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Cona v. Township of Washington

Superior Court of New Jersey, Appellate Division

August 29, 2018

CHRISTOPHER C. CONA, individually and as a class representative on behalf of others similarly situated, Plaintiff-Appellant,
TOWNSHIP OF WASHINGTON, Defendant-Respondent. SHARON DOWNS, individually and as a class representative on behalf of others similarly situated, Plaintiff-Appellant,
BOROUGH OF PAULSBORO, Defendant-Respondent. WILLIAM R. BRODY and KATHLEEN D. O'HARA, individually and on behalf of others similarly situated, Plaintiffs-Appellants,

          Argued May 24, 2018

          On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket Nos. L-1602-15, L-0180-16, L-0487-16 and L-1102-15.

          Lewis G. Adler argued the cause for appellants (Lewis G. Adler, attorney; Lewis G. Adler, Roger C. Mattson and Paul DePetris, of counsel and on the briefs).

          Brian P. Shotts argued the cause for respondents Township of Washington (in A-5067-15) and Township of Deptford (in A-0443-16) (Grace, Marmero & Associates, LLP, attorneys; Brian P. Shotts, on the briefs).

          M. James Maley, Jr. argued the cause for respondent Borough of Paulsboro (in A-5615-15) (Maley Givens, PC, attorneys; M. James Maley, Jr. and Erin E. Simone, on the brief).

          James P. Pierson argued the cause for respondent City of Woodbury (in A-0443-16) (Angelini, Viniar & Freedman, LLP, attorneys; James P. Pierson, on the brief).

          Gary M. Marek argued the cause for respondents Borough of Westville and Borough of Glassboro (in A-0443-16) (Law Office of Timothy D. Scaffidi, attorneys; Gary M. Marek and Timothy D. Scaffidi, on the briefs).

          Walter F. Kawalec, III argued the cause for respondent Borough of National Park (in A-0443-16) (Marshall Dennehey Warner Coleman & Goggin, attorneys; Walter F. Kawalec, III and Ashley L. Toth, on the brief).

          Before Judges Simonelli, Haas and Rothstadt.



         In these matters, which we considered back-to-back and have consolidated for purposes of writing one opinion, plaintiff landlords rely upon our opinion in Timber Glen Phase III, LLC v. Township of Hamilton, 441 N.J.Super. 514 (App. Div. 2015) in their appeals from orders[1] entered in the Law Division dismissing their complaints that alleged defendant municipalities' ordinances that required plaintiffs to pay certain license fees are ultra vires. In Timber Glen, the ordinance we reviewed required landlords to obtain a license before any residential rental unit could be occupied and pay an annual license fee of $100 per unit.[2] Id. at 519. The municipality contended it had authority under the Licensing Act, N.J.S.A. 40:52-1, to require such licenses and that its authority was compatible with its regulatory power under N.J.S.A. 40:48-2.12m. Id. at 523. The stand-alone license fee it charged was in addition to fees it required for mandatory "annual habitability inspections . . . ." Id. at 519.

         We rejected the municipality's position in Timber Glen, noting, "the powers to regulate and to license, although related, are discrete" and that the power to regulate did not include the power to require a license and payment of a fee. Id. at 526 (citation omitted). We concluded that a 1998 amendment to the Licensing Act prohibited the licensing of rental units rented for 175 days or more and that any ordinance attempting to impose such a requirement was "invalid as ultra vires and unenforceable." Id. at 532. However, we noted that "[o]ur opinion [was] confined to the authority to license and [did] not address [a municipality's] regulatory or inspection authority granted by other statutes designed to assure rental premises remain safe, building and fire code compliant and structurally sound." Id. at 532 n.4 (citation omitted).

         The issue raised in the present appeals is whether fees imposed by defendant municipalities are for revenue generation as prohibited under Timber Glen, or if they are reasonably related to the municipalities' exercise of their regulatory powers as authorized by statute. The plaintiffs' complaints alleged the municipalities violated the New Jersey Civil Rights Act (CRA), N.J.S.A. 10:6-1 to -2, and that the ordinances requiring the payment of license fees were ultra vires under Timber Glen, entitling them to damages and a declaratory judgment awarding them injunctive relief. The municipalities responded by filing motions to dismiss under Rule 4:6-2(e). The trial court judges who considered the matters found that the challenged ordinances were distinguishable from the ordinance invalidated in Timber Glen, as the fees were permissible under a municipality's regulatory powers in order to defray costs for inspections or registration of rental units. For the reasons that follow, we affirm.

         The challenges raised by each plaintiff are summarized as follows. O'Hara brought her challenges against defendants City of Woodbury and the Borough of Glassboro where she maintained properties for rent. The Woodbury ordinance[3] requires landlords to secure a license that "attest[ed] that the rental unit had been properly registered" under the ordinance. Before a unit can be registered and occupied, the ordinance requires an inspection "for the purpose of determining Woodbury City Code compliance and compliance with [the ordinance's] Housing Standards . . . ." Annual registration of rental units and payment of a $100 "license fee" have to be completed before the city will issue a license to permit their rental.

