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Templeton Arms v. Feins

Decided: August 10, 1987.


On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Union County.

O'Brien and MacKenzie. The opinion of the court was delivered by MacKenzie, J.s.c. (temporarily assigned).


Plaintiff Templeton Arms, the owner of a 104-unit apartment complex, appeals from the dismissal of its summary dispossess action brought against defendant Ada Feins for nonpayment of rent for April and May 1986, N.J.S.A. 2A:18-61.1(a). Mrs. Feins, now 73 years old, has been a tenant of Templeton Arms since April 1981. Until March 31, 1986, her rent had been subsidized by the United States Department of Housing and Urban Development (H.U.D.) under Section 8 of the United States Housing Act of 1937, 42 U.S.C.A. § 1437f ("Section 8 program"). While conceding that she had not paid the rent demanded by Templeton Arms, Mrs. Feins contended that the landlord failed to show good cause for nonrenewal of her Section 8 Existing Housing Program Lease ("Section 8 lease") which would have guaranteed payment of the rent claimed due.

Templeton Arms argued that it had good cause for nonrenewal because it sought to terminate its participation in the Section 8 program, a program in which Mrs. Feins was the only participating tenant. The trial judge, after hearing oral argument, issued a letter opinion in which he set forth his finding that Templeton Arms' reasons for termination were administrative in nature and did not constitute good cause. The complaint was dismissed, leaving Mrs. Feins in possession and under no obligation to pay the full amount of rent.*fn1

The present appeal raises numerous questions respecting the interpretation of the "good cause" requirement for termination of Section 8 tenancies, 42 U.S.C.A. § 1437f(d)(1)(B)(ii); 24 C.F.R. 882.215(c)(1)(iii), and the application of that standard in the particular factual circumstances of this case. We hold that a landlord must establish good cause for nonrenewal of a Section 8 lease, even where he seeks to terminate his participation in the Section 8 program, and irrespective of the number of subsidized tenancies involved. The expressed desire to withdraw from the program does not, by itself, constitute good cause in the absence of factual findings necessary to support this essentially legal conclusion. Although the trial judge invoked the appropriate standard, we reverse and remand for an evidentiary hearing to determine whether Templeton Arms has good cause.

The lower-income housing assistance program established under 42 U.S.C.A. § 1437f is "[f]or the purpose of aiding lower-income families in obtaining a decent place to live and of promoting economically mixed housing." 42 U.S.C.A. § 1437f(a). A local public housing agency, here the New Jersey Department of Community Affairs ("D.C.A."), selects those qualified to participate in the Section 8 program. 24 C.F.R. 882.209(a); 42 U.S.C.A. § 1437a(a), (b)(2) and (b)(3). An eligible tenant is responsible for finding an appropriate apartment in the private rental market and an owner willing to participate in the program. 24 C.F.R. 882.209. After approval of the dwelling unit, two documents must be executed in order to implement the subsidy program: a Section 8 lease between the landlord and tenant, obligating the tenant to pay his monthly rental contribution; and, a housing assistance payments contract

("H.A.P. contract") between the landlord and the D.C.A., obligating the D.C.A. to pay the landlord the difference between the tenant's contribution and the approved contract rent. 24 C.F.R. 882.209(k); 24 C.F.R. 882.102. The D.C.A. acts as a conduit for H.U.D. in paying the rent subsidy to the landlord, distributing subsidy funds received pursuant to an annual contributions contract with H.U.D. 24 C.F.R. 882.102; 24 C.F.R. 882.104.

Mrs. Feins originally entered into a standard form lease with Templeton Arms at a monthly, unsubsidized rent of $285, effective April 1, 1981. Shortly thereafter, she applied to the D.C.A. and qualified for H.U.D. assistance, while contemporaneously Templeton Arms agreed to participate in the Section 8 program. Consistent with the regulatory scheme, a Section 8 lease and a H.A.P. contract were executed. The parties continued their participation in the program through annual renewals of the Section 8 lease and the corresponding H.A.P. contract; a standard form, landlord-tenant lease was renewed annually as well. The last H.A.P. contract and Section 8 lease, which covered the period April 1, 1985 to March 31, 1986, provided that the total contract rent payable was $350 per month, of which Mrs. Feins was to contribute $71, and the D.C.A. the balance of $279.

Sometime in early 1986, Templeton Arms decided it no longer wished to continue its participation in the Section 8 program. Through correspondence, Howard S. Mitnick, managing agent of Templeton Arms and its attorney, advised both Mrs. Feins and the D.C.A. that Templeton Arms would not enter into a new H.A.P. contract. In his letter of February 25, 1986 to a representative of the D.C.A., Mr. Mitnick explained,

My concern is that the proposed forms forwarded by you place additional obligations on the Landlord solely for qualifying for this assistance program, which the Landlord would not otherwise agree to. There is no inducement to the Landlord to extend its responsibilities or obligations to qualify for this one tenancy.

