landlord must file an Operation and Maintenance and Essential Services Certification (OMESC) in which he/she must state the building's income and expenses and certify that he/she made payments and/or incurred obligations to pay at least 90% of the expense allowance for the operation and maintenance of the building and that he/she will continue to maintain all essential services. The deadline for filing this form is usually the beginning of October, for increases effective January 1st. This form has calculations for "normal" buildings, High Payroll buildings and buildings that have residential and commercial tenants. Most buildings fall into the "normal" category and the Landlord can use the "Alternative" procedure, which calculates the allowable profit according to a percentage of the rent roll. Landlords must consider all expenses, including management and professional fees in addition to fuel, utilities, water, taxes, insurance, repairs & maintenance, supplies, superintendent, vacancy loss, etc. (Mortgage interest and amortization are not allowable expenses.) In some cases, where the rent roll exceeds the allowable profit percentage, increases are denied. However, if the forms are properly filled out most buildings do qualify for increases.
About two months after the Landlord has filed the OMESC, he/she will receive a request for payment of a fee of $30 per Rent Controlled apartment (up from $20 in 1998). Upon payment of this fee, DHCR will review the application.
When approved, DHCR issues an MBR Order of Eligibility to the Landlord and each Rent Controlled tenant. The order authorizes the Landlord to calculate, on official forms, the Maximum Base Rents and Maximum Collectible Rents for each Rent Controlled apartment. The effective date of the MBR increase is either January 1 of the applicable (even) year if forms were timely filed, or 6 months after filing the VC or 3 months after filing the OMESC, whichever is later. However, due to delays in paperwork at DHCR, MBR Orders of Eligibility are rarely issued by January 1st. In most cases, even when the MBR application has been filed timely, Landlords should not expect to receive their Order until March, or later. In these cases, where issuance of an Order results in a retroactive rent increase, the tenant may choose between making a lump sum payment or paying in equal monthly installments, equal to the number of months of the retroactive rent increase. This causes a lot of confusion, especially for elderly tenants, who do not understand how much they are supposed to pay. This confusion is usually compounded by the Fuel Cost Adjustments (FCA), which are always retroactive to January 1st and which are never sent out timely by DHCR.
The Landlord must then serve the tenants with a Notice of Increase in MBR and MCR Computation (DHCR Form RN 26S or RN 26). They must send a copy of the Order of Eligibility to the tenant along with the Notice. This Notice should be sent by Certificate of Mailing. The Landlord must also file a completed Master Building Rent Schedule with DHCR, listing the MBRs, MCRs and FCAs for all rent controlled apartments. This should be sent by Certified Mail - return Receipt Requested.
DHCRexpert.com prepares and files all forms for Rent Control increases and sends cover letters to the tenants, explaining exactly how much they have to pay and why.
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