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Fromet Properties, Inc. v. Buel

November 6, 1996


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

Approved for Publication November 8, 1996.

Before Judges Muir, Jr., Kleiner and Coburn. The opinion of the court was delivered by Kleiner, J.A.D.

The opinion of the court was delivered by: Kleiner

The opinion of the court was delivered by KLEINER, J.A.D.

This appeal arises from a landlord-tenant dispute in which the landlord, Fromet Properties, Inc., attempted to raise the monthly rent of each tenant residing at the Tamarack Mobile Home Court located in Warren County. After a four-day nonjury trial, the Law Division Judge concluded that plaintiff's intended rent increase was not "unconscionable" under N.J.S.A. 2A:18-61.1(f). The Judge also concluded that the rent increase was not retaliatory under N.J.S.A. 2A:42-10.12. In considering this appeal, we are asked to resolve issues raised in two prior, but conflicting, reported trial court decisions analyzing unconscionable rent increases under N.J.S.A. 2A:18-61.1(f). We must also consider, for the first time, the applicability and meaning of N.J.S.A. 2A:42-10.12 which addresses retaliatory rent increases.

Defendants-tenants appeal, contending that the trial court erred in: (1) placing the burden of proving that the intended rent increase was unconscionable upon the tenants; (2) finding that theintended rent increase was not unconscionable; and (3) finding that the intended rent increase was not in retaliation for earlier interaction between the landlord and its tenants.

We conclude, as discussed in Part III of this opinion, that the Law Division properly assessed defendants-tenants' evidence as to retaliation and properly concluded that defendants had failed to prove retaliation. We also conclude, for reasons which do not completely agree with the Law Division, that plaintiff's intended rent increase was not unconscionable. We therefore affirm the judgment.


Fromet Properties, Inc. ("Fromet") owns several properties in Warren County including a mobile home park known as Tamarack Mobile Home Park ("Tamarack"), a restaurant, another trailer park, and a house. Tamarack consists of twenty-five concrete mobile home pad sites upon which the tenants place their mobile homes. The residents of Tamarack have been renting their pad sites pursuant to written leases dated April 1, 1992, at a monthly rent of $195.

On January 25, 1994, Fromet sent written notice to each tenant terminating their respective tenancies effective February 28, 1994, and offering each tenant a new tenancy at a rate of $250 per month. The twelve defendants involved in this appeal, and several additional tenants, rejected the increase in rent and continued to pay $195 per month as required by the former lease.

On April 5, 1994, Fromet commenced sixteen separate summary dispossession actions in the Special Civil Part. On the return day of plaintiff's summary actions, those sixteen tenants sought to consolidate all pending actions and sought removal of the consolidated action to the Law Division for the purpose of pretrial discovery. Both forms of relief were granted. *fn2

On June 14, 1994, defendants served a set of twenty-seven interrogatories on Fromet in an attempt to discover the financial justification for the intended rent increase. Fromet answered two interrogatories and asserted objections to the remaining twenty-five. Defendants then served plaintiff with a demand for production of documents under R. 4:18. On November 14, 1994, the Law Division Judge ordered Fromet to comply with the notice to produce and to answer the unanswered interrogatories. The matter was scheduled for trial, to begin February 6, 1995.

On January 23, 1995, Fromet provided defendants with answers to the interrogatories and complied with the notice to produce documents. Among the documents produced were Fromet's federal tax returns for the years 1991, 1992, and 1993. The documents and interrogatory answers provided did not separate the income and expenses for the operation of Tamarack from the income and expenses for the operation of Fromet's other business enterprises.

When the trial commenced, the trial Judge, citing Calhabeu v. Rivera, 217 N.J. Super. 552, 526 A.2d 295 (Law Div. 1987), concluded that "unconscionability" was a defense and, as such, the burden of proving an unconscionable rent increase rested with defendants. Defendants unsuccessfully argued that because Fromet's business records did not yield information readily usable to demonstrate unconscionability, that the burden of proof should shift to Fromet to prove that the intended rent increase was conscionable. Defendants cited Hill Manor Apartments v. Brome, 164 N.J. Super. 295, 395 A.2d 1307 (Essex County Dist. Ct. 1978), to support their argument.

Defendants presented three witness. Two tenants described conditions within the mobile home park citing examples of disrepair, improper maintenance, inadequate snow-plowing, and drainage problems. Defendants' third witness, Michael Schmidt, was offered as an expert in fair rental value. Schmidt's qualifications were that he was a licensed real estate broker, a licensed real estate appraiser, and a certified tax assessor. He testified that he had previously been hired by other mobile home parks to assist in setting rents.

Preliminarily, Schmidt testified that there are not many vacancies in mobile home parks, that it is very expensive to move a mobile home, and that mobile home park owners do not like to accept older mobile homes into their parks. Schmidt specifically testified that in assessing the fair market rental value of a pad at Tamarack, he conducted a physical inspection of Tamarack. He then compared the rents, facilities, physical condition, and the location of Tamarack with six other mobile home parks in Warren County. Schmidt explained:

In taking each of the parks, I looked at the -- you know, the physical condition of the park as they related to the unknown, whether or not there were amenities such as washing machines permitted, snow plowing, garbage removal, sanitary sewer or septic, water and the general -- the overall general appearance and the physical location of the parks as they relate to Tamarack. . . . I made adjustments for whether or not septic or sewer was included in the monthly rent, the physical location of the properties in relationship to the subject and the overall general appeal and condition which gives me an overall adjustment. When you apply that to the monthly rent, you get an indicated fair market rent for the subject.

Schmidt then calculated what he thought the fair rental market value would be of the other six parks if they had the same conditions and facilities as Tamarack. Schmidt concluded that, after accounting for adjustments, the fair market rents of the other six mobile home parks ranged from $168 to $247, with a weighted average of approximately $200 per month.

Schmidt testified that he had never seen rent increases of the percentage that were being imposed at Tamarack "without extraordinary reasons behind them." He illustrated this Conclusion with a reference to HUD regulations, where seven per-cent is the maximum rent increase permitted for federal, subsidized housing. In Schmidt's opinion, the rent increase sought by Fromet was "one that is not governed or restrained by conscience, is unreasonable, immoderate or excessive."

Fromet presented two witnesses, Froman Mehl, its president, and Arlene Prentiss, the owner of another Warren County mobile home park.

Over defendants' objection, Mehl was permitted to testify that six other mobile home parks in the geographic area charged monthly rents in 1994 as follows: $350, $270, $325, $230, $290, $300, and $241. In Mehl's opinion, those mobile home parks were comparable to Tamarack in location and in the amenities that they offered. Prentiss testified that she charged $275 rent at her trailer park and ...

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