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Amy Ryan v. Hoboken Rent Leveling & Stabilization Board and Gina Marie

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 7, 2011

AMY RYAN, PLAINTIFF-APPELLANT,
v.
HOBOKEN RENT LEVELING & STABILIZATION BOARD AND GINA MARIE, L.L.C., DEFENDANTS-RESPONDENTS.

On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4095-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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 Ordinance; and Gina Marie had failed to base its application on pre-conversion expenses.

On November 12, 2009, in response to Ryan's contention that Gina Marie had not made a prudent investment, and that its mortgage payments were therefore inflated, Gina Marie sent a letter to Ryan and to the Board accompanied by a three-page appraisal report. The letter notified the Board of Gina Marie's intention to rely upon the appraisal report at the November 16, 2009 hardship application hearing. The appraisal valued the property, at the time of Gina Marie's purchase, at $2.4 million as it was, and $3 million if improvements were made.

On November 15, 2009, Ryan requested an adjournment of the hearing scheduled for November 16, in order to obtain a complete copy of Gina Marie's property appraisal and to secure the appearance of the Hoboken Tax Assessor, Sal Bonaccorsi, to testify on her behalf. As to Gina Marie's property appraisal, Ryan believed it to be incomplete because it was only three pages long and there were binder marks on the copy.

On November 16, 2009, before the hearing began, Gina Marie responded to Ryan's request for an adjournment by advising the Board that the property appraisal would only be used to rebut an argument by Ryan of an imprudent investment, but would not be used in its case in chief. Gina Marie opposed any further adjournment.

Before the Board voted on Ryan's adjournment request, counsel for the Board advised Ryan's counsel that if, at the end of the hearing, she wished to retain her own expert to value the property, she could request a continuance of the hearing to enable her to present the testimony of her expert at the Board's next meeting. When Ryan's attorney attempted to argue that such a procedure was unfair because Gina Marie's appraisal report had already been "submitted" to the Board, counsel for the Board disagreed, commenting that members of the Board had no intention of considering the appraisal report unless its contents became an issue through an argument advanced by Ryan.

Before voting on Ryan's adjournment request, the Board also discussed Ryan's effort to subpoena Bonaccorsi, finding it improper because the Tax Assessor is not a licensed real estate appraiser and had no authority to render an opinion on the value of the 610 Madison Street property, or any other property. By unanimous vote, the Board denied Ryan's adjournment request and decided to proceed with the hearing.

Rather than participate in the hearing, and exercise Ryan's right to challenge the evidence and cross-examine witnesses, and rather than request a continuance at the conclusion of the hearing, as offered to her by the Board, Ryan's attorney left the November 16, 2009 hearing before it began.

During the hearing, the Board considered Gina Marie's undisputed testimony concerning its operating expenses for the subject property. In light of Ryan's earlier contention that Gina Marie had improperly included expenses that resulted from conversion of the property into condominiums, even though Ryan was a "pre-conversion" tenant, Gina Marie provided two expense sheets, one listing only pre-conversion expenses, and the other listing post-conversion expenses. As a result of removing the post-conversion expenses, the monthly operating expenses for Ryan's apartment were reduced from $10,461 to $7356. Thus, the total pre-conversion hardship increase requested for Ryan's apartment totaled $1605 per month.

At the conclusion of testimony from Gina Marie,*fn3 having sufficient evidentiary support before it, the Board closed the hearing, and granted the hardship increase based upon the pre-conversion expenses. The Board also denied Gina Marie's request that the hardship increase be applied retroactively to June 2009, the date of the original application. The Board increased Ryan's rent from $305 per month to $1910 per month.

On December 7, 2009, Ryan filed an amended complaint in lieu of prerogative writs, in which she asserted that the Board's approval of the hardship rent increase on November 16, 2009 was arbitrary and capricious because: 1) the Board wrongly refused to grant Ryan's request for an adjournment of the November 16, 2009 meeting to enable her to subpoena Bonaccorsi;2) the Board improperly permitted Gina Marie to submit a list of pre-conversion expenses on the day of the hearing, thereby violating the twenty-day notice requirement imposed by the Hoboken Rent Control Ordinance; and 3) Gina Marie's mortgage payment of $1.6 million was improperly treated by the Board as an increase in Gina Marie's equity in the property.

In a written opinion issued on April 13, 2010, the Law Division rejected each of the arguments advanced by Ryan, concluding that: the rent control ordinance does not require a landlord to provide a tenant with a copy of each document upon which the landlord intends to rely at the hearing; the Board correctly determined that the Hoboken Tax Assessor, Bonaccorsi, was not authorized to provide expert opinion; and the Board did not act in an arbitrary or capricious manner when it refused to grant Ryan an adjournment so that she might obtain a full and complete copy of Gina Marie's appraisal report, in light of the fact that Gina Marie only intended to use the report in rebuttal. The judge did not address the allegation in Ryan's complaint that by paying down the mortgage in the amount of $1.6 million, Gina Marie had not increased its equity in the building.*fn4 The judge later denied Ryan's motion for reconsideration.

On appeal, Ryan maintains: 1) "the Board's same day approval of Gina Marie's filing of a new Hardship Increase Appeal/Application, using pre-conversion expenses for 2005, without any proof of service of notice of its details on Ryan," violated the Hoboken rent control ordinance and was arbitrary, capricious, unreasonable and ultra vires; and 2) the Board's "blanket approval" of Gina Marie's same day filing without any proof for the listed expenses was improper and should be set aside.

