March 1, 2011
BROWNSTONE ASSOCIATES AND
MAIN UNION ASSOCIATES, PLAINTIFFS-APPELLANTS,
MAYOR AND COUNCIL OF
THE TOWNSHIP OF LITTLE FALLS, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-3833-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 4, 2011 - Decided Before Judges Wefing, Payne and Koblitz.
Plaintiffs Brownstone Associates and Main Union Associates appeal the dismissal of their complaint in lieu of prerogative writs, filed pursuant to Rule 4:69, against defendant, Mayor and Council of the Township of Little Falls (Little Falls), seeking to void an ordinance extending the current rent control ordinance initially adopted by Little Falls in 1973. Plaintiffs claim that passage of this rent control extension was arbitrary and capricious because Little Falls did not conduct studies or amass evidence to establish a scarcity of apartments for rent. After reviewing the record in light of the contentions advanced on appeal, we affirm.
The rent control ordinance in question renews Chapter 178 of the Code of the Township of Little Falls, which applies to residential rental buildings with four or more units. Section 178-5 provides that a landlord may appear before the Township Rent Leveling Board and appeal for a hardship rent increase. The section specifically provides that "[w]here a landlord is not making a just and reasonable return on his investment, he may apply to the Rent Leveling Board for a hardship rent increase." In 2002, plaintiff Brownstone Associates applied for and received such a hardship rent increase after appearing before the Board.
Each plaintiff owns an apartment building in Little Falls. Collectively, plaintiffs own a total of 132 housing units in the town. More than half of the units "are occupied by senior citizens many of [whom] have lived there for decades."
Plaintiffs maintain that the conditions that gave rise to the rent control ordinance in 1973 and its subsequent renewals no longer exist. The minutes of the August 10, 2009 meeting where the ordinance was adopted reflect that Brownstone's counsel spoke against the ordinance, indicating that the landlords are experiencing vacancies, which demonstrates the lack of a housing scarcity. Also, plaintiffs' counsel indicated that the rent control ordinance has resulted in disparities in the amount different tenants pay for comparable apartments.
Two residents spoke supporting the ordinance. The meeting minutes also sets forth that the council president had "done a lot of work on this particular subject and informed [the council] that approximately 126 of the municipalities in New Jersey have rent control; many are more aggressive than Little Falls." The president further "pointed out that this ordinance has been in place for many years and explained that he would like to approve the ordinance as it is now, and have the committee review same as quickly as possible." The president assured those in attendance that "the Council would look into it, adding that there are approximately 200 people affected by this ordinance." The Council conducted a study to review rental conditions only four years earlier.
The trial court stated that Little Falls is permitted to pass any ordinance that does not conflict with state or federal law. The court found that a town legislative body is not bound by the same standard of review as a board of adjustment, planning board or rent leveling board.
N.J.S.A. 40:48-2 states,
Any municipality may make, amend, repeal and enforce such other ordinances, regulations, rules and by-laws not contrary to the laws of this State or of the United States, as it may deem necessary and proper for the good government, order and protection of persons and property, and for the preservation of the public health, safety and welfare of the municipality and its inhabitants, and as may be necessary to carry into effect the powers and duties conferred and imposed by this subtitle, or by any law.
Almost forty years ago the Court found that rent control ordinances enacted pursuant to this "police power" are constitutional. See Inganamort v. Borough of Fort Lee, 62 N.J. 521, 536 (1973) (the "reservoir of police power" contains sufficient authority to support municipal rent control ordinances).
The Court has repeatedly held that "municipal rent control ordinances 'are subject to the same narrow scope of review under principles of substantive due process as are other [forms of legislative price regulations.]'" Orange Taxpayers Council v. Orange, 83 N.J. 246, 255 (1980) (quoting Hutton Park Gardens v. West Orange Town Council, 68 N.J. 543, 563-64 (1975)). The Court has noted "a three-part analysis for assessing local rent control provisions." Ibid. Initially, a reviewing court considers "whether the legislative body could rationally have concluded that the unrestrained operation of the competitive market was not in the public interest." Hutton, supra, 68 N.J. at 564. The second inquiry is whether the ordinance provides the landlord with an opportunity to receive a "just and reasonable" return on its investment. Id. at 568-69. The final consideration is whether the means adopted by the ordinance are rationally related to the purposes of the ordinance. Id. at 572-73.
Where, as here, plaintiffs attack a municipal ordinance as "arbitrary and unreasonable," they face a "heavy burden." Id. at 564. Municipal ordinances carry a presumption of validity. Moyant v. Paramus, 30 N.J. 528, 534-35 (1959). This is because "factual support for the legislative judgment will be presumed and, absent a sufficient showing to the contrary, it will be assumed that the statute rested 'upon some rational basis within the knowledge and experience of the Legislature.'" Burton v. Sills, 53 N.J. 86, 95 (1968) (quoting Reingold v. Harper, 6 N.J. 182, 196 (1951), appeal dismissed, 394 U.S. 812, 89 S. Ct. 1486, 22 L. Ed. 2d 748 (1969)).
