Does Gas Re-Piping Qualify as MCI When Done to Fix Gas Leak?

Q Our rental building had an unexpected gas leak and Con Edison shut off the gas service for six months for mandatory repairs. As part of the repairs, we were required to change all the gas pipes in the building to be able to reinstate the gas service to the tenants (75 apartments in total). Can the owner pass this repair and replacement expense as an MCI increase onto the tenants? That is, would the DHCR approve an application for an MCI increase for such a reason? This was obviously not a voluntary work for improvement of service but rather the only option of the owner, who had to reinstate the discontinued service (due to the gas leak) to the tenants.

A The DHCR would approve an MCI application for gas re-piping, provided that the work otherwise qualified for a rent increase, says Elizabeth Lentini, partner at Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. Under the Rent Stabilization Law, to qualify for an MCI rent increase, the work must: (1) be depreciable under the tax code; (2) be essential for the preservation, energy efficiency, functionality, or infrastructure of the entire building; (3) be completed on a building-wide basis; and (4) meet the useful life schedule.

It is longstanding DHCR policy that gas re-piping meets the definitional requirements for an MCI rent increase, says Lentini. The DHCR has recently affirmed this policy in the reasonable cost schedule (which was enacted pursuant to HSTPA). The reasonable cost schedule specifically permits a rent increase for gas re-piping, meaning that the new requirements in HSTPA don’t exclude gas re-piping as a qualifying improvement. The DHCR’s most recent reasonable cost schedule can be found at https://hcr.ny.gov/system/files/documents/2022/01/operational-bulletin-2021-1-update-1.pdf.

The fact that the re-piping was done to remedy a gas leak or other condition doesn’t constitute a bar to a rent increase. The Rent Stabilization Code specifically permits a rent increase for improvements performed to comply with the law. There is no requirement that the improvement be “voluntary.”