On appeal from the Superior Court of New Jersey, Law Division, Monmouth County.
Morton I. Greenberg, Long and Havey. The opinion of the court was delivered by Havey, J.A.D.
[213 NJSuper Page 512] In this action in lieu of prerogative writs defendant, Tenants Association of Holly Hill Mobilehome Terrace, appeals from a judgment declaring an operating ratio formula in Hazlet Township's rent control ordinance invalid and granting a rental increase to plaintiffs, Daniel Parks, Sr., Daniel Parks, Jr., and John Holden, partners, trading as Holly Hill Mobilehome Terrace. In entering judgment the trial court found that the operating ratio formula was unconstitutional because it did not measure a just and reasonable return on the value of plaintiffs'
park. It thus made computations based on Hazlet's prior ordinance which permitted rental increases to allow for return on the owner's investment. The trial court, however, applied the present value of the mobile home park instead of plaintiffs' cash investment.
On appeal defendant's principal contention is that the trial court erred in striking down as unconstitutional the operating ratio formula. Alternatively it argues that once the court found that the operating ratio formula was unconstitutional, the matter should have been remanded to defendant Rent Control Board of Hazlet (board) for further fact finding.
Plaintiffs are owners and operators of the Holly Hill Mobilehome Terrace, an 84-space mobile home park on a 7.5 acre tract in Hazlet. Prior to July 5, 1983 section 9-2.9 of Hazlet's rent control ordinance, applicable solely to mobile home parks, permitted the board to grant rental increases:
The ordinance also allowed rent increases for major improvements (not to exceed 15% of a tenant's rent), for substantial service or expense increases and for major renovations requiring the expenditure of 40% of the property's assessed value.
In July 1983 the ordinance was amended. Section 9-2.9 permitting rent increases based on a rate of return formula was repealed. Rent increases for capital improvements, major renovations, additional services or increases in taxes and utility charges, were permitted but the rental increase could not exceed 10% of the tenant's rent. Under the amendment the cost of the capital improvement would be pro-rated over its useful life.
On September 23, 1983 plaintiffs filed for a rental increase. They based the application in part on the ordinance as amended seeking "capital improvement" and "expense" increases. However,
since plaintiffs were of the view that the July amendment which repealed the "rate of return" formula was unconstitutional, they also incorporated into their application a request for an additional $75.66 per month per unit increase computed based on a reasonable rate of return on the present value of the park.
While plaintiffs' application was pending, the ordinance was again amended on October 17, 1983. The new amendment permitted hardship increases:
Operating expenses did not include mortgage amortization, mortgage interest or depreciation. Management fees could ...