How to Get Proper Consent for Improvements/New Equipment Rent Hike

If you want to collect a rent hike for making improvements to, or installing new equipment in, an occupied rent-stabilized apartment, you must get the tenant’s written consent to the rent hike. If you don’t do this properly and the tenant challenges the rent hike by filing a rent overcharge complaint with the Division of Housing and Community Renewal (DHCR), you could lose out on the rent hike.

Remember that as a result of the Rent Act of 2011, the number of apartments you have in your building determines what percentage of improvement costs you may pass on to your tenants. Individual apartment improvements completed in buildings with more than 35 apartments allow the owner to increase the legal regulated rent by one-sixtieth (1/60th) of the cost of the improvements. For improvements or equipment installed in buildings containing 35 or fewer apartments, you can pass on one-fortieth (1/40th) of the costs.

We’ll tell you how to get a tenant’s consent to an improvements/new equipment rent hike in a form that will withstand a challenge if the tenant later decides to renege. And we’ll give you a Model Agreement: Use Consent Agreement to Get Rent Hike for Improvements/New Equipment, that you can adapt and use.

Don’t Rely on Oral Consent

It’s vital to get the tenant’s consent in writing to the improvements/new equipment rent hike before you make the improvements or install the equipment. Don’t take the tenant’s word if he promises orally to pay a rent hike for the improvements/new equipment. If the tenant decides to challenge the validity of the increase after the improvements are made or the equipment is installed, you’ll be out of luck without his written consent to show to the DHCR. That means he’ll end up with the improvements or new equipment free of charge, and you’ll end up with a broken promise and no way to defray the cost of the improvements/new equipment.

For example, in one case, the owner upgraded a tenant’s kitchen at some point after the tenant moved in. The owner admitted that it collected $50 per month for 22 months from the tenant. The owner claimed that the tenant agreed to this payment. But the tenant never consented in writing to the increase, so the owner was barred by Rent Stabilization Code Section 2522.4(a)(1) from collecting this charge even if the owner otherwise properly charged the tenant for improvements, not repairs [Avenue 219 West 81st LLC: DHCR Adm. Rev. Docket No. YB410030RO (7/20/10)].

Also, if you make improvements or install new equipment without the tenant’s written consent, you lose the right to collect the rent hike for those improvements/new equipment forever. Even after the current tenant moves out, you can’t collect the improvements/new equipment rent hike from the next tenant to occupy the apartment by claiming that the improvements were made or the equipment was installed before that second tenant moved in.

Cover Two Key Points in Tenant’s Consent

To avoid confusion and unnecessary procedural delays, written consent to rent increases for apartment improvements should not be gathered in a piecemeal fashion. Your written consent obtained from the tenant should have all the needed information.

In one case, a tenant complained of a rent overcharge after the owner added a 1/40th rent increase for apartment improvements. The work was done while the tenant lived in the apartment, so it required written consent. The DHCR found that the tenant signed a consent form, but that the form didn’t state the amount of the rent increase. The owner appealed, claiming that the tenant signed a consent form in January 2009, then signed a lease rider in February 2009, agreeing to the specific amount of the rent increase. Together, these documents showed the tenant’s consent to the rent increase. But the case was sent back to the district rent administrator for further fact finding because two different renewal leases with different amounts had been submitted [45-55 Realty LLC: DHCR Adm. Rev. Docket No. YL210039RO (9/29/11)].

The tenant’s statement of consent should cover two key points:

1. Acknowledgment of improvements/new equipment. Have the tenant acknowledge the improvements that you’ll make to, or the equipment that you’ll install in, the apartment. List each improvement or item of new equipment. Remember that the improvements/new equipment listed must qualify for a rent hike. If you list items that the DHCR considers repair or maintenance, you won’t be able to collect the rent hike, despite the tenant’s consent.

2. Payment of rent increase. The tenant must agree to pay the rent increase. The consent agreement should state the specific amount of the rent increase. If it doesn’t, the DHCR may find that the agreement can’t be used to prove that you got the tenant’s consent to the improvements/new equipment rent hike.