FactSheet:

The 1996/97 Revised MBR Factor: What It Means For You

On September 12, 1997, the state housing agency sent notices to rent controlled tenants telling them that the MBR factor for the 1996/1997 years would be 32.4%, not the 3% that tenants were assessed in January of 1996. This announcement has left thousands of tenants anxious and fearful about their rent. Met Council offers this fact sheet to help tenants figure out whether or not they have to pay an increase retroactive to January of 1996, and what they can do to fight the increase. This fact sheet offers guidelines--not legal advice. If you have questions about the advice we offer, please call Met Council during our hotline hours (see back page); if you need legal advice, contact a tenant attorney. (Met Council has a list.)

Background

The NYS Division of Housing and Community Renewal (DHCR) sent all rent controlled tenants a Revised Order of Eligibility on September 12, 1997 for an MBR factor of 32.4 percent. This was a revision of the notice sent in the beginning of 1996 which raised the MBR by only 3 percent. The DHCR was forced to revise the factor after losing a lawsuit filed by landlords unhappy with the 3 percent. In thinking it was complying with the judges’ decision, the DHCR used a different formula which resulted in an extraordinarily high increase. The MBR system was designed to compensate landlords for increases in costs, but also guarantee them a large profit. The 32.4 percent increase is clearly out of sync with current economic conditions where landlords’ costs are very low. No state official could possibly argue that landlords are entitled to high rent increases on rent controlled apartments at the same time that rent stabilized tenants have been enjoying small increases averaging 4.5 percent in the same period. On Tuesday, September 30, 1997, Mayor Giuliani signed into law a bill which changes the formula back to the one the DHCR used to get the 3 percent. This started a legal battle between the Pataki administration (which supports the landlords and the 32.4 percent increase) and the city (which supports the tenants). The issue has not yet been resolved although there may be a temporary solution by mid-Octo-ber. A final decision may not come for many months.

Who will be charged the new increase?

If you are rent controlled, and can answer yes to all of these, you will probably be charged under the new MBR factor rent increase:

1. I received the Revised Order of Eligibility from the DHCR shortly after 9/12/97.
2. I did not pay the full 7.5 percent increase in 1996 and again in 1997 because my Maximum Collectible Rent (MCR) had already reached the MBR. (MCR is the rent you pay before the fuel or labor passalong is added.)
3. I am not now in the Senior Citizen Rent Increase Exemption (SCRIE) program (If the new MBR increase makes you eligible, apply now -- see below for instructions.)

Rent controlled tenants who already paid a 7.5 percent increase in 1996 and again in 1997 will not have to pay any new increases until 1998.

What will my increase be?
(You answered yes to all the above.)

You were already at MBR if you paid a 3 percent increase in the beginning of 1996 and no increase in 1997 (excluding fuel and major capital improvement increases), you will be charged an additional 4.5 percent for 1996 and the full 7.5 percent for 1997.

You were close to MBR if you paid more than the 3 percent increase in the beginning of 1996, but less than the full 7.5 percent in 1996 or 1997 (excluding fuel and major capital improvement increases), you will be charged the difference between the percentage you paid in 1996 and the full 7.5 percent, and the difference you paid in 1997 and the full 7.5 percent.

Your landlord has 60 days from the day you received the Revised Order of Eligibility to send you a new rent calculation form, called Form RN-26. Once you receive the Notice of Maximum Collectible Rent for 1996 and 1997 (RN-26), you have thirty-three days (33) to challenge the order. You can challenge it by following the directions below. Once you receive the notice, the rent increase goes into effect on the next rent payment day (October 1 or November 1 for most tenants).

Do I have to pay the whole retroactive amount at once?

No. Do not freak out if the landlord sends you a rent bill asking for $1,000 in retroactive rent. The landlord must tell you what the total retroactive amount owed is and then divide it by 21 installments which you can pay off monthly. Some landlords will skip giving you this information.

What is being done to fight this increase?

The New York City Council voted to change the MBR formula so that it reflects what was intended in 1970 when the MBR law first went into effect. This change went into effect on September 30, 1997. Tenants and their advocates are supporting this new law, but there is a legal battle over whether or not the state has to follow the new city law. This battle will not be resolved immediately.

What should I do in the meantime?

Tenants have the choice to pay or withhold the increase. You should pay if you are unwilling or unable to appear in Housing Court if your landlord brings a non-payment action against you. Tenants who wish to withhold the increase until the courts decide the issue can do so if they follow the guidelines below.

Withhold the rent increase

Pay the rent you have been paying up to now but put aside and save the amount of the increase plus the monthly retroactive amount. You must save this amount every month. There may be a temporary solution to the dispute in mid-October, but a full resolution may not come for months. Once the issue is settled you will either have to pay the amount you put aside to the landlord, or, if we win, you can keep it. If you don’t pay the landlord the increase once you get the RN-26, the landlord may refuse to accept your partial rent and start an non-payment eviction proceeding in Housing Court against you. Going to Housing Court often means appearing on at least two different days, if not more. Call us for advice if you get court papers.

Challenge the Revised Order of Eligibility

Challenge your new MBR with DHCR Form RA-94 MBR. Get it from DHCR by visiting a borough office or calling 718-739-6400. You must file this challenge within 33 days of receiving the RN-26, Notice of Maximum Collectible Rent. Your challenges can contain any or all of the following:

1. New York City’s new law supercedes the state Order of Eligibility and so the revised MBR factor of 32.4 percent is null and void.
2. There were uncorrected violations of record in my apartment or in the building when the landlord applied for the MBR in 1995. (List what the violations were, or are.)
3. The landlord is not maintaining all essential services (such as heat and hot water) and is not eligible for an MBR rent increase.
4. The landlord hasn’t spent 90 percent of the MBR expense allowance on the maintenance and operation of the building. (The MBR provision has an allowance for running the building and the landlord has to certify that he is spending at least 90 percent of it on the building.)
5. The city-wide MBR factor of 32.4% is excessive and does not apply to this building. I demand that the DHCR calculate a specific MBR factor for my building based on an audit of my landlord’s books.

How can I apply for a Senior Citizen Rent Increase Exemption?

If you are 62 years or older, and your household disposable income is $20,000 or less, and you pay one-third or more of your income for rent (or face an increase that will cause you to pay one-third), you can apply for SCRIE. If the new MBR rent increase makes you eligible, apply right away for the program. The SCRIE agency has a backlog, so be prepared to wait for a decision on your application. Apply to the NYC Dept of Aging, SCRIE Unit at 2 Lafayette St, NYC 10007 or call (212) 442-1000. Visit a local senior center or elected official’s office for the forms and help completing them.

How do I stay informed about this issue?

Join Met Council and add your name to our special rent control list. We regularly mail out alerts to rent controlled tenants with updates on the progress of the fight against the new MBR.