Nutley Investment Group v. Rent Leveling Board

502 A.2d 78, 206 N.J. Super. 240, 1985 N.J. Super. LEXIS 1605
CourtNew Jersey Superior Court Appellate Division
DecidedDecember 31, 1985
StatusPublished

This text of 502 A.2d 78 (Nutley Investment Group v. Rent Leveling Board) is published on Counsel Stack Legal Research, covering New Jersey Superior Court Appellate Division primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nutley Investment Group v. Rent Leveling Board, 502 A.2d 78, 206 N.J. Super. 240, 1985 N.J. Super. LEXIS 1605 (N.J. Ct. App. 1985).

Opinion

The opinion of the court was delivered by

BRODY, J.A.D.

Defendant Rent Leveling Board (the Board) ruled that plaintiff, a partnership owning rental dwelling units in a condominium complex, is subject to the municipal rent control ordinance. The ruling was upheld by summary judgment entered in the Law Division. Plaintiff appeals and we affirm.

Sleepy Hollow Condominiums was constructed as a five-building, 92-dwelling-unit condominium complex. The original developer, Sleepy Hollow Development Group (SHDG), was also a partnership. SHDG sold over half the units to owner-occupiers and rented the rest in expectation of their eventual sale to owner-occupiers. Thereafter, SHDG sold 18 rental units to [242]*242plaintiff and 16 to LLGYMMR, another partnership. William Govel and James Yacenda were partners in all three partnerships. We do not know from this record the number or identity of the other partners.

The present action resulted from a notice of rent increase that plaintiff gave the tenants of Unit E-6 at the end of the one-year term of their written lease with SHDG. SHDG sold plaintiff Unit E-6 and two other rental units in the same building, and sold LLDYMMR two rental units in that building. After receiving the notice of rent increase, the tenants filed a complaint with the Board alleging that the increase exceeded the amount allowable under the rent control ordinance. Plaintiff contended that it was exempt under the ordinance because it did not own four or more rental dwelling units in the building containing Unit E-6.

The ordinance subjects a “landlord” to rent control. A “landlord” is defined as “[a]n owner, lessor, sublessor or any other person entitled to receive rent for the use and occupancy of any housing space____” “Housing space” is defined as “[ujnits of dwelling space in multiple dwellings rented or offered for rent ----” A “multiple dwelling” is defined as “[a]ny building or structure or portion thereof and any land appurtenant of four (4) or more dwelling units, the tenant or tenants of each of which dwelling unit lives or live independently of each other.” Read literally, the ordinance does not exempt plaintiff from rent control because Unit E-6 is one of at least four rental dwelling units in a building or structure.

This is so because the ordinance establishes coverage based on the number of units in a building or structure, not on the number of units owned by the landlord. Thus the owner of three or fewer rental dwelling units is exempt if the units are in a building or structure containing no more than three rental dwelling units, but is covered if his units are in a building containing four or more rental dwelling units. The drafters assumed that whoever owned one rental dwelling unit in a building owned them all. [243]*243They did not consider that different units in a condominium building may have different owners.

This feature of condominium ownership was also not considered by the drafters of the rent control ordinance in AMN, Inc. v. So. Bruns. Tp. Rent Leveling Bd., 93 N.J. 518 (1983). The ordinance there exempted “housing units of two units or less.” The landlord owned only two rental dwelling units in a building containing more than two. The Court held that the owner was exempt because he must be treated like the owner of a building containing only two rental dwelling units. The Court ruled that

... when a court interprets an ordinance that was drafted without the situation in question having been considered by the drafters, the court should interpret the ordinance in a reasonable manner. A determination of rent control applicability that turns on the physical structure of the building bears no reasonable relationship to the purposes underlying rent control. [Id. at 525-526]

The Court then summarized the reasons given in prior cases for exempting owners of small holdings from rent control:

Professional landlords of large apartment complexes were perceived as being less caring or responsive to tenants’ demands than landlords of single-family or two-family rental units. There was less fear of unequal bargaining power between tenants and landlords of single-family or two-family rental units. Further, it was recognized that municipalities are reluctant to subject landlords of single-family or two-family rental units to the burden of complying with the complicated and burdensome provisions existing in most rent control ordinances. [Id. at 526]

Plaintiff here contends that because it owned only three rental units in the building containing Unit E-6, AMN requires that it be treated like the owner of a three-family house and therefore it was exempt. The Board disagreed for two reasons. First it determined that although plaintiff owned only three rental units in the building that contained Unit E-6, it was the “beneficial owner” of the two units owned by LLGYMMR. The Board did not explain what it meant by “beneficial owner.” It simply treated the two partnerships as one because Govel and Yacenda were two of the partners in each. Alternatively the Board determined that all 18 units that plaintiff owned in the complex should be counted to determine whether plaintiff was [244]*244the owner of four or more units and therefore subject to the ordinance.

In affirming the Board, the trial judge determined that the “landlord” of Unit E-6 was SHDG because it had first leased the unit to the tenants at a time when SHDG owned four or more rental units in the building. The judge held that plaintiff was subject to the ordinance as SHDG’s successor. Alternatively, the trial judge determined that because Govel and Yacenda were partners in plaintiff and LLGYMMR, both partnerships were under the same control and therefore their total holdings in the building, five rental units including Unit E-6, must be counted as owned by plaintiff. The trial judge did not pass on the Board’s alternate determination that all 18 units that plaintiff owned in the complex must be counted, not just the three it owned in the building containing Unit E-6. We reject the trial judge’s reasoning but affirm on the Board’s alternate approach. The number of rental units plaintiff owned in the complex must be aggregated to determine whether Unit E-6 was contained in “[a]ny building or structure or portion thereof ... of four (4) or more dwelling units____”

The ordinance provides that “[a]t an anniversary date a landlord may claim an increase in basic rent.” An “anniversary date” is defined to include “[i]n the case of premises occupied under a written lease having a stated term of at least one (1) year, the day next following the expiration date specified in the lease; ____” The landlord referred to in the ordinance is the landlord on the anniversary date, not the landlord from whom the tenant first rented the premises. A prior landlord cannot “claim an increase in basic rent” after he has sold the unit. Plaintiff, not SHGD, was the landlord on the anniversary date and its holdings on that date determine whether it was exempt from rent control under the ordinance.

On the anniversary date plaintiff owned only three rental units in the building containing Unit E-6. The fact that plaintiff shared two partners with LLGYMMR, the owner of two [245]*245other rental units in the building, does not necessarily mean that plaintiff owned five units in the building.

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Related

AMN, Inc. v. Township of South Brunswick Rent Leveling Board
461 A.2d 1138 (Supreme Court of New Jersey, 1983)

Cite This Page — Counsel Stack

Bluebook (online)
502 A.2d 78, 206 N.J. Super. 240, 1985 N.J. Super. LEXIS 1605, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nutley-investment-group-v-rent-leveling-board-njsuperctappdiv-1985.