DHCR Revises Monthly Surcharges for Tenant-Installed Appliances

The DHCR recently issued Supplement No. 2 to Operational Bulletin 2005-1, which sets the monthly surcharges you can collect from rent-controlled and rent-stabilized tenants who buy and install their own portable or permanent washing machines, dryers, or dishwashers. The last time this Operational Bulletin was updated was in July 2009. The DHCR says the permissible monthly surcharges take effect immediately, and it will apply them in all currently pending cases in which the owner is seeking a surcharge for one of these tenant-installed appliances.

We’ll tell you how much the Operational Bulletin says you can collect for each type of appliance and how to collect the surcharges. We’ll also give you two examples of letters you can send to tenants to notify them about a surcharge.

How Much to Collect

The amount you may collect as a monthly surcharge depends on the type of portable or permanent appliance the tenant installs and who pays for electricity. You can refer to our surcharge chart. “Electrical exclusion” means the tenant pays for electricity; “electrical inclusion” means the owner pays for electricity. The DHCR may make a downward adjustment of the surcharge where a tenant pays for heating of hot water.

Various cost factors were considered when setting the surcharge amounts, including, where applicable, the cost of energy to heat water and the cost of electricity. Non-energy factors considered were water costs and wear and tear on plumbing. Cost estimates were based on properly installed and functioning machines placed in buildings whose plumbing, water supply, and electrical systems are adequate for use of the relevant appliance.

According to the Operational Bulletin, these amounts will remain in effect at least through Sept. 30, 2014. At that time, the DHCR may update them. If it doesn’t do so, they’ll continue to apply until the DHCR does update them.

When to Collect

Unless a lease provides otherwise, owners aren’t required to allow tenants to install washing machines, dryers, or dishwashers. According to both Rent Stabilization Code (RSC) Section 2522.9 and the Operational Bulletin, you can collect the surcharge when you consent to a tenant’s installation of a portable or permanent washing machine, dryer, or dishwasher in the tenant’s apartment. You may collect the surcharge in the following two situations:

1. The tenant asks your permission to install and use a washing machine, dryer, or dishwasher in his apartment, and you consent. In this situation, you may start collecting the surcharge as of the date the tenant installs the appliance; or

2. You discover that the tenant has already installed a washing machine, dryer, or dishwasher in his apartment, and you consent to the appliance’s continued use. In this situation, you may start collecting the surcharge prospectively—from the date you give your consent to the continued use of the appliance.

You may provide consent in the second situation because your building’s plumbing and/or electrical systems won’t be affected by additional appliances. And it may be more cost effective to simply collect the surcharge, instead of fighting with the tenant to remove it; or you may have known about the appliance for a long time and think a court may rule that you gave up your right to object to the appliance by not objecting to it on time.

However, in the second situation, if you don’t want to provide consent you should speak with your attorney about your other options instead of collecting the surcharge. For example, you may want to try to get the tenant to remove the appliance. Or you could sue to evict the tenant for installing the appliance without first getting your consent.

How to Collect

The Operational Bulletin states that the surcharge won’t become a part of the legal regulated or maximum rent for the purpose of computing any guidelines or other increases under the rent law or regulations. In other words, the surcharges won’t become part of a rent-stabilized tenant’s legal regulated rent or a rent-controlled tenant’s maximum collectible rent (MCR) for the purpose of calculating future rent increases.

To avoid confusion, you should show the surcharge as a separate charge on your rent bills to tenants. In addition, you should send the tenant a letter the first time you bill him for the surcharge, explaining that you’re allowed to collect it. We’ve provided Model Letters: Avoid Confusion by Explaining DHCR-Allowed Appliance Surcharge that you can use to provide consent to a tenant-installed appliance and notify your tenant of the surcharge you’re allowed to collect.

It’s also important to note that the Operational Bulletin applies only if the tenant installs a washing machine, dryer, or dishwasher, not for any other appliance the tenant may install. So, for example, if the tenant installs her own refrigerator or garbage disposal, you can’t collect a surcharge from the tenant.

Who’s Responsible for Repairs

The Operational Bulletin also makes clear that under no circumstances shall servicing or replacement of such appliance or appliances become a service required to be provided by the owner. Owners and managers aren’t responsible for repairing or replacing an appliance subject to the surcharge. Presumably, this means that the tenant is responsible.