How to Collect 2012-13 MBR Increases for Rent-Controlled Units

The Division of Housing and Community Renewal (DHCR) recently updated its Web site with the necessary forms you have to fill out to start the process for increasing the rents of your rent-controlled apartments during the 2012-13 maximum base rent (MBR) cycle. Once you receive the orders of eligibility, you can raise your MBRs by 7.8 percent over their 2010-11 levels. The MBR increase for this cycle is lower than the 12.9 percent increase used in 2010-11.

If you've been through the process before, you should find it familiar, since it's basically the same as in the last MBR cycle. 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 forms you need can be found on the DHCR's Web site at www.nysdhcr.gov/forms under Owner Forms. The forms are:

1. Notice of Increase in 2012-13 Maximum Base Rent and Maximum Collectible Rent Computation (Long Form) [RN-26 (1/12)] and (Short Form) [RN-26S (1/12)]. 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 applied for a 2010-11 labor cost adjustment for the apartment in 2010 or 2011, and the DHCR issued an order granting the adjustment; 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 maximum collectible rent (MCR). Date and sign the back of each form.

When you download your MBR binder from the DHCR Web site, 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 (1/12)]. 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 2010 or 2011, and the DHCR issued an order granting the adjustment before Jan. 1, 2010.

If you paid for the tenant's gas and/or electricity, you need to fill out, date, and sign page one 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 page two of the form. This will modify the tenant's MBR to reflect that adjustment.

3. 2012 Maximum Base Rent Master Building Rent Schedule [RMB-2012 (1/12)]. This is a building-wide rent schedule of 2012 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.

PRACTICAL POINTER: The DHCR forms binder also contains two forms that you don't need now, but will need at the end of the year if you're eligible to get any MCR rent increases from tenants in 2013. Save them in your files. They are:

o Notice of Maximum Collectible Rent: Effective Jan. 1, 2013 [RN-26s.1 (1/12)]; and

o 2013 Maximum Base Rent Master Building Rent Schedule [RMB-2013 (1/12)].

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 mail the rent schedule to the DHCR at the Gertz Plaza address given on the front of the form. Send it by certified mail, return receipt requested. This gives you proof that the DHCR got the schedule. Instead, you can hand-deliver the rent schedule to the DHCR's Gertz Plaza office. 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.

> If you file by mail. You must mail the rent schedule (with attachment forms) to the DHCR within 60 days of the date it issued the order of eligibility. 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. Note also that your envelope must be postmarked by the deadline. The DHCR will accept only official U.S. Postal Service postmarks as proof of on-time filing—not postmarks generated by an owner's postage machine.

> If you file in person. You must hand-deliver the rent schedule (with attachments) to the DHCR by the close of business on the 60th day after the order of eligibility was issued. On the schedule, you must certify that you delivered the forms to your tenants within 60 days of the date that the order of eligibility was issued.

What Rent Hike Can You Collect?

Although the 2012-13 MBR has been increased by 7.8 percent, you may collect no more than a 7.5 percent increase from your rent-controlled tenants during 2012. That's because the MCR, which is the rent you may actually collect from your tenant, can rise by no more than 7.5 percent per year.

After giving tenants the “2013 Notice of Maximum Collectible Rent” forms later this year, you can collect another increase of up to 7.5 percent, effective Jan. 1, 2013.

Example: At the start of the 2012-13 cycle, an apartment's MBR and MCR are both $600 per month. The MBR increases by 7.8 percent ($46.80) to $646.80. But in 2012, your MCR can rise by up to only 7.5 percent. So you can collect only $645 per month ($600 x 7.5 percent = $45; $600 + $45 = $645). In 2013, if you increased the rent again by 7.5 percent, you would get $693.38. Since this would be greater than the MBR, you can increase the MCR only to the MBR, which is $646.80. So you can collect only $646.80 per month from the tenant in 2013.

The total rent you may collect from a rent-controlled tenant for 2012 is the sum of: (1) the MCR, which is the figure on line 6 of the short form or line 14 of the long form; and (2) the total fuel cost adjustments.

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, 2012. The 2012 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, 2012.

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.