A Major Capital Improvement is defined as an improvement which becomes a permanent part of the building and increases its value.  Building systems such as plumbing, heating, electrical systems, windows and exterior work are eligible.  Total renovation of bathrooms and kitchens, as well as replacing walls, ceilings and floors also qualify.  Cosmetic work such as painting and repairs do not qualify, unless they are required due to replacement of an eligible item (example - painting a new wall or floor covering over new sub-flooring).  Installation of a new sink and vanity with new faucet and valves would qualify - replacing just the faucet would not.  

There are 3 types of Major Capital Improvements (MCI) which allow Landlords to increase rents.

• The first, and simplest, is the renovation of an apartment while it is vacant.  The increase amount is 1/40th of the MCI work done in the apartment.  This increase is added to the Vacancy Increase and Guidelines Increases for the new tenant and does not require DHCR or tenant approval.  Note: Simply painting the apartment, scraping the floors and making a few minor repairs does not qualify (no matter how much you spend).
• The second type of MCI Increase is for improvements in an apartment that is occupied.  The MCI work must be requested by the tenant and the tenant must sign a document agreeing to pay the additional rent.  The increase amount is also 1/40th the cost of the improvement.  The most frequent type of improvement in this category is what is commonly known as an "Appliance Increase" for a new stove, refrigerator, etc., however, tenants may agree to pay an increase in rent for new kitchen cabinets, bathroom renovation, etc.
• The third, and most difficult MCI increase to obtain, is the Building Wide MCI.  This increase is for MCI work that is Building Wide - all like items throughout the building must be replaced, for example, windows, doors, etc., or the improvement must affect the entire building, such as roof, boiler, pointing, etc.  All work must be done by licensed contractors (as required) with any required permits and sign-offs.  The Landlord must file an application with DHCR which includes Contractor Certifications and documentation that the work was done and paid for, including contracts, invoices, copies of cancelled checks, permits and sign-offs.  DHCR then notifies each tenant of the Landlord's application and allows them to respond.  If a tenant (or tenants) complain that the work was not done or not properly done, DHCR gives the Landlord an opportunity to reply.  DHCR then determines the allowable costs based on the documentation in the application and their own schedule of costs and determines the total amount of work which is eligible for an increase.  The increase amount is 1/84th of the approved costs.  The total processing time for these applications is from 3 months to up to 2 years, depending on the complexity and accuracy of the application.  In certain cases, DHCR awards a retroactive increase which can be collected on top of the permanent increase.  There are maximums on the percentage of the increase, depending on each tenant's rent and there are limitations on increases in cases where Landlord's also apply for J-51 Tax Abatements.

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