On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4095-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 15, 2011 - Decided
Before Judges Wefing, Baxter and Koblitz.
This is an appeal from a Law Division order that upheld a decision of the Hoboken Rent Leveling & Stabilization Board (Board), in which the Board awarded a hardship-based rental increase to defendant Gina Marie, L.L.C. (Gina Marie), for an apartment rented by her tenant, plaintiff Amy Ryan.*fn1 We reject plaintiff's arguments that the Board acted in an arbitrary and capricious fashion when on November 16, 2009 it approved Gina Marie's application, even though some of the documents upon which Gina Marie relied had not been served upon Ryan prior to the hearing. We likewise reject Ryan's contention that the Board improperly approved the rent increase without requiring Gina Marie to submit any proof of the underlying expenses. We affirm.
I. Ryan has lived in Apartment #10 of 608 Madison Street in Hoboken since 1993. Gina Marie purchased the property in 2005 for $2.4 million, of which $600,000 was paid in cash and the balance was secured by a mortgage. At the time of acquisition in 2005, the building consisted of ten residential units, of which six were vacant and four were rent-controlled. Between May 2007 and March 2008, Gina Marie remodeled five of the vacant units and sold them as condominiums for a total of approximately $1.7 million. Plaintiff's unit was not one of the five units converted to a condominium.
On March 26, 2009, defendant sent plaintiff a letter stating, "[a]s per the Hoboken Rent Control Ordinance Sec. 155-14, A[,] I will be filing a hardship application for your unit. Attached is a copy of the ordinance." The letter contained no other details about the application, and no supporting documents were enclosed. More than two months later, on June 16, 2009, Gina Marie submitted its application for a hardship increase to the Board and attached a copy of its March 26, 2009 letter to Ryan. Gina Marie's application, which was filed with the Board, specified in relevant part that Gina Marie sought a rent increase for Ryan's apartment in the amount of $1265, for a total monthly rent of $1570. The application specified that Gina Marie purchased the building in December 2005 for a purchase price of $2.4 million with a mortgage of $1.9 million.*fn2
Attached to Gina Marie's application for a rent increase was an operating statement (statement) for the twelve-month period beginning January 1, 2008. The statement showed a gross annual income for apartment #10 of $3660, based upon the monthly rent of $305. Gina Marie listed operating expenses of $6098, which included $3048 for property tax, $481 for insurance and $2569 for "repairs & miscellaneous." The latter entry contained a notation next to it stating "Association fees." The statement also showed mortgage interest of $21,815, which, when divided by "5 units," equaled an interest payment of $4363 for each unit.
On the "summation sheet" submitted to the Board, Gina Marie listed total expenses of $18,837 for Ryan's apartment, which consisted of $3048 for property tax, $481 for insurance, $4363 for mortgage interest, and $2569 for an "Association Fee," for a subtotal of $10,461. When six percent of the equity in the building was added, as permitted by the Rent Control Ordinance, Gina Marie listed its total annual expenses for Ryan's apartment as $18,837. Because the total rental income from the apartment was only $3660, Gina Marie experienced a twelve-month "deficit" of $15,177, for which it sought a monthly rental increase of $1265.
Along with its June 16, 2009 application, Gina Marie submitted the required supporting documentation, including a copy of the mortgage, a list of all tenants and the proposed rental increase for Apartment 10, copies of all bills substantiating its operating expenses, copies of canceled checks validating the payment of those expenses, current mortgage statements showing recent mortgage payments, a copy of the deed and proof of the rent currently being paid by Ryan.
Even though the applicable section of the Rent Control Ordinance specified that tenants are entitled to twenty-day notice of a landlord's application for a hardship increase, the Board scheduled Gina Marie's June 16, 2009 rent increase application for a hearing on June 24, 2009 because the Board did not conduct meetings in July or August. The Board granted Gina Marie's request for a rental increase of $929, for a total rent of $1,234. The Board notified Ryan of that increase by letter on June 25.
On June 30, 2009, Ryan protested the Board's decision, pointing to the lack of twenty-day notice. On August 24, 2009, the Board agreed with Ryan and scheduled a new hearing for October 14, 2009.
On the written application that Gina Marie submitted in anticipation of the June and October hearings, it specified that no equity had accrued in the property subsequent to the purchase of the building in December 2005. Nonetheless, at the October 14, 2009 hearing, Gina Marie's attorney notified the Board that Gina Marie had actually paid down the mortgage in the amount of $1.63 million, thereby increasing its equity in the building in a corresponding amount. Deeming that information to be a substantial change from the written application Gina Marie had submitted, the Board decided to adjourn the application until its next meeting on November 16, 2009.
On November 4, 2009, Ryan filed a brief with the Board opposing Gina Marie's application, which was scheduled to be addressed at the November 16 hearing. Ryan argued that Gina Marie did not make a prudent investment; the property did not fit the definition of subject property under the Hoboken Rent Control ...