Lynch, Bischoff and Kole.
Defendant tenants in this appeal challenge the validity of certain regulations (24 C.F.R. § 403 et seq.; 40 Fed. Reg. 49318) adopted by the Department of Housing and Urban Development (HUD) and question whether they preempt the Newark Rent Control Ordinance (Revised Ordinance 15:9B-1 et seq.).
Plaintiff Hill Manor Apartments is a 21-story apartment complex constructed in 1970. It consists of 426 units and is owned by the Newark Community Housing Corporation, a limited dividend corporation. Federal financial assistance was utilized in the construction of these apartments, with the mortgage being insured by HUD pursuant to § 221(d)(3) of the National Housing Act, 12 U.S.C.A. § 1715 l (d)(3). This mortgage has been assigned to HUD.
The relationship between HUD and plaintiff is governed by a regulatory agreement.
On November 27, 1974 plaintiff served the tenants with notice of a 27% rent increase, which had been approved by HUD, to be effective January 1, 1975.
At that time there was in effect a Newark rent control ordinance (Revised Ordinance 15:9B-1 et seq.), which allowed
a 5% rent increase automatically, but any request for an additional rent increase had to be granted by the Rent Control Board after a hearing.
This attempt by plaintiff to increase the rent was challenged by the tenants in the Superior Court of New Jersey. That court restrained all but 5% of the increase and ordered a hearing before the Newark Rent Control Board.
The Newark Rent Control Board held a hearing on April 25, 1975 and granted an 11% rental increase, effective July 1, 1975, pursuant to the hardship section of the rent control ordinance.
While these proceedings were pending HUD promulgated 24 C.F.R. § 403.5 et seq. , which purports to exempt all unsubsidized insured housing projects from local rent control. This regulation became final October 22, 1975.
We pass interim, irrelevant proceedings and proceed to October 22, 1975, the day the HUD regulation became final. Plaintiff, on that date, served notice of intention to increase all rents by 25% and invited comments from the tenants in accordance with the procedure established by the new regulation. 24 C.F.R. § 403.6. The tenants submitted 170 letters and a cover letter outlining the position of the tenants' association opposing the increase.
On December 29, 1975 plaintiff gave the tenants notice to quit and made a demand for possession, coupled with a 25% increase in ...