Architectural Fees Relating to Canopy Restoration Added to MCI Rent Hike

The DRA granted landlord's MCI rent increase application in part by approving an increase for pointing and waterproofing based on a comprehensive exterior restoration project with related architectural services and sidewalk bridging. But the DRA excluded costs associated with construction management and engineering services, as well as portions of the architect's fees pertaining to work done on the canopy over the entryway, to "courtyard lights," and fees for reimbursables. Landlord and tenants both appealed. Each side won in part. As a result, the MCI rent increase was increased by 2 cents per room, from $18.37 to $218.39 per room

The DHCR granted landlord an additional $9,900 MCI increase for architectural costs pertaining to canopy restoration that the DRA had excluded. That work included masonry and structural steel and was included as a component of the approved facade MCI. But the DHCR otherwise ruled against landlord. It was long-established by DHCR Policy Statement 2017-1 that, while the costs of certain professional services that are directly related to a qualifying MCI may be included in the approved MCI amount, the cost of construction supervision services generally don't qualify as an MCI-eligible expense. The construction management services in question didn't qualify as an added MCI cost as they were in the nature of construction supervision only. It was also established DHCR policy that costs related to testing, such as the stress tests on the exterior walls here, weren't eligible to be included in the approved MCI amount. And it was long-standing DHCR policy that fees pertaining to "reimbursables" such as those provided by landlord's architect weren't eligible for MCI coverage. As to architectural services for courtyard lights, landlord didn't show that this was directly related to restoration of the outdoor canopy. 

The DHCR granted tenants' request to exclude the $8,635 cost of the new roof over the janitor's closet from the MCI increase. The DHCR ruled that tenants' claim that there were insufficient grounds for approving a waiver of useful life was without merit. Landlord's architect had submitted a statement that some areas of the facade had deteriorated since prior work was done, presenting a hazardous condition and requiring the removal and replacement of the terra cotta throughout the entire facade. The DHCR had approved a waiver of useful life in a prior opinion. The DHCR also didn't have to give tenants a chance to object to landlord's useful life waiver application. They had sufficient opportunity to object in response to landlord's MCI application. The DHCR also denied tenant's claims that the facade work had been done defectively and in a piecemeal fashion. And the DHCR denied tenants' request to apply HSTPA amendments concerning MCIs to the case at the PAR level. 

Langham Mansions LLC/Langham Tenants: DHCR Adm. Rev. Docket Nos. GN430025RO, GN430042RT (7/16/21)[4-pg. document]