Surcharges and Fees

There are certain fees that owners may charge tenants that are separate and apart from the rent. Fees of any kind cannot become a part of the legal or preferential rent and cannot be added to the rent for the purpose of calculating lease renewal increases.

There are certain surcharges that owners may charge tenants that are separate and apart from the rent. Surcharges of any kind cannot become a part of the legal or preferential rent and cannot be added to the rent for the purpose of calculating lease renewal increases.

For a detailed explanation of lawful and unlawful fees, see Fact Sheet #44.

For a detailed explanation of surcharges for washing machines, dryers, or dishwashers, see Operational Bulletin 2005-1 - Supplement No. 3.

For a detailed explanation of surcharges for air conditioners, see the 38th Annual Update to Operational Bulletin 84-4, Supplement 1.

For a summary of surcharges for air conditioners, see the Fact Sheet section. For historical allowable surcharges for air conditioners and washing machines, dryers, or dishwashers, see the Operational Bulletin section. For an owner’s application to apply for DHCR approval to collect air conditioner surcharges for rent controlled apartments, see the Forms section.

1) Who is responsible for paying a 421-a tax benefit - 2.2% surcharge and how is it calculated?

The 2.2% surcharge is collectible primarily from tenants in market-rate units in buildings that receive 421-a (subdivision 1-15) tax benefits. It is not collectible from tenants in market rate or income-restricted units in buildings that receive 421-a (subdivision 16) tax benefits (Affordable New York Housing Program Benefits).

The 2.2% surcharge is not part of the legal rent and cannot be compounded by Rent Guidelines Board increases for one and two-year leases or by any other lawful rent increases including, but not limited to Major Capital Improvement (MCI) or Individual Apartment Improvement (IAI) rent increases. The 2.2% surcharge is a monthly surcharge that can be increased once a year, subject to the limitations explained below, regardless of how many leases have been executed in any given year. The collection of the 2.2% surcharge is also not affected by a DHCR order reducing rent for decreased services.

The 2.2% surcharge is only collectible if the applicable leases include a rider that is signed by the tenant, notifying the tenant in at least 12-point type of the owner’s right to collect the 2.2% surcharge and the approximate date of expiration of the 421-a Benefits. If the owner does not include the rider in a tenant’s vacancy (first) lease, DHCR will allow owners to add it to such tenant’s renewal lease and collect the 2.2% surcharge that could have been charged, prospectively only, plus any future lawful annual surcharges. A subsequent tenant who moves into an apartment during the phase-out of such building’s 421-a Benefits provided that he, she, or they receive the rider, can be prospectively charged the surcharge amount that had been or could have been charged to the prior tenant, plus any future lawful annual surcharge increases.

The 2.2% surcharge (a) can be increased annually during the phase-out period of the tax abatement up until the date upon which the 421-a Benefits expire, (b) is calculated for each year as a percentage of the rent charged on the date that such phase-out began.

Owners and tenants are strongly encouraged to check with the NYC Housing Preservation and Development (HPD) and the Department of Finance (DOF) to identify the type of tax benefit received and its commencement and expiration dates. HPD also has a Fact Sheet on 421-A.

The collection of surcharges in excess of the following limitations shall be considered an overcharge:

421-a tax abatement for 10 years - the phase-out surcharge collection of 2.2% begins in year 3, eight increases, total surcharge not to exceed 17.6%. 

421-a tax abatement for 15 years - the phase-out surcharge collection of 2.2% begins in year 12, four increases, total surcharge not to exceed 8.8%. 

421-a tax abatement for 20 years - the phase-out surcharge collection of 2.2% begins in year 13, eight increases, total surcharge not to exceed 17.6%. 

421-a tax abatement for 25 years - the phase-out surcharge collection of 2.2% begins in year 22, four increases, total surcharge not to exceed 8.8%. 

The total surcharge assessed upon the expiration of the 421-a Benefits is a fixed final surcharge that may continue to be charged each year thereafter. However, no additional 2.2% increase can be added to the final surcharge after the 421-a tax benefits expire. The collection of the final surcharge terminates when the tenant who is in occupancy on the date the 421-a benefits expire vacates the apartment.