How to Collect 2020–21 MBR Increases for Rent-Controlled Units

NYC Local Law 30 of 1970 stipulates that Maximum Base Rents be established for rent-controlled apartments according to a formula calculated to reflect real estate taxes, water and sewer charges, operating and maintenance expenses, return on capital value, and vacancy and collection loss allowance. The Maximum Base Rent (MBR) is updated every two years by a factor that incorporates the changes in these operating costs.

The rent that rent-controlled tenants pay is called the Maximum Collectible Rent (MCR). The MCR generally is less than the MBR. Pursuant to the Housing Stability and Tenant Protection Act (HSTPA) of 2019, the MCR can’t be increased by more than 7.5 percent per year or the average of the previous five-year Rent Guidelines Board (RGB) increases for each year of the two-year MBR cycle, unless there are major capital improvements or individual apartment rent increases.

For example, if a tenant’s rent (MCR) on Jan. 1, 2019, was $1,000 and the MBR was $1,200, then on Jan. 1, 2020 (effective date of MBR) the rent (MCR) would rise by not more than 7.5 percent to $1,075 or the last five years’ RGB increases, whichever is less. And the MBR ceiling would rise by the Standard Adjustment Factor (SAF). On Jan. 1, 2021, the MBR would remain the same (since MBRs cover a two-year period), but the MCR would rise by another 7.5 percent or the average of the last five years’ increases approved by the RGB, whichever is lowest.

According to MBR forms, pursuant to HSTPA, the MCRs in effect on Dec. 31, 2019, are increased by not more than 0.85 percent on Jan. 1, 2020. This figure is based on the average of the previous five years of one-year rent adjustments for rent-stabilized apartments.

The Division of Housing and Community Renewal (DHCR) recently updated its website with the necessary forms you have to fill out to start the process for increasing the rents of your rent-controlled apartments during the 2020-21 MBR cycle. Once you receive the orders of eligibility, you can raise your MBRs by 9.5 percent over their 2018-19 levels.

Here are the steps you must take after you get an order of eligibility, plus other information you need to ensure that you can collect an MBR increase.

Fill Out Forms

The MBR Binder with the forms you need can be found on the DHCR’s website at www.hcr.ny.gov/tenant-owner-forms under Owner Forms. The forms are:

1. Notice of Increase in 2020–21 Maximum Base Rent and Maximum Collectible Rent Computation (Long Form) [RN-26 (1/20)] and (Short Form) [RN-26S (1/20)]. There are two versions of this notice--a long form and a short form. You must use the appropriate version to compute each rent-controlled tenant’s rent increase and to notify that tenant of the increase.

• You must use the long form if:
• You previously filed a long form for the apartment;
• You paid for gas and/or electricity for the apartment;
• You were granted a labor cost adjustment for the unit during the last MBR cycle; or
• You got a rent adjustment for the apartment after Aug. 1, 1970. Rent adjustments include major capital improvement increases, new equipment increases, and rent decreases (for example, for a decrease in services). They don’t include previous MBR increases.

In all other situations, you use the short form. Both the long and short forms take you step-by-step through the computation of the MBR and the MCR. Date and sign the back of each form.

When you download your MBR binder from the DHCR website, print or make enough copies of both the long and short forms so that you’ll have enough of them for all of your rent-controlled tenants. You may have to use short forms for some apartments and long forms for others in the same building.

Practical Pointer: If you didn’t get an order of eligibility for the previous MBR cycle, use the special calculations that appear on both the long and short forms.

2. Attachment form [RMBR-ATT (1/20)]. You must attach this form to the long form if:

• You paid for the tenant’s gas and/or electricity; or
• You applied for a labor cost adjustment in 2018 or 2019, and the DHCR issued an order (RO-33.8 or RO-33.8m) granting the adjustment before Jan. 1, 2020. If your latest Labor Cost Adjustment Application was filed prior to 2018, you don’t file this labor cost adjustment page because the 2020 Standard Adjustment Factor modifies the prior MBR Modification for labor.

If you paid for the tenant’s gas and/or electricity, you need to fill out, date, and sign pages one and two of the attachment form. This will adjust the tenant’s MBR to reflect your utility payments. If you got a labor cost adjustment, you need to fill out, date, and sign the page titled “For Modification of 2020 MBR to Include Appropriate Labor Cost Adjustment.” This will modify the tenant’s MBR to reflect that adjustment.

