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Rosen v. Hoboken Rent Leveling and Stabilization Board


September 12, 2008


On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket Nos. L-6334-05, L-5343-06, L-5344-06.

Per curiam.


Argued April 28, 2008

Before Judges Stern, A. A. Rodríguez and C. S. Fisher.

In these appeals, we construe some of the provisions of the City of Hoboken's Municipal Rent Control Ordinance, §§ 155-1 to 155-34 (the Ordinance). Specifically, we affirm the Board's construction of the Ordinance to require that the filing of a rent decontrol certificate and a current registration statement are prerequisites to the grant of a rent decontrol increase.

Charles and Suzanne Rosen (Landlords) purchased an eight-apartment dwelling in Hoboken in 1979. It is undisputed that the rental units in the building are subject to the Ordinance. The Ordinance, which was adopted in 1973, provides that the owner of the dwelling must file a registration statement with the Division of Rent Leveling and Stabilization every year by October 1st. Hoboken Gen. Ord. § 155-30A. The registration statement must disclose, among other things, the name of each tenant and the apartment number, the number of rooms in each unit, the current rent paid for each unit, and the date and amount of the last rent increase. Ibid. Failure to file the registration statement is punishable by a $500 fine. Id. at § 155-30C. Thereafter, the landlord may increase the rent on a yearly basis not to exceed 7.5% of the current rent, or a formula that is a function of the Consumer Price Index. Id. at § 155-5. The only exception to this limitation on rent increase is found at Section 155-31, which addresses a rent decontrol exemption as follows:

Provided that a dwelling is registered in accordance with § 155-30 upon the vacation of a residential apartment unit by a tenant, the apartment unit shall become decontrolled and exempt from the provisions of this chapter for the new tenant's initial rent; provided, however, that said rental shall be limited to an increase of twenty-five percent (25%) over the last rental paid by the tenant who voluntarily vacated the rental unit[.] [Hoboken Gen. Ord. § 155-31.]

Further, Section 155-33 requires that:

[w]hen any apartment unit is decontrolled under this Article, the landlord shall file a certificate . . . indicating the name of the vacating tenant, the existing rental, the circumstances under which the tenant vacated the apartment unit, the name of the new tenant, the new rental and the effective date of the new rental. [Id. at § 155-33.]

In April 2005, Susan Livesay, the tenant in Unit 2E, requested a Legal Rent Calculation (LRC) for her unit, pursuant to the Ordinance. When Livesay moved into Unit 2E in February 1999, her monthly rent was $1,400. The rent was increased by $35 in 2000, by $46 in 2001, by $29 in 2002, by $30 in 2003, by $43 in 2004, and by $17 in 2005. Thus, she paid $1,600 rent per month in 2005.

The Rent Leveling Officer, Carole McLaughlin, made a determination that the appropriate rent for the year 2005 was $1,056. Following the Ordinance, McLaughlin used a 1982 registration, the earliest known registration, to calculate the rent. The 1985 registration listed Unit 2E as being occupied by the superintendent and as having no rent. Therefore, the base rent for 1985 was determined by averaging the rent in other comparable units. McLaughlin also determined that a 25% decontrol increase would be allowed for 1994, pursuant to Section 155-33 of the Ordinance.

Landlords appealed to the Hoboken Rent Leveling and Stabilization Board (Board) challenging: (1) the amount of the starting rent, which served as the basis for future rent increases; and (2) the denial of a vacancy decontrol allowance. They argued that the fair market value of the unit should be used to determine legal rent, not an average of the other rents in the building.

The Board upheld McLaughlin's determination. It found that Landlords were not in compliance with Section 155-33 because no vacancy decontrol certificates were on file and no annual statement had been filed prior to the tenant's request for a LRC. The Board also found that it was bound by prior holdings of the New Jersey Superior Court interpreting the Ordinance as requiring a landlord to file both an annual registration and a vacancy decontrol certificate in order to obtain a vacancy decontrol increase. However, the Board did not identify the decisions, which are apparently unpublished.

Landlords challenged the Board's decision by filing an action in lieu of prerogative writs in the Law Division (the Livesay matter). While this action was pending in the Law Division, McLaughlin discovered a registration from 1982. Because Section 155-1 of the Ordinance requires that the oldest registration on file be used to calculate legal rent, there was a new computation. McLaughlin reversed her determination regarding the 25% vacancy decontrol allowance and disallowed it in 1994. Thus, the 2005 legal rent was set at $607 per month. Due to this development, the Law Division remanded the matter back to the Board.

