Topic No. 307: Special Rules for Properties with 1-5 Residential Units
For capital improvement petitions filed after November 13, 2002, 100% of the certified capital improvement costs may be passed through to the tenants of properties with one to five residential units. All residential units on the same property must be counted, even if they are in different buildings. Commercial units do not count for purposes of this rule, although a portion of the cost must be allocated to commercial units that benefit from the capital improvement work.
The amount of the passthrough may not exceed the greater of $30.00 or 5% of a tenant’s petition base rent in any 12-month period. Where certified costs exceed this limit, the landlord must impose the passthrough in phases. For large passthroughs, it may take the landlord several years before the passthrough is fully imposed.
The capital improvement cost must be amortized over 10 years, 15 years or 20 years, depending upon the type of improvement. The amortization schedules for various types of improvements can be found in the Capital Improvement Petition form for Properties with 1-5 Residential Units. To obtain a copy of the petition form, you can visit the Forms Center on our website. The petition form is also available at our office.
The capital improvement passthrough does not become part of the tenant’s base rent and must be discontinued at the end of the applicable amortization period. If the landlord fails to discontinue the passthrough at the proper time, the landlord is liable to the tenant for the overpayments.