3. 2020 Maximum Base Rent Master Building Rent Schedule [RMB-2020 (1/20)]. This is a building-wide rent schedule of 2020 MBRs and MCRs for all rent-controlled tenants in your building. Fill out this form, using the information on the long or short forms that you completed for each tenant in the building. You must also date and sign the front of this schedule to certify the truth and accuracy of the information in it.

Deliver Notices to Tenants

You must deliver the appropriate, completed long or short form, and the attachment form, if required, to each rent-controlled tenant.

How to deliver. The forms don’t specify how you should deliver them to tenants. But it’s a good idea to use a method that will give you proof of delivery in case a tenant later claims never to have gotten the notice.

You can hand-deliver the form and have the tenant sign a receipt. But you may run into a problem if the tenant isn’t home or refuses to sign the receipt. You can also use certified mail; but again, the tenant may not be home to sign for it and may be unable to pick it up at the post office. If you send each form by regular mail, however, you can buy a certificate of mailing from the post office for each one.

Delivery deadline. The deadline for delivery of the forms is 60 days after the issue date or the effective date of the order of eligibility—whichever is later. The effective date appears in the lower left-hand corner of the order of eligibility, and the issue date appears in the upper right-hand corner. Count the day after the order is issued as day one.

If you deliver the forms to tenants by mail, your envelopes must be postmarked by the 60th day. If you use certificates of mailing, make sure they show that your envelopes were mailed by the 60th day.

If you deliver the forms by the deadline, you can collect the MBR increases retroactively to the effective date of the order. If you don’t deliver them by the deadline, you can collect the MBR increases only prospectively—starting from the next rent payment date after you send the tenant the form.

File Rent Schedule with DHCR

File the building-wide rent schedule with the DHCR. Along with it, send a copy of each attachment used with a long form. But don’t send the DHCR copies of either the long or short forms.

How to file. You can file the rent schedule form online at https://apps.hcr.ny.gov/masterbuildingrentschedule/. Or you can mail the rent schedule to the DHCR at the Gertz Plaza address. If you decide to mail in the form, send it by certified mail, return receipt requested. This gives you proof that the DHCR got the schedule. You can also hand-deliver the rent schedule to the DHCR’s Gertz Plaza office. Just bring the original schedule, along with a copy, and have a DHCR clerk date-stamp the copy. Keep the copy in your files so you have solid proof that you filed the schedule on time.

Filing deadline. If you don’t file the rent schedule on time, your rent increases may be revoked. You have 60 days of the issuance date of the order of eligibility (or the “computed order of eligibility”) to do so. On the schedule, you must certify that you delivered the forms to your tenants within 60 days of the date the order of eligibility was issued.

What Rent Hike Can You Collect?

The 2020-21 MBR has been increased by 9.5 percent. The total rent you may collect from a rent-controlled tenant for 2020 is on line 6 of the short form or line 13 of the long form.

How to Collect Retroactively

If you get your forms to tenants and the rent schedule to the DHCR on time, you can collect the MCR increases back to the effective date of the order of eligibility. The tenant may choose either of two ways to pay the retroactive portion of the increase.

Monthly installments. The number of installments must equal the number of months between the effective date of the order of eligibility and the next rent payment date after the tenant gets the form.

Example: An order of eligibility is effective as of Jan. 1, 2020. The 2020 MCR increase for the tenant is $10 per month. You deliver the form to the tenant on April 23 and file the rent schedule with the DHCR on April 27. The tenant may pay the retroactive $10-per-month increase (for January, February, March, and April) in four monthly installments, starting with the rent payment due May 1, 2020.

Lump sum. The tenant may instead choose to pay the entire retroactive increase in one lump sum on the next rent payment date after he or she gets the form.

Takeaways

• Owners must serve each rent-controlled tenant the proper notice and file the Master Building Rent Schedule within 60 days of Jan. 1, 2020, or the issue date of the order, whichever is later, to collect the rent increases for the first year of the 2020–21 cycle.
• The MBR’s 2020–21 Standard Adjustment Factor is 7.4 percent.
• With the passage of HSTPA, the MCRs in effect on Dec. 31, 2019, are increased by not more than 0.85 percent.