The Board upheld the calculation of the legal rent at $607. The Livesay matter returned to the Law Division. Judge Edward T. O'Connor, Jr., granted summary judgment in favor of Livesay, the Board and McLaughlin, determining that the Board's decision was correct, and that the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184, applied to this matter. The judge entered a substantial judgment in favor of Livesay for treble damages, counsel fees and costs. The judge found that the Board was not "arbitrary, capricious [or] unreasonable in starting with the earliest rent history for the subject apartment;" nor in "finding that the timely filing of both the annual registration statement and the vacancy decontrol certificate were necessary preconditions to the grant of a vacancy decontrol."

Landlords appealed the judgment in the Livesay matter. Docket No. A-3188-06T2 was assigned to this appeal. At a subsequent pre-argument conference, pursuant to the Civil Appeals Settlement Program (CASP), the Landlords reached a compromise with Livesay only. The appeal continued as to the other parties.

In January 2006, Helen Huang and Laszlo Nadler, the tenants in Unit 4W, requested a LRC for their unit pursuant to the Ordinance. McLaughlin determined the legal rent for Unit 4W to be $625 per month effective June 1, 2005. In making this determination, she denied a 25% vacancy decontrol allowance for 1996 and 2003, because no vacancy decontrol certificates were on file. Landlords appealed to the Board. The Board upheld the calculation of the legal rent at $625.

In March 2006, Nancy Colasurdo, the tenant in Unit 1W, requested a LRC. Colasurdo had moved into Unit 1W in November 1998 and paid a rent of $1,250 per month. McLaughlin determined the legal rent for Unit 1W to be $593. She then updated the calculation to $746 for 2006. Once again, Landlords appealed to the Board. The Board upheld the $746 rent.

Landlords challenged the Board's decisions regarding Units 4W and 1W by filing two actions in lieu of prerogative writs. Judge Barbara Curran consolidated the Huan/Nadler and Colasurdo matters. She dismissed the consolidated actions because the only issue raised was whether the filing of a vacancy decontrol was a condition precedent to the granting of a 25% rent decontrol increase and Judge O'Connor had already made that determination in an action involving the same parties.

Vacancy Decontrol

Landlords appealed. Docket No. A-3764-06T2 was assigned to the second appeal. We now decide both appeals in this opinion. Both appeals present a similar issue: was the Board's denial of vacancy decontrols for failure to file a registration statement or a certification of vacancy decontrol arbitrary, capricious and unreasonable? We hold that the Board's action was proper.

Judicial review of the decision of a rent control board is limited to whether the Board's findings and conclusions are supported by the record. Reid v. Twp. of Hazlet, 198 N.J. Super. 229, 234-35 (App. Div.), certif. denied, 101 N.J. 262 (1985). A rebuttable presumption that the municipality has properly exercised its discretion exists. Harvard Enters., Inc. v. Bd. of Adj., 56 N.J. 362, 368 (1970). Therefore, a trial court may not substitute its judgment for that of the municipal body unless it is proven that the board's action was arbitrary, capricious or unreasonable. Ibid.; Kramer v. Bd. of Adj., 45 N.J. 268, 296-97 (1965). Accordingly, an agency's determination will not be "upset . . . in the absence of a showing that it was arbitrary, capricious or unreasonable, or that it lacked fair support in the evidence, or that it violated legislative policies . . . ." Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963). We must affirm even if we "would have reached a different result . . . ." Campbell v. N.J. Racing Comm'n, 169 N.J. 579, 587 (2001).

When reviewing an agency's interpretation of a statute, "substantial deference" is accorded to the interpretation of the agency charged with enforcing it and the "agency's interpretation will prevail provided it is not plainly unreasonable." Merin v. Maglaki, 126 N.J. 430, 436-37 (1992)(citing Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313, 327 (1984)). However, we are "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973). The burden is on the party challenging the validity of an agency's decision to demonstrate that it is arbitrary, capricious or unreasonable. Med. Soc'y of N.J. v. Dep't of Law & Pub. Safety, 120 N.J. 18, 25 (1990).

Landlords contend that "[t]he Ordinance does not specifically state 'when' the [vacancy decontrol] certification must be filed[,]" and therefore a late filing does not preclude the Board from granting a vacancy decontrol. Landlords advocate reliance on three New York cases, Thorgeirsdottir v. New York City Loft Bd., 555 N.Y.S.2d 706 (N.Y. App. Div. 1990), aff'd o.b., 573 N.E.2d 574 (N.Y. 1991), Wittlin v. Rent Control Div., 452 N.Y.S.2d 462 (N.Y. App. Div.), aff'd o.b., 444 N.E.2d 1009 (N.Y. 1982), and Forbes v. Lomazow, 254 N.Y.S.2d 238 (N.Y. App. Div. 1964), in support of the proposition that the Board's decision not to deny a vacancy decontrol due to improper filings would operate to extinguish the landlord's right to receive market rent prior to filing of a transactional report and constitute an illegal addendum to the statute which departs from its clear legislative intent. Thorgeirsdottir, supra, 555 N.Y.S.2d at 707-08.

