What is 412a surcharges


A few friends of mine saw 421a surcharges on their rent and asked me if it’s legal for the landlord to raise rent that way. Well, the short answer is yes unfortunately. But there are three prerequisites to be met before your landlord can impose the surcharges on your rent.

Here is some background information. 421a is a NYS tax incentive program and administered by HPD and DOF in New York City. The program provides property tax abatement (for a period of time) to real estate owners or developers who construct new residential buildings. In return, a portion of the residential units created will be set aside as affordable units and all units in the building will be subject to NYS rent regulation. Within the tax abatement period, the owner can raise rent up to a maximum amount set by the Rent Guideline Board (RGB). Historically, this maximum amount is around 1-1.5%, which is very small compared to the general rent movement in NYC.

However, there is a special provision in 421a that allows the building owner to impose 421a surcharges on rent stabilized units. The provision says: In 421-a buildings, where the tax benefits are for 10 or more years, and provided that a “2.2% lease rider” is offered by the owner and signed by the tenant, owners can collect annual “421-a” surcharges equal to 2.2% of the rent charged at the beginning of the period of gradual diminution (when real estate taxes begin being phased in). There are 3 prerequisites to this provision:
  • The building receives tax abatement under the 421a program
  • “2.2% lease rider” has been sent to and received by the renter in a timely manner
  • Property taxes begin being phased in
To verify the 1st prerequisite, you can assess DOF’s database here and enter your building’s street address to access the property’s main page. On the left side, you will find a side menu called Property Info, click on the 8th tab “Benefits - Business and Construction” from the top. If the building receives 421a tax abatement, you shall be able to see it there.

As to the 2nd prerequisite, you shall refuse 421a surcharges if you never receive the “2.2% lease rider”. Per NYS rent regulation, this rider shall be sent to the renter along with the renewal lease 90 to 150 days prior to your current lease expiration date, or at the time when you receive the new lease. The burden is on the landlord to prove that you “received” the lease and any rider in the mail. If your landlord ignores your complaint about the surcharge, you can file a formal complaint with NYS DHCR using the form RA-89 Tenant's Complaint of Rent and/or Other Specific Overcharges in a Rent Stabilized Apartment. 

Finally, the 421a has an abatement period typically 15-30 years. At the beginning of the period, property usually receives 100% tax exemption. As abatement period runs out, property taxes start to kick in. Instead of applying the full tax amount against the building all at once, the program is set up to phase in the tax (e.g. 20% increment) over a period of time, usually the last 5-10 years of the abatement period. The landlord cannot impose 421a surcharge before this phase-in period begins. To get an idea if this phase-in period has started for your building, you can access the same DOF’s database, under Property Info, click on the 5th tab “Notice of Market Value” from the top. The notice of market value from any given year shall list the overall abatement period and the year of construction complete. With this information, you can find out where the building is within the abatement period. To confirm the phase-in schedule, you can always call DHCR to inquire.

The 421a surcharge is set up to help the owner or the developer to absorb the “shock” of sudden tax increase to their building. Typically, property tax is roughly 20-30% of the total rental income of a residential building in NYC. Clearly 2.2% rent increase from the surcharge is not going to cover the tax amount. The landlord will have to absorb the majority of it.

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