On appeal from the Superior Court, Law Division, Bergen County.
Morton I. Greenberg, O'Brien and Gaynor. The opinion of the court was delivered by Morton I. Greenberg, P.J.A.D.
This matter comes on before this court on appeal by defendants City of Englewood in Bergen County and Englewood Rent Board*fn1 (board) from a judgment of the trial court declaring rollback provisions of a rent control ordinance invalid. The judgment was entered in accordance with an opinion of the trial judge which held that an amendment to the Englewood rent control ordinance could not require that rents previously fixed pursuant to the ordinance be reduced for payments due after the effective date of the amendment. The trial court considered that the amendment unconstitutionally impaired the obligation of contract under the leases. We disagree and reverse.
There has been a long history of intensive rent control in Englewood. The first rent control ordinance, Ordinance No. 1924, was adopted in 1972 in response to what the city council, Englewood's governing body, considered to be a housing shortage leading to burdensome rental increases not necessarily related to the value of the property, the cost of providing services or inflationary trends. Ordinance No. 1924 limited rental increases to the percentage of increase in the consumer price index (CPI). A companion enactment, Ordinance No. 1922, provided for establishment of a Landlord-Tenant Relations Board to administer the ordinance, a function now performed by the board. However in view of the then uncertainty as to the power of a municipality to enact a rent control ordinance, Ordinance No. 1924 was not to be effective until the Supreme Court of New Jersey determined that a municipality was authorized to adopt a rent control ordinance or until 20 days after the enactment of state enabling
legislation allowing such ordinances. Following the Supreme Court decision in Inganamort v. Bor. of Fort Lee, 62 N.J. 521 (1973), upholding rent control as a valid exercise of municipal police power, the council enacted Ordinance No. 1999 activating Ordinance No. 1924. Then in May 1973, the council adopted Ordinance No. 2004 providing that the limitations on increases in Ordinance No. 1924 would apply to increases effective on or after January 12, 1973, unless a notice increasing rents was served on the tenant before January 12 in accordance with the federal rent control regulations in force before that date.
In 1974 the council adopted Ordinance No. 2075 amending Ordinance No. 1924 by reducing the allowable increase to the lesser of one-half of the percentage of increase in the CPI or 5% of the rent under an expiring lease. This amendment was passed because council perceived that excessive increases were allowed under Ordinance No. 1924. In 1978 Ordinance No. 1924 was repealed and replaced with Ordinance No. 2301 limiting increases to 5.5% of the base rent but making increases contingent upon proper maintenance of the property by the landlord. Ordinance No. 2301 required landlords to give tenants at least 30 days' notice before increasing rent and further provided that when the notice was given a landlord was required to file with the Landlord-Tenants Relations Board a statement by Englewood's Chief Inspector, dated within the 30 days immediately before filing, stating that the rental premises had no outstanding notice of violation under any applicable law pertaining to the occupancy or maintenance of the rental premises.
Ordinance No. 2301 was amended in 1980 by Ordinance No. 80-16 allowing rental increases of 7% if the landlord supplied heating for the tenant and 5.5% if not. In 1982 a further amendment allowed for an adjustment of rents based on a percentage of the increase or decrease in the city's real property tax rate.
By 1983 the council had apparently concluded that the rent increases then allowed might have become excessive and consequently it requested the board to review the increases permitted.
The board held a public hearing on the issue on August 31, 1983. It subsequently recommended that the council eliminate the tax adjustment and the differential in increases permissible based on the allocation of heat expenses. The board recommended that the city instead use a weighted formula reflecting various adjustment factors.
The council acted positively toward these suggestions. In November 1983 it adopted Ordinance No. 83-42 amending Ordinance No. 2301 as then codified in Englewood's revised general ordinances. The annual rental increases were limited by the amendment to 4% of the base rent, defined as the rent immediately prior to July 1983. Ordinance No. 83-42 became effective on November 17, 1983 and applied "to any rent increase to become effective on or after July 1, 1983." The amendment, however, did not indicate whether landlords could retain rents collected before its effective date.
At the time of the adoption of the ordinance council caused a statement to be read into its minutes explaining why the maximum allowable increase was reduced to 4%. Prior to the amendment a landlord supplying heat could obtain a 7% increase plus a tax adjustment which through August 31, 1983 allowed a net increase in rent of 8.94%. After that date a landlord could obtain a net increase of 8.36%. But the increase in the CPI had fallen to about 4%, a figure which council believed reflected increases in the expenses that a landlord would have such as for utilities, maintenance and insurance. The statement pointed out that if rents had been increased on or after July 1, ...