II. We turn first to Ryan's contention that the Board acted improperly by permitting Gina Marie to rely on a list of pre-conversion expenses even though the document in question had not been served on Ryan prior to the November 16, 2009 hearing, and she had no notice, much less the required twenty-day notice, of Gina Marie's intention to rely on the document.

We begin our analysis by stating the obvious. Ryan did not argue before the Law Division that the Board acted in an arbitrary and capricious manner by permitting Gina Marie to supplement its application for a hardship rent increase with a list of pre-conversion expenses. Instead, Ryan confined her argument before the Law Division to her claim that the Board wrongly denied her an adjournment, thereby making it impossible for her to obtain Gina Marie's complete appraisal report, or secure the appearance of Bonaccorsi to testify as an expert on her behalf. Absent exceptions not relevant here, we will not consider on appeal arguments that could have been raised before the trial court but were not. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). Nonetheless, for the sake of complete appellate review, we will exercise our discretion to consider this argument even though it was not presented in the Law Division.

A portion of the Hoboken Rent Control Ordinance (Ordinance) specifies that the landlord shall provide the tenant with at least twenty days notice of an application for a hardship rent increase, with the application "setting forth in detail the basis for said appeal." In relevant part, the Ordinance provides:

In the event that a landlord cannot meet his operating expenses or does not make a fair return on his investment, he may appeal to the Rent Leveling & Stabilization Board for a hardship rental increase. . . . Prior to any such appeal to the Board, however, the landlord shall serve on each tenant a notice of appeal setting forth in detail the basis for said appeal, and said notice shall be served at least twenty (20) days before hearing thereon. In considering hardship applications, the . . . Board shall give due consideration to any and all relevant factors, including but not limited to the following: (4) Whether the operating expenses are reasonably incurred and the income statement is accurate. . . . [Hoboken Rent Control Ordinance, § 155-14.]

As early as June 30, 2009, in her appeal to the Board from its adverse June 24, 2009 decision, Ryan argued that the Board could not apply post-conversion expenses to her rent, as she was a pre-conversion tenant.*fn5 The record demonstrates that Gina Marie attached to its June 2009 application for a hardship increase the mortgage statements, deed and monthly expenses we have already described. While it is true that Gina Marie did not provide Ryan with a copy of each of those items, each was available from the clerk of the Board starting in June 2009. Moreover, Section 155-14 of the Ordinance does not require a landlord applying for a rent increase to provide the tenant with a copy of each document upon which the landlord will rely. Instead, the tenant is entitled only to a "detail[ed]" statement of the basis for said appeal.

To satisfy the requirement of the Ordinance that the landlord set forth "in detail the basis" for the rent increase being sought, Gina Marie instead provided Ryan with a copy of the Ordinance. Because all of the necessary documents had been on file with the clerk of the Board for a period of five months before the November 16, 2009 hearing, and because the list of pre-conversion expenses presented at the November 16, 2009 hearing differed only slightly from the pre-conversion expenses that had been on file ever since June 2009, we cannot fault the Board for proceeding with the application at its November 16, 2009 hearing.

This is especially so in light of the Board's assurance to Ryan's attorney that at the conclusion of the hearing, she could request a continuance to permit her to more fully address any of the facts presented by Gina Marie at the hearing. While we recognize that the Board's offer of a continuance was made in the context of the real estate appraisal offered by Gina Marie, and not in the context of the list of pre-conversion expenses, it bears repeating that by the time the pre-conversion list of expenses was reviewed and considered by the Board, Ryan's attorney had left the hearing and therefore did not avail herself of the opportunity to request a continuance to investigate the expenses listed on the newly-submitted pre-conversion statement of expenses.

In the absence of any contrary showing by Ryan, we have every confidence that if asked by Ryan's attorney at the end of the November 16, 2009 hearing for a continuance of the proceedings to permit Ryan to address the newly-submitted statement of pre-conversion expenses, the Board would have done so in much the same fashion as it was willing to grant a continuance to address the newly-submitted real estate appraisal. Moreover, as the judge correctly observed, nothing in section 155-14 of the Ordinance requires a landlord to supply a tenant with a copy of each document upon which the landlord intends to rely.

Thus, reviewing the record as a whole, we reject Ryan's argument that the Board acted in an arbitrary and capricious fashion by considering the pre-conversion statement of expenses at its November 16, 2009 hearing even though the statement had not been submitted to Ryan in advance of the meeting.

III. Ryan also maintains that the Board acted in an arbitrary and capricious fashion by approving the rent increase sought by Gina Marie without requiring Gina Marie to submit "any proof for the listed expenses." In its testimony before the Board, Gina Marie explained in considerable detail its operating expenses for the building. Applying its expertise, the Board was satisfied that the claimed expenses were reasonable. The members of the Board asked a number of questions, including the cost for utilities and for insurance. At the conclusion of the hearing, the Board voted to grant the increase we have already described.

Ryan argues that the Board should have required more, namely, that the Board should have insisted that Gina Marie supply additional documents to supplement those that were provided at the time the rental increase application was submitted to the Board in June 2009. Yet, despite advancing that argument on appeal, Ryan has not demonstrated what bearing these additional documents would have had, if they had been presented. We are unwilling to assume that requiring Gina Marie to submit additional proofs would have altered the outcome. We therefore reject Ryan's argument that the Board should have required Gina Marie to submit additional documentary proofs.

Affirmed.*fn6


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