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Nutley Investment Group v. Rent Leveling Board of Township of Nutley

Decided: December 31, 1985.

NUTLEY INVESTMENT GROUP, A PARTNERSHIP, PLAINTIFF-APPELLANT,
v.
RENT LEVELING BOARD OF THE TOWNSHIP OF NUTLEY, DEFENDANT-RESPONDENT



On appeal from Superior Court of New Jersey, Law Division, Essex County.

Brody, Gaynor and Baime. The opinion of the court was delivered by Brody, J.A.D.

Brody

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

plaintiff 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 LLGYMMR 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 "[u]nits 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.

They 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

The Court then summarized the reasons given in prior cases for exempting owners of small ...


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