I have two questions regarding how MCI Rent Increases are applied and calculated to preferential rents.
1) Is an MCI rent increase added to the Preferential Rent or is the latter exempted from the MCI Rent Increase? In other words, is the MCI Rent Increase only added to the Legal Regulated rent and not Preferential Rent?
2) If DHCR's policy is that an MCI Rent Increase is added to the Preferential Rent amount, how is the MCI Rent Increase calculated for the Preferential Rent?
The law states a 2% annual cap on an MCI Rent Increase. In the situation where a tenant pays a Preferential Rent, is the 2% increase calculated on the Legal Regulated Rent amount or on the Preferential Rent Amount, or both?
To use an example:
Prior to the MCI order the rents are as follows:
-Legal Regulated Rent = $2,000
-Preferential Rent = $1,000
DHCR issues an MCI Rent Increase order which shall be calculated using the 2% increase cap, therefor:
-A 2% increase of the Legal Regulated Rent ($2,000) = + $40
-A 2% increase of the Preferential Rent ($1,000) = + $20
...continuing with the above example...
Question
Does the LL increase the Preferential Rent ($1,000) by:
a.) $40 (new total Preferential Rent w/MCI Increase = $1,040)
b.) $20 (new total Preferential Rent w/MCI Increase = $1,020)
c.) $0 (new Preferential Rent total remains the same = $1,000; only the Legal Regulated Rent receives the MCI Rent Increase; the Preferential Rent is not increased)