A plaintiff can overcome the presumption of validity only by a clear showing that an ordinance is arbitrary or unreasonable. 515 Assocs. v. City of Newark, 132 N.J. 180, 186 (1993) (citing Hudson Circle Servicenter, Inc. v. Kearny, 70 N.J. 289, 299 (1976)). Plaintiffs can do so "by proofs that preclude the possibility that there could have been any set of facts known to the legislative body [that] would rationally support a conclusion that the enactment is in the public interest." Hutton, supra, 68 N.J. at 565. Plaintiffs must demonstrate that "there is no factual basis for the finding that rent control is in the public interest." Troy Hills Village v. Twp. Council of Parsippany-Troy Hills, 68 N.J. 604, 618 (1975).
Further, the Court has held that "[a]bsent a specific statutory or constitutional requirement to the contrary, there is no obligation upon the municipality to hold special public hearings, or make any special study of the local rental housing market prior to adopting rent control ordinances." Id. at 616. See also Brunetti v. Borough of New Milford, 68 N.J. 576, 594n.20 (1975) (stating that "public hearings or undertaking comprehensive studies . . . are to be encouraged," but holding that "they are not constitutionally required"); Hutton Park Gardens, supra, 68 N.J. at 560 ("Clearly, proof of 'special circumstances' or 'emergent conditions' was long ago rejected as the only standard for determining whether legislative enactments violate substantive due process.").
In Troy Hills Village, supra, the Court characterized the nature of evidence appropriate to challenge a municipal rent control ordinance, specifically an ordinance that derives in part from a housing shortage. The Court initially noted that such ordinances are presumed valid, and that municipalities are under no obligation to hold hearings or conduct special studies.
68 N.J. at 616.
The Court found plaintiffs' evidence insufficient to overcome the presumption of validity, stating that "[i]solated evidence of the vacancy rates in particular apartment complexes . . is of limited value in demonstrating the absence of a housing shortage." Id. at 616-17 (citing Helmsley v. Fort Lee, 362 F. Supp. 581, 594 (D.N.J. 1973)). The Court stated that "[i]n general, proof of the absence of a housing shortage requires careful analysis of the housing needs and income levels of the various categories of persons who actively desire to live in the community." Id. at 617. The Court also required challengers to provide "evaluation of the availability of rental units within the municipality suitable to the needs and financial capacity of those potential tenants," finding "that plaintiffs have not borne their heavy burden of proof." Ibid.
Finally, the Court noted that even if plaintiffs had established a lack of housing shortage, "there are other sets of facts from which a legislative body may rationally conclude that free operation of the housing market is not in the public interest." Id. at 618. Therefore, plaintiffs' burden is to "establish that there is no factual basis for the finding that rent control is in the public interest." Ibid. (emphasis added).
In applying the standard set forth by the Court, we have upheld rent control ordinances and denied a landlord relief where it "made no concrete prima facie showing tending to establish that it was denied a just and reasonable return because of the manner in which the ordinance was interpreted or applied, or that the result reached on the local level was arbitrary, unreasonable, capricious, or discriminatory." Salem Mgmt. Co. v. Twp of Lopatcong, 387 N.J. Super. 573, 582 (App. Div.), certif. denied, 188 N.J. 579 (2006).
In Salem Management Co., supra, the landlord, which owned ninety percent of the apartments in the township, challenged the constitutionality of a rent control ordinance allowing up to a three-percent increase in rent per year for both vacant and occupied apartments. We found that the landlord did not present sufficient evidence to overcome the presumption of validity because it "offer[ed] little more than arguments about the merits of vacancy decontrol." Ibid. We held that "[s]uch bare assertions cannot substitute for evidence that a landlord has been deprived of a just and reasonable return on its property." Ibid.
Plaintiffs have simply asserted that there are numerous rental vacancies amounting to a five-percent vacancy rate, whereas in the past there was generally a waiting list for apartments. In general, plaintiffs allege facts (vacant units, declining rents) but do not provide support for their contentions. They have failed to provide any evidence beyond their attorney's letter to the council and recent real estate tax records.
Finally, plaintiffs point to the 2009 ordinance's recitation of 2005 findings as evidence that adoption of the ordinance was "arbitrary and capricious." Plaintiffs have not met their burden of proving that there was no rational basis to adopt the ordinance.
Little Falls' explanation that the ordinance was enacted to ensure immediate continuation of rent control for some 200 affected tenants pending further study by the Council provides abasis for the adoption of the ordinance.
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