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Liberty Terrace, LLC v. Rent Leveling Board of the Township of North Bergen

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


April 18, 2011

LIBERTY TERRACE, LLC, PLAINTIFF-APPELLANT,
v.
RENT LEVELING BOARD OF THE TOWNSHIP OF NORTH BERGEN, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3927-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Telephonically Argued December 6, 2010

Before Judges Gilroy and Ashrafi.

Plaintiff Liberty Terrace, LLC, appeals from the March 17, 2010 order that dismissed its complaint in lieu of prerogative writs seeking to reverse defendant Rent Leveling Board of the Township of North Bergen's (the Board) denial of plaintiff's application for a capital improvement surcharge. We affirm.

On March 2, 2007, plaintiff filed an application for a capital improvement surcharge seeking to recoup the costs of installing two new heating boilers and related equipment in its 120-unit residential apartment complex in the Township of North Bergen (Township). On March 17, 2008, the Board adopted a resolution denying the application, determining that plaintiff did not qualify for the surcharge pursuant to that part of the Township's rent control ordinance that exempts recoupment of the costs for repairs, improvements or replacements made by a landlord to comply with the law or to cure a code violation.

On April 29, 2008, plaintiff filed a complaint in lieu of prerogative writs under Docket No. HUD-L-2157-08, challenging the denial of its application. On November 21, 2008, Judge Curran entered an order that: 1) determined Township Ordinance

No. 467-93, "AN ORDINANCE TO REGULATE, CONTROL AND STABILIZE RENTS AND TO CREATE A RENT LEVELING BOARD AND TENANT ASSISTANCE PROGRAM WITHIN THE TOWNSHIP OF NORTH BERGEN AND TO REPEAL ALL PRIOR ORDINANCES REGARDING RENT CONTROL AND REGARDING SECURITY POSTING BY LANDLORDS," as amended and supplemented, constitutional; 2) determined the Board's conclusion that the boilers were installed simply to "cure a code violation" was arbitrary, capricious, and unreasonable; and 3) remanded the matter to the Board pursuant to Georgian Gardens Tenants Ass'n v. Georgian Gardens, 249 N.J. Super. 475 (App. Div. 1991), to consider whether the new boilers contained any special features that benefited the tenants so that the boilers could be considered a capital improvement under the Township's rent control ordinance.

The Board conducted the remand hearing on March 16 and May 18, 2009. At the conclusion of the hearing, the Board adopted a resolution denying plaintiff's application determining in relevant part:

BE IT FURTHER RESOLVED that after carefully considering the testimony of all of the witnesses and after having read the memorandum submitted by counsel and having heard the arguments of counsel, it is the considered determination of the members of the North Bergen Rent Leveling Board that the new boiler does not qualify as a capital improvement pursuant to the North Bergen Rent Leveling Ordinance since it contains no enhanced features which "benefits tenants to some significant degree" as required by Section 2(b) for the following reasons:

A. The fact that the boiler turns on automatically provides no benefit to the tenants because if the older boiler were turned on in a timely fashion, the tenants would have been provided with the same amount of heat and at the same time. Further, the outside temperature is set at 56 degrees thereby requiring the boiler to be manually turned on if the temperature remains at approximately 57 degrees for several days.

B. The fact that the boiler is in four parts does not provide a significant benefit to the tenants because, notwithstanding the alleged ability of the boiler to provide heat in the event one of the sections breaks down, entire boiler has been shut off between 20 and 30 times, sometimes for as many as five hours because of leaks or other problems in the pipes.

C. The fact that the new boiler is safer than the old boiler does not qualify it as a capital improvement. The old boiler was "red-tagged" and shut down because it was unsafe. The new boiler was simply a[n] improvement or replacement required by law to comply with applicable state regulations and, therefore, does not qualify as a capital improvement pursuant to Section 2(b) of the Ordinance.

On August 4, 2009, plaintiff filed its present complaint in lieu of prerogative writs challenging the Board's May 18, 2009 decision denying its application for a capital improvement surcharge. On March 5, 2010, following oral argument on the complaint, Judge Costello rendered an oral opinion that affirmed the Board's decision. The court found that the Board properly addressed the remand issue, and concluded that plaintiff had failed to prove that the Board's decision was arbitrary, capricious or unreasonable. In so doing, the court reasoned:

This case is not similar to Georgian Gardens, because the ordinance which defines exactly what qualifies as a capital improvement [is] different and distinguishable. Again, in Georgian Gardens the Ordinance merely required a betterment to the building, [whereas] in this case the North Bergen Ordinance sets forth a higher standard, and it's the standard the Board used to determine whether the new boilers constitute a capital improvement. Pursuant to the Ordinance the improvement must benefit the tenants to a significant degree.

Section 8C of the Ordinance grants the Board the power to hold hearings, and adjudicate applications from landlords for additional rent or surcharges as provided herein. As such, the Board maintains full discretion to determine whether the improvement fits squarely within the . . . Ordinance's definition of a capital improvement. After a thorough investigation, the Board determined that the improvement did not confer a substantial benefit on the tenants, and that the new boilers['] "special" features were not actually capital improvements.

