On appeal from Superior Court of New Jersey, Law Division, Bergen County.
Before Judges Gaulkin, Baime and Kestin.
The opinion of the court was delivered by BAIME, J.A.D.
This is an appeal from a judgment sustaining the denial of plaintiffs' application for a hardship rent increase by the Mayor and Council of Cliffside Park. Plaintiffs also appeal from the dismissal of their action for inverse condemnation and for damages under 42 U.S.C. § 983. During the pendency of these proceedings, the tenant vacated the subject apartment which was then rented at market value as authorized by the vacancy decontrol provision of the rent control ordinance. Plaintiffs have disavowed
any intent to sue the tenant for the difference between the rent charged and the amount sought in their hardship application. We thus dismiss as moot plaintiffs' appeal from the denial of their request for a hardship rent increase. We affirm the Law Division's dismissal of plaintiffs' claims for inverse condemnation and for damages under the federal Civil Rights Act.
This appeal has a tortured history. On June 15, 1980, George Ahrens entered a month-to-month lease for a one bedroom apartment at "the Chateau" in Cliffside Park. The monthly rent was $370 including electricity. On December 8, 1980, the owner began converting the building into condominiums. On July 27, 1981, the Senior Citizens and Disabled Protected Tenancy Act (N.J.S.A. 2A:18-61.22 to -61.39) became effective. Under the Act, Ahrens could not be evicted for a 40 year period following the conversion. See N.J.S.A. 2A:18-61.23; N.J.S.A. 2A:18-61.24h. However, the Act authorizes the owner to effect reasonable rent increases during this period, as long as such increases are not attributable to the cost of conversion. N.J.S.A. 2A:18-61.31.
On August 25, 1981, plaintiffs entered into a contract with the building owner to purchase the unit occupied by Ahrens. In September 1981, the Cliffside Park rent control ordinance was amended to include condominiums. Ahrens' unit was conveyed to plaintiffs for $52,500 by deed dated November 6, 1981, approximately one month after the effective date of the amendment to the rent control ordinance. Plaintiffs believed, however, that their newly purchased unit was not covered by the amendment because the purchase contract antedated the amendment's effective date.
Plaintiffs sought to increase Ahrens' rent to $470, effective February 1, 1982. After serving a notice to quit, plaintiffs instituted a summary eviction action in the Bergen County District Court. The District Court dismissed plaintiffs' complaint on the ground that Ahrens' rent was controlled by the Cliffside Park
ordinance. On June 21, 1983, we affirmed in an unreported opinion.
During the pendency of their appeal to this court, plaintiffs filed a hardship application with the Cliffside Park Rent Leveling Board, requesting an increase of $1,166 per month. Under the Cliffside Park ordinance, the Board "may grant the landlord a hardship rent increase if it is satisfied that such hardship does in fact exist . . . ." Cliffside Park, N.J., Rev. Ord. Supp. § 11-2.11 (1980). The ordinance does not specify a method for calculating "hardship" nor does it set forth criteria, standards, or guidelines in that respect. At the time of plaintiffs' application, the rent control ordinance also authorized an automatic seven percent increase at the expiration or termination of a tenancy. In the case of a month-to-month lease, municipal authorities construed the ordinance as authorizing an annual seven percent increase in rent. Plaintiffs, however, never sought an increase under this provision.
We need not describe in detail the extensive materials presented to the Board in support of plaintiffs' hardship application. Plaintiffs employed both the "return on fair value" and "return on investment" approaches described by our Supreme Court in Troy Hills Village v. Parsippany-Troy Hills Tp. Council, 68 N.J. 604, 350 A.2d 34 (1975); but see Helmsley v. Borough of Fort Lee, 78 N.J. 200, 215, 394 A.2d 65 (1978). Plaintiffs claimed that the $52,500 purchase price was an "insider price" and that the condominium was worth $65,000 - a value they arrived at by utilizing comparable sales for two similar apartments in the same building. Although the rent for the comparable units was "in the $750's" for one and "in the high $600's" for the other, plaintiffs asserted they were entitled to a 16% rate of return, which, coupled with reasonable expenses, yielded a total of $17,359.25 to be amortized over a 12 month period. Applying the fair value approach, plaintiffs suggested a monthly rental of $1,446. Plaintiffs also presented expert testimony respecting the return on investment approach. Of the $52,500 purchase price, plaintiffs borrowed $47,300 at an interest rate of 14.5 percent. By adding various expenses and costs,
plaintiffs' total investment in "current dollars" was said to be $24,195. Applying a sixteen percent rate of return on investment yielded $3,871, to which operating expenses and investment payments on the mortgage were added. Amortizing the total amount, $17,089, over a 12 month period, the expert testified that $1,422 ...