Topic No. 302: Capital Improvement Petitions - General Information
A landlord may petition the Rent Board to pass through to tenants the costs of certain renovations to the property, which are considered capital improvements. A capital improvement is one that materially adds to the value of the property, appreciably prolongs its useful life, or adapts it to new uses, and which may be amortized over the useful life of the improvement of the building. Examples of capital improvements include new windows, a roof replacement and exterior painting. Repair and maintenance work, such as replacing a broken window pane, patching a roof or clearing a clogged pipe, or costs that are attributable to legalizing an existing dwelling unit under Planning Code Section 207.3 are not capital improvements.
The cost of capital improvement work that was required to correct a code violation for which a notice of violation was issued and remained unabated for 90 or more days will not be certified for passthrough to the tenants unless the landlord made timely good faith efforts to do the work within that 90-day period, but was unsuccessful due to the nature of the work or circumstances beyond the landlord’s control.
The landlord must file a Capital Improvement Petition with the Rent Board before the landlord serves the tenant with a written notice of rent increase for the capital improvement passthrough. The passthrough does not become part of the tenant’s base rent and should not be included in the base rent when calculating an annual or banked rent increase.
Capital Improvement Petitions must be filed within five years of the completion of the capital improvement work. A petition cannot be filed until the work is entirely completed. All petitions must be submitted on the forms provided by the Rent Board and must include supporting documentation. There are different forms and requirements for properties with 1-5 residential units and for properties with 6 or more residential units. There is also a special capital improvement petition form for seismic work required by law. Each form includes specific instructions for filing a Capital Improvement Petition.
If payment of a capital improvement passthrough would present a financial hardship for a tenant, he or she may seek relief from payment of the increase by filing a Tenant Financial Hardship Application with the Rent Board. A tenant must wait to file the Hardship Application until the tenant has received either a rent increase notice from the landlord or written decision from the Rent Board. Once the tenant has filed the Hardship Application, the tenant does not have to pay the capital improvement passthrough unless the Rent Board issues a final decision denying the Hardship Application. If the Hardship Application is denied, the tenant will have to pay the capital improvement passthrough retroactive to the effective date on the rent increase notice. If the Hardship Application is granted, relief from payment of the capital improvement passthrough may be for an indefinite period or a limited period of time, depending on the nature of the tenant’s financial hardship.
For tips on preparing a capital improvement petition, refer to Fact Sheet 5, “Landlord Petitions and Passthroughs.” To obtain a copy of various capital improvement petition forms available and/or Fact Sheet 5, you can visit the Forms Center on our website. The forms and Fact Sheet 5 are also available at our office.
Please refer to the topics that follow for important information on specific requirements for Capital Improvement Petitions.
- Topic 303: Estimator Fees
- Topic 304: How to Allocate Capital Improvement Costs
- Topic 305: Interest on Capital Improvement Costs
- Topic 306: Uncompensated Labor Rates
- Topic 307: Special Rules for Properties with 1-5 Residential Units
- Topic 308: Special Rules for Properties with 6 or More Residential Units
- Topic 309: Special Rules for Seismic Work and Other Improvements Required by Law
- Topic 310: Special Rules for Energy Conservation Work
- Topic 311: How to Notify Tenants of a Capital Improvement Increase
- Topic 312: Tenant Objections to Capital Improvement Petition