When the NYS legislature renewed rent regulations effective July 2015, there were some significant changes that affect co-ops and condos.
If a co-op/condo has an unsold share holding with one or more rent controlled and/or rent stabilized apartments, and the Holder of Unsold Shares obtains an MCI rent increase order, now there is a significant financial benefit for the building as well – a large credit on property taxes.
Example: Cooperative has 95 units, gets a $400,000 exterior restoration job. The Holder of Unsold Shares has 6 rent stabilized apartments, and applies for and gets a rent increase. (That alone is an appreciable financial benefit for the building, since improved cash flow on an unsold share holding tends to increase the value of all apartments.) Now the building can also get a direct tax credit of $44,444.44, 11.1%* of the cost of the work. This comes in the form of a one-time credit on the property tax, the “MCI Abatement.” The co-op/condo gets the entire amount in one year.
This is not a J-51 abatement (which sometimes come with many strings attached) but a new “MCI Abatement” arranged by NYC Dept of Finance and the NYS Housing Division (DHCR.) It goes to the building owners, not the Holder of Unsold Shares, since the improvement was paid for by the building.
So if this credit is available only if there is an MCI rent increase order in the building, what work in buildings qualifies? Eligible work involves replacing a “building wide system.” “Building Wide System” has a complicated definition that is not always logical. Most high-priced jobs do qualify. There are also filing deadlines.
Our thanks to Ed Tristram Associates, Inc. for this article.