On remand the Board indeed considered the special features, and after their consideration [it] determined that the special features did not qualify as a capital improvement. It's noteworthy that Judge Curran's order did not state that the Board could not consider the fact that the improvements were made simply to cure violations of the law, rather Judge Curran declared that this could not be the only consideration. Judge Curran ordered the Board to take into consideration the new boilers['] special features, and after careful consideration it was determined that those special features were repairs, and did not confer a substantial benefit on the tenant.

I appreciate the fact that plaintiff argues that collateral reasons shall not be taken into consideration, and that is an accurate argument. The same court also held that the Board's sole consideration shall be whether the improvement fits under the definition of capital improvement under their Ordinance. Both principles are expressed in the Green Acres of Verona case cited previously. So, although the Board did hear complaints from a variety of tenants, this testimony may be necessary or may have been necessary in order to determine whether the improvement confers that substantial benefit or not as required by the definition in the Ordinance. Indeed the Ordinance's substantial benefit requirement makes any inquiry into the Ordinance a more fact intensive inquiry. As such, it was necessary for the Board to take into consideration all facts and testimony available to help [it] determine whether the new boiler confers a substantial benefit.

Accordingly, the Board . . . did base its determination on substantial evidence in the record, and the determination that the boiler system and its special features didn't fit within the definition of capital improvement seems and is declared to be reasonable by me. Plaintiff didn't meet the burden in establishing an arbitrary or capricious act by the Board, and the application is dismissed.

On March 17, 2010, the court entered a memorializing order.

On appeal, plaintiff argues the trial court erred in affirming the Board's decision. Plaintiff contends that the Board's finding that "the tenants did not reap the benefits of the enhancements to boilers that provided more efficient heating and safer features than the prior boiler" was arbitrary, capricious and unreasonable. We disagree.

A trial court's review of a determination by a local rent control board is limited to an examination of the record before the board. Green Acres of Verona, Inc. v. Borough of Verona, 146 N.J. Super. 468, 470 (App. Div. 1977). "This process is analogous to that applied in variance applications before a board of adjustment." Ibid. Thus, to withstand judicial scrutiny, a board must articulate the basis for arriving at its conclusions and make factual findings supporting them. Park Tower Apts., Inc. v. City of Bayonne, 185 N.J. Super. 211, 222 (App. Div. 1982).

Accordingly, the determination of a local rent control board is presumptively valid, and the burden is on the party challenging the board to prove otherwise by showing that the board's action was arbitrary, capricious or unreasonable. Ibid. In reviewing a decision of a rent control board, the court should not substitute its discretion for that of the local board. Ibid. However, the same deference does not apply to a board's interpretation of an ordinance. Schulmann Realty v. Hazlet Twp. Rent Control Bd., 290 N.J. Super. 176, 184 (App. Div. 1996). "[T]he interpretation of an ordinance constitutes a purely legal matter for which an administrative agency has no particular skills superior to a trial court . . . ." Ibid.

We have considered plaintiff's argument in light of the record and applicable law. We affirm substantially for the reasons expressed by Judge Costello in her oral decision of March 5, 2010. Nevertheless, we add the following comments. Section 10(a) of the Township's rent control ordinance permits landlords to apply for capital improvement surcharges upon written notice to the tenants. Section 10(f) provides that upon determining that the improvement is a capital improvement as defined in the ordinance and upon the landlord meeting all other requirements contained in the ordinance, the local Board should grant the surcharge. A capital improvement is defined under Section 2 of the ordinance as meaning:

[A]n addition to the property that substantially enhances its value or prolongs its life. It is not ordinary maintenance or repair and it is not a repair, improvement or replacement required by law to comply with applicable state or federal statutes or regulations or to cure a code violation. It must benefit tenants to some significant degree.

Because the term "capital improvement" is defined differently in the Township's ordinance than the ordinance before the court in Georgian Gardens, supra, 249 N.J. Super. at 478, the fact that the installation of the two new boilers may have resulted in a "betterment to the building" is not controlling. Ibid. Rather, to qualify under the Township's rent control ordinance, the improvement must not only "substantially enhance[] its value or prolong[]" the property's life but also must benefit the "tenants to some significant degree."

Plaintiff presented evidence before the Board on the remand hearing concerning what it believed were "special features of the new boilers" including: 1) the boilers turned on automatically; 2) they provided heat more quickly than the old boiler; 3) each of the two boilers had two heating zones therefore providing heat even if one zone ceased operating or had to be turned off for repairs; and 4) the boilers operated more safely. Based on the evidence presented, the Board determined that the boilers failed to benefit the tenants "to some significant degree" as required by Section 2(b) of the Township's ordinance. Moreover, the Board specifically determined that the boilers failed to qualify as a capital improvement because they were installed as a result of the old boiler having been "red tagged" and shut down for safety concerns by the Township officials. The Board's findings are supported by credible evidence in the record. Accordingly, we affirm.

Affirmed.

20110418

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