Q: Question: Can a landlord raise rents (for unregulated unit) for Major Capital Improvement Costs and pass onto Tenant
This is for an Apartment in a 3-family property so all Apartments are unregulated. Tenants moved in recently, there is no signed lease (with BOTH parties having signed). Tenants signed, but the Landlord has not signed. So Tenants claim there is an oral lease in place. However, I believe there are mechanisms for raising rents for Major Capitol Improvements that may be necessary, even if there is supposedly an oral lease in place. Landlord claims there is no lease because it was not ratified or signed by both parties. Landlord believes Tenants are in Month to Month Tenancy, which is fine, but Landlord will have to raise rents starting in November 1 due to Major Capital Improvements costs. Even if there was an "oral lease" in place, there is a law that allows Major Capitol Improvement Costs to passed onto Tenants, no?
A: Rent increases for Major Capital Improvements ("MCIs") relate only to rent regulated properties. In unregulated properties, landlords are not required to justify the reason for a rent increase. If a tenant has a lease for a specific term, the rent cannot generally be increased until the lease expires unless the terms of the lease provide a specific exception allowing the landlord to do so. In non rent-regulated apartments, Landlords are required to provide written notice to tenants if they intend to raise rent by five percent or more. The landlord must provide such notice at least: 30 days in advance of renewal if a tenant has lived in the apartment less than one year and has less than a 12-month lease.
You really should have an attorney. You have confused several legal concepts. New York State allows for an oral lease of residential property for up to one year. Your offer of a one-year lease may very well be deemed an oral lease, as you were the proponent, and the tenant signed the lease. Does the lease contain the terms that this lease is not effective until signed by both tenant and landlord? If so, letting the tenant move in without you also signing the lease seems like you now have an oral lease for one year. If so, you are bound by the terms and conditions of the lease, and there is no rent increase available.
There is no legal notion of Major Capital Improvement (rent increase) beyond Rent Stabilization (and Rent Control). In a non-regulated rental, the landlord does not need any reason to offer a new lease (Real Property Law Section 226-C) with a rent increase of more than 5% above the current rent. But you cannot do so during the current lease.
Do you want a long-term relationship with this tenant (decide with an attorney if this makes sense--as the tenant has some understanding of the law)? If you do, why did you offer a lease and allow the tenant to move in without signing the lease? With a lawyer, you may develop a written proposal for a long-term lease with a new rent structure to give the tenant.
In New York, for unregulated apartments, landlords generally have greater flexibility to raise rents, and this can include recouping costs for major capital improvements (MCIs). However, the ability to pass these costs onto tenants will typically depend on the terms of any existing rental agreement.
If there is no formal lease signed by both parties, the tenants might be considered month-to-month tenants, and the landlord can usually adjust the rent with proper notice, which is typically 30 days. Yet, any oral agreement that can be proven may have bearing on what increases are permissible during its term.
For MCIs, while regulated apartments have specific guidelines, these do not automatically apply to unregulated units, and landlords must still provide tenants with appropriate notice of rent increases. The landlord should consult with an attorney to ensure compliance with local laws and regulations when planning to increase the rent for capital improvements.
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