We find it unnecessary to rely on the New York cases to decide this simple ordinance-construction issue. First, we note that the Ordinance has the following provision:

§ 155.29. Construal Provisions.

This chapter, being necessary for the welfare of the city and its inhabitants, shall be liberally construed to effectuate the purposes thereof as set forth in its preamble.

The purpose of the Ordinance is to stabilize rents and to provide a public record system so that landlords, tenants and the Rent Leveling Officer can quickly ascertain the "legal" rent for any apartment. The requirements of an annual registration statement and a vacancy decontrol certificate advance that goal. Non-compliance with these registration requirements impede the Ordinance's purpose and objective.

Second, contrary to Landlords' argument, the Ordinance does set a deadline for filing the registration statement and vacancy decontrol certificate. As to the registration statement, it must be filed by October 1st of every year. Hoboken Gen. Ord. § 155-30A. As to the vacancy decontrol, the Ordinance provides "[w]hen any apartment unit is decontrolled . . ., the landlord shall file a [decontrol] certificate . . . ." Id. at § 155-33.

In construing a statute or ordinance, "a court must first look to the language of the statute itself." Macysyn v. Hensler, 329 N.J. Super. 476, 485 (App. Div. 2000) (citing Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 128 (1987)). "Each word in the statute must be given its plain meaning; no word should be rendered inoperative or superfluous." Ibid. (citing Dempsey v. Mastropasqua, 242 N.J. Super. 234, 238 (App. Div. 1990)). Indeed, where the language "'is precise and unambiguous there is no room for judicial interpretation or for resort to extrinsic materials. The language speaks for itself.'" Ibid. (quoting Vreeland v. Byrne, 72 N.J. 292, 302 (1977)).

Therefore, here, pursuant to the clear and unambiguous language of Section 155-33, the registration must be filed when the unit is vacated. By necessity, a reasonable period after the unit becomes vacant must be allowed. However, Unit 2E became vacant in 1994.*fn2 A decontrol certificate had not yet been filed in 2005 when Livesay requested a LRC.

Use of Earliest Registration

In the Livesay appeal, the Landlords also contend that the Board's decision to use the 1982 registration was arbitrary, capricious and unreasonable. Landlords argue that "[t]here are no factual findings set forth supporting th[e] conclusion" of the Board that "[t]he Rent Control Office is required to use the earliest known registration on file . . . in conducting a legal rent calculation." In addition, they argue that due to the period of occupancy by the superintendent when no rent was paid, fair market value is an appropriate means by which to calculate the new legal base rent. We disagree.

Once again, the objective of the Ordinance is to stabilize rents beginning with the current rents at the time that the Ordinance was adopted. Rents can then be calculated for each subsequent year. Obviously, the rent set by the earliest registration is the starting point for determining the allowed rent when a tenant requests a LRC. We find no error in the Board's determination that the earliest registration statement must be used.

As for the determination of the rent for the superintendent's unit, we are not persuaded that the methodology used by the Board is improper. Landlords suggest an alternative method to calculate rent after the superintendent's occupancy ends, which runs counter to the purposes of the Ordinance. The very idea of rent control is to stabilize rents, not to let the market set the rent. In other words, the objective of the ordinance is to regulate rent amounts despite the market level. Thus, we affirm the Board's methodology in setting the rent for Unit 2E, after the superintendent vacated it.

Res Judicata

Landlords also argue that the dismissal of Landlords' actions in lieu of prerogative writs due to res judicata was not proper. We agree with the result reached by Judge Curran.

"[T]he term 'res judicata' refers broadly to the common-law doctrine barring relitigation of claims or issues that have already been adjudicated." Velasquez v. Franz, 123 N.J. 498, 505 (1991). Res judicata serves "important policy goals that have currency in both administrative law and judicial settings." Hennessey v. Winslow Twp., 183 N.J. 593, 599 (2005). "Res judicata does not bar strangers to a prior action from filing an action of their own, precisely because every plaintiff is entitled to his day in court." Brunetti v. Borough of New Milford, 68 N.J. 576, 587 (1975). However, "the danger of multiple suits by landlords is not particularly great because collateral estoppel prevents re-litigation of any issue actually determined in the original suit." Id. at 587-88.

Here, the Livesay matter concluded with a determination by Judge O'Connor that the filing of a vacancy decontrol certificate is a condition precedent to receiving a 25% vacancy decontrol. The sole issue raised in the Huan/Nadler and Colasurdo matters is the same, i.e., denial of vacancy decontrols for failure to file a decontrol certificate. Even if we are not technically dealing with an issue of issue preclusion or res judicata, and although the decision of law by one trial court is not binding on another trial judge, there was no reason for Judge Curran to depart from the prior decision of Judge O'Connor.


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