A copy of this letter was sent to Mrs. Feins. In a letter to Mrs. Feins dated March 12, 1986, Mr. Mitnick stated that the H.A.P. contract "imposes conditions upon the Landlord other than those governing Leases with all of the other tenants at [sic] the property, and the Landlord objects to certain provisions in the required Contract." As was conveyed in both letters, however, Templeton Arms did offer Mrs. Feins a new, unsubsidized lease, effective April 1, 1986 at $364 per month.*fn2

At oral argument, Mr. Mitnick concurred with the trial judge's statement that Templeton Arms wanted to discontinue the subsidy program because "it involves a lot [of] paperwork." Mr. Mitnick further elaborated, however, that the landlord "decided not to continue with the program primarily because the requirements of the H.U.D. contract placed additional burdens, including full disclosure of records and many other provisions which are not in the standard . . . lease that the landlord wishes to be bound by."

The provision of the federal statute which governs termination of a Section 8 tenancy reads in pertinent part:

(1) Contracts to make assistance payments entered into by a public housing agency with an owner of existing housing units shall provide (with respect to any unit) that -- . . .

(ii) the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause; [42 U.S.C.A. § 1437f(d)(1)(B)(ii) (emphasis supplied)].

The H.U.D. regulation implementing the above statute provides:

(c) Termination of tenancy (for Leases entered into on or after October 1, 1981).

(1) The Owner shall not terminate the tenancy except for:

(i) Serious or repeated violation of the terms and conditions of the Lease;

(ii) Violation of Federal, State, or local law which imposes obligations on the tenant in connection with the occupancy or use of the dwelling unit and surrounding premises; or

(iii) Other good cause. [24 C.F.R. 882.215(c) (emphasis supplied)].

As is evident, neither the statute nor the regulation expressly requires good cause for nonrenewal of a Section 8 lease. They are also silent as to whether good cause is required when a landlord seeks to withdraw entirely from the Section 8 program. Moreover, although examples of "other good cause" are provided in 24 C.F.R. 882.215(c)(2), the standard is not defined.

Both parties argued that Ivy Hill Park Apartments v. Martin, 207 N.J. Super. 594 (Law Div.1985) is supportive of their respective positions. In Ivy Hill, plaintiff's landlord similarly had brought a summary dispossess action against a tenant for nonpayment of rent pursuant to N.J.S.A. 2A:18-61.1. Martin was one of approximately two hundred tenants in the residential complex who received H.U.D. assistance under the Section 8 program. Prior to the expiration of Martin's lease, the landlord sent her various notices to cease, alleging tenant misconduct and lease violations. Ivy Hill also notified Martin that it was not going to renew the Section 8 lease. Ms. Hammer, the manager of Ivy Hill, testified that Ivy Hill was "phasing out the § 8 tenancies." Id. at 597. The court was thus confronted with the question of whether a landlord can "on a whim, to avoid the bureacracy [sic] of government, or for any reason, unilaterally declare he no longer wishes to take part in the § 8 arrangement?" Id. at 598. Construction of the good cause requirement, as set forth in both 42 U.S.C.A. § 1437f(d)(1)(B)(ii) and N.J.S.A. 2A:18-61.1, was also at issue.

The trial judge determined that when "good cause" relates to a tenant's conduct, its meaning is the same under both statutes. With respect to a landlord's conduct, however, he found that the definition of "good cause" under the federal statute was

"of necessity" much broader. Id. at 599. The trial judge explained:

Specifically in a situation where a landlord refuses to renew a § 8 lease because the landlord wishes to get out of the § 8 program, this court finds that a landlord has "good cause," i.e., he has the right to disinvolve himself. But, he must do so fairly, observing due process and constitutional protections. He may not discriminate; he may not pick and choose; he must treat all tenants equally. General common law notions of fair play, and constitutional restrictions, apply to such landlords who wish to terminate § 8 programs. U.S. Const., Amend. XVI; see Jeffries v. Georgia Residential Finance Authority, 503 F. Supp. 610, 618, 619 (N.D.Ga.1980); see Swann v. Gastonia Housing Authority, 675 F.2d 1342, 1345-1356 (4 Cir.1982). The landlord must proceed in an orderly process, singling no one out, prejudiced against no one and treating all fairly. Depending on the timing of the termination of various tenant's [sic] leases, he may start with any one tenant's § 8 lease. Once this is begun the landlord thereafter must refuse to renew each and every § 8 tenancy as the leases sequentially expire. [ Ibid. ].

Applying the foregoing principles, the court concluded that Ivy Hill did not have good cause under the federal statute as:

Ivy Hill . . . sought to use § 8 as a way to rid themselves of Martin by alleging they were phasing themselves out of the § 8 program. Ivy Hill, however, did not prove that they were conducting an orderly scheme to terminate their participation in the program. Ms. Hammer was specifically vague as to whether or not other § 8 tenancies had been terminated after Martin had received her nonrenewal. [ Id. at 599-600].

Having found that Ivy Hill lacked good cause under the federal statute, the trial judge also determined that it lacked good cause for possession under N.J.S.A. 2A:18-61.1. Id. at 600.

Templeton Arms, relying on Ivy Hill, argued that in exercising its clear right to withdraw from the Section 8 program, it did so fairly and in a nondiscriminatory manner. In contrast to the landlord in Ivy Hill, Templeton Arms had only one tenant involved in the program. It was not concluding its participation as a means of eliminating a difficult or unwanted tenant and, in fact, offered Mrs. Feins a new, standard form lease. Counsel also represented that Templeton Arms had refused to participate in the program in September 1985, when so requested by a tenant in the complex, as well ...

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