         The Glassboro ordinance[4] also requires annual registration and the payment of a fee before it will issue a license permitting the rental of a unit. In addition, if there is a change in occupancy, a new registration and an additional fee have to be paid. A license will not be issued, however, unless the unit passes an inspection to insure there are no "safety violations" and that the units meet the ordinance's "performance standards . . . ." The $160 "annual registration fee [that the ordinance requires] include[s] all inspections and one re[-]inspection at no additional fee."

         Brody, a landlord who maintains rental properties in defendants Borough of Westville, Borough of National Park and the Township of Deptford, challenged each of those municipality's ordinances. The Deptford ordinance[5] contains a registration and licensing requirement, but does not require re-registration upon a change in occupancy, although it requires re-inspection. Inspection is required "to determine the condition of rental facilities, rental units and rooming/boarding houses in order . . . to safeguard the health, safety, welfare of the occupants . . . and of the general public." The ordinance further provides that a fee has to be paid upon registration before a license will be issued. It also provides for a re-inspection fee upon a change in occupancy. No separate licensing fee is imposed.

         Westville's and National Park's ordinances also require annual registration and the payment of a fee before licenses will be issued to landlords. Westville's ordinance[6] imposes an "annual registration fee and first inspection fee" of fifty or sixty dollars per rental unit depending on the number of rental units on a property. It also has a re-inspection fee and late fee that it charged for untimely payments. The ordinance provides that "inspection shall be for the purpose of determining . . . Land Use and Development compliance and, to the extent applicable, to determine if the property complies with the Property Maintenance Code, Uniform Construction Code, Housing Code and/or Building Code and/or Uniform Fire Safety Act." Westville's ordinance does not designate any of its fees as license fees.

         Similarly, National Park's ordinance[7] provides "[u]pon the filing of a completed registration form and payment of the prescribed fee and a satisfactory inspection, the owner shall be entitled to the issuance of a license . . . ." Payment of the fee was due "[a]t the time of the filing of the registration form . . . ." The ordinance calls for "inspections to determine the condition of rental facilities, rental units, and rooming/boarding houses in order [to] . . . safeguard the health, safety, welfare of the occupants . . . and of the general public." Periodic inspections are also required to ensure "zoning, [and] compliance . . . with Property Maintenance, the Uniform Construction Code, Housing Code, . . . the Building Code and the Uniform Fire Safety Act." National Park's ordinance also does not mandate the payment of a separate fee for the issuance of a license.

         O'Hara and Brody filed an initial complaint in August 2015, which they amended in April 2016. Judge David W. Morgan granted the municipalities' motions to dismiss on June 28, 2016.[8] In his oral decision placed on the record on that date, Judge Morgan discussed our holding in Timber Glen, the significance of footnote four in that case, and the distinction between a fee charged by a municipality to offset costs of regulation as compared to generating revenue, as discussed in Timber Glen and Daniels v. Point Pleasant, 23 N.J. 357 (1957). The judge then framed the issue before him as being, "Do we have a license-type of ordinance or is it a regulation-type of . . . ordinance?" He defined a license as being the granting of "authority to go out and conduct [the subject] activity" and "[r]egulations . . . . [as] relat[ing] to the manner by which the activity is to be conducted." Relying on N.J.S.A. 40:48-2.12a, N.J.S.A. 40:48-2.12a1, N.J.S.A. 40:48-2.12c, [9] and N.J.S.A. 40:48-2.12m[10] the judge noted that municipalities are authorized to regulate buildings in order to insure the public's health and safety and make inspections for that purpose, require registrations, and issue certificates of occupancy (CO) and charge fees for those certificates.

         Turning to the challenged ordinances, he observed that the municipalities' "ordinances have very similar framework." He found that the ordinances were different from the one addressed in Timber Glen because in order to get a license under the framework of the challenged ordinances, a landlord had to comply with various regulations that were authorized by statute, not just pay a fee as was the case in Timber Glen. The distinction, he concluded, gave the challenged ordinances "the appearance of . . . regulation, as opposed to simply a licensing act." After reviewing in detail the specific contents of the ordinance challenged in Timber Glen, and commenting on what parts related to regulation versus licensing, the judge turned to the subject ordinances, which he also discussed in detail.

         During his review, Judge Morgan observed that unlike Timber Glen, Woodbury's ordinance required landlords to pay a fee and comply with various regulations before being able to obtain a license. He stated:

[W]hen you read . . . [the] ordinances they're . . . a very integrated set of ordinances that basically regulate the conduct, the operations of the apartment.
And charge a fee for the license that you get, once you've demonstrated after an inspection that you're in ...

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