On certification to the Superior Court, Appellate Division, whose opinion is reported at 169 N.J. Super. 288 (1979)
For affirmance -- Chief Justice Wilentz and Justices Sullivan, Pashman, Clifford, Schreiber, Handler and Pollock. For reversal -- none. The opinion of the Court was delivered by Pashman, J.
This is the third of three related cases challenging municipal power to prevent the deterioration of rented residential housing.*fn1 Here we consider the validity of a rent control ordinance which prohibits increases in rent without a certification that a dwelling is in "substantial compliance" with municipal housing regulations.
On November 15, 1976, the City of Orange enacted Ordinance MCD 27-76 "to regulate, control and stabilize rents and to create a Rent Control Board within the City of Orange * *."
The enactment codified and replaced the various ordinances regarding rent control which had been passed since 1972. It applied to all rented housing besides hotels, motels, one- and two-family dwellings and three-family, owner-occupied dwellings. The ordinance prohibited increases in rentals except under three sets of circumstances. When a lease expired or a periodic lease terminated, a landlord could charge an increase in rent proportionate to the increase in the Consumer Price Index*fn2 over the period of the former lease. Such periodic increases were originally limited to an annual rate of 4%.*fn3 A landlord could also petition for an increase to avoid economic hardship if he could not meet his "usual[,] customary and normal" operating expenses, including mortgage payments and maintenance costs. Finally, the ordinance permitted a landlord to seek additional rent for "major capital improvements or service [improvements]." An increase by reason of hardship or capital improvements was limited to 15% of a tenant's rent.
While no further official authorization was needed for periodic increases, each proposed increase in rentals due to hardship or capital improvements required the approval of the city's Rent Leveling Board. The board consisted of five members and two alternates appointed by the City Council for three-year terms. The ordinance granted the board authority to promulgate rules and regulations to implement the ordinance. Such regulations would "have the force of law." An aggrieved landlord or tenant could appeal decisions of the Rent Leveling Board to the City Council within 20 days of the date of determination.
The ordinance contains several provisions designed to insure a multiple dwelling's compliance with municipal standards for safety and habitability. When seeking a periodic increase in rents, a landlord must give formal notice to his tenants of the
calculations involved in the increase, "and a certification that said dwelling and housing space is in substantial compliance with the applicable Property Maintenance Codes." Petitions for increases due to hardship or capital improvements required "a certification from the Property Maintenance Department of the City of Orange that the building and grounds are in Substantial Compliance with the Property Maintenance Code." The ordinance provided that the landlord must apply for official certification no more than one month prior to filing his petition with the Rent Leveling Board.
The ordinance defined "substantial compliance" as follows:
"Substantial Compliance" means that the housing space and dwelling are free from all heat, hot water, elevator and all health, safety and fire hazards as well as 90% qualitatively free of all other violations of the Orange Property Maintenance Code and the Property Maintenance Code of the State of New Jersey*fn4 where applicable. [footnote added]
As written, the definition appeared to mandate compliance with both the State and municipal housing codes. After the Appellate Division's decision in this case, however, the Rent Leveling Board issued regulations requiring substantial compliance with only the municipal housing code for the issuance of certificates.
Orange Taxpayers Council, Inc., a coalition of owners of rental properties in Orange, and several individual landlords*fn5 instituted this challenge to the rent control ordinance on March 10, 1977. Filing a verified complaint in lieu of prerogative writs, R. 4:69, plaintiffs named as defendants the City of Orange, its Rent Leveling Board, each of the board's members and its secretary,*fn6 the Orange Tenants Association, an unincorporated association of tenants residing in Orange, and Barbara Davis,
the association's president.*fn7 Plaintiffs alleged numerous grounds for the invalidation of Orange's rent control scheme. Among them were challenges to the requirements that a landlord provide or obtain a certification of "substantial compliance" as a condition for any increase in rents.*fn8
The parties filed cross motions for summary judgment on the legality of the certification scheme.*fn9 In a letter opinion the trial court held it invalid. According to the court, the requirement that an apartment be in "substantial compliance" with housing regulations was unrelated to the purposes of rent control. It found that the ordinance imposed penalties on landlords for violations of State as well as municipal housing regulations. Relying upon the Appellate Division decision in Modular Concepts, Inc. v. South Brunswick Tp., 146 N.J. Super. 138 (App.Div.1977), certif. den., 74 N.J. 262 (1977), the ...