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Litt v. Rutherford Rent Board

Decided: July 12, 1984.

DONALD LITT, PLAINTIFF,
v.
RUTHERFORD RENT BOARD AND JOHN PETTI, DEFENDANTS



Evers, J.t.c. (temporarily assigned).

Evers

[196 NJSuper Page 458] In this in lieu of prerogative writ matter plaintiff, as a representative of a class of shareholders (landlord) in a cooperative apartment complex known as Hastings Village, Inc. (Hastings), seeks to reverse a decision of the defendant Borough of Rutherford Rent Board (Board) by which landlord's attempt to pass through a tax surcharge to defendant (tenant), a representative of a class of tenants in Hastings, all of whom occupied such status prior to its conversion to a cooperative form of ownership, was denied. Involved are questions of substantive and procedural due process and interpretation of the pertinent sections of the Rutherford Rent Control Ordinance and N.J.S.A. 2A:18-61.22 et seq. (Senior Citizen and Disabled Protected Tenancy Act). There being no dispute as to any material fact the parties brought cross motions for summary judgment. See

Judson v. Peoples Bank and Trust Co. of Westfield, 17 N.J. 67 (1954).*fn1

Following the conversion of Hastings from a rental apartment complex to a cooperative, the 1983 real estate taxes were increased from $122,289.81 based on the 1982 assessment, to $292,590.42. A reduction was granted by the Bergen County Board of Taxation following an appeal by the taxpayer, with the result that the net increase was $9.38 per room per month. Landlord notified tenant that his rent would be increased accordingly. At its meeting of August 11, 1983 the board approved the tax surcharge "pass-through" in its entirety. However at a meeting on September 15, 1983 the board determined to reopen and rehear the matter. This determination was apparently made in response to a letter from the president of the governing body who requested such action because of a conflict on the part of a board member and further because of certain statements made by the tax assessor before the mayor and council, which indicated that the tax increase was caused by the conversion from a rental complex to a cooperative. Copies of the tax assessor's statements were furnished to the Board by the councilman. Additionally the Board decided on that course of action because the then recent Supreme Court decision in AMN, Inc. of New Jersey v. South Brunswick Rent Leveling Bd., 93 N.J. 518 (1983) had been brought to its attention. Thereafter, at a meeting on September 29, 1983, in which counsel for landlord participated but at which the assessor did not testify, the Board, concluding that the portion of the tax increase resulting from the conversion could not be "passed through" to preconversion tenants, allowed only that portion of

the increase attributable to a normal increase in the tax rate (the 1982 preconversion assessment multiplied by the increased 1983 tax rate).*fn2

Landlord contends that the decision of the Board to reopen the matter was wrong because it was not based on valid reasons; that consideration of the assessor's statements made at a council meeting was improper and a denial of due process to landlord; that the rent control ordinance (§ 83A-7A) specifically allows the tax surcharge "pass-through" and that N.J.S.A. 2A:18-61.31 does not prohibit it; and denial of the surcharge is to deny to him a reasonable return and would be confiscatory in violation of his substantive constitutional due process rights.

Additionally, landlord claims that a decision of the Board, pursuant to § 83A-5K of the rent control ordinance, can only be taken by an appeal to court. While this argument was not pursued it must be stated that I find no authority that would prohibit the Board, on its own motion, from reopening such matters. I construe § 83A-5K, which does provide for an appeal to the courts from an adverse decision, to apply to those parties affected by the decision. Such was the course chosen by this plaintiff.

The question concerning the propriety of considering the assessor's statements made at the council meeting is moot. At the court's direction the assessor testified at the Board hearing on remand, at which time he was cross-examined by landlord's counsel. Although landlord complains that the court's order, which precluded the assessor from testifying and being cross-examined concerning his value conclusion and the method of valuation employed in arriving at such conclusion, was too restrictive, I perceive no prejudice to landlord or any violation of his right to cross-examine the witness. The function of the

Board is to determine whether the increased taxes could be passed through to the tenants. Whether the assessment was proper and whether the assessor employed a market data, replacement cost or income approach or any combination thereof, can play no part in that decision making process. Ample opportunity was presented to the parties to examine the assessor concerning those matters when the assessment was appealed to the County Board. I further note that the record of this hearing fully supports the Board's conclusion that the portion of the tax increase under review was solely the result of the conversion. I further conclude that the conversion did not provide the tenants with any services or amenities which were not previously provided.

As to landlord's claim that the decision to reopen was based on invalid reasons, it is clear that the Board's decision to disallow the pass-through was founded on its understanding that a tax increase resulting from a conversion could not be surcharged to tenants who occupied the premises prior to the conversion. Whether the decision to reopen was prompted by Justice Garibaldi's opinion in AMN, a case which landlord contends dealt with an entirely different issue and which afforded no reason for the Board to rehear the matter, is immaterial. If the final decision is legally correct and is supported by the facts in the record below it will be sustained. It has been held that administrative agencies such as this Board are created for the purpose of applying expertise in the areas which they are entrusted to administer. The agencies are not intended to operate in a vacuum and are, in fact, encouraged to make determinations in light of the full knowledge and information available to them. See In re Shore Hills Water Co., 101 N.J. Super. 214 (App.Div.1968). Thus when, subsequent to a determination made by it, an administrative agency becomes aware of factors not within its knowledge or considered by it at the time of its initial determination which indicate that there may have been error therein, not only is the agency permitted

to, but in fact, is mandated by principles of fairness to reopen and reconsider the matter.

Landlord claims that this tax increase pass-through is expressly permitted by § 83A-7A of the rent ...


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