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316 Paterson Plank Road, L.L.C. v. Union City Rent Leveling Board

A-0005-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

LANDLORD-TENANT; RENT CONTROL—If an ordinance affecting rent controlled apartments is intended to have retroactive effect, it should either expressly say so, or be ameliorative in nature, be curative, or comport with the expectation of those affected.

A local rent leveling board’s administrator calculated the “legal rent” for two apartments in a low income housing apartment building, “Legal rent” is a formal written determination made by the board upon a tenant’s complaint of illegal rental increases or a landlord’s request. Each apartment’s rent was significantly reduced. The administrator used the earliest recorded rent for each apartment unit as the base rent. He then added annual cost of living increases to that base rent, but only for the years for which rent registration statements had been filed. The landlord, who had acquired the property only a year earlier, had filed a statement for that year, but the previous landlord only filed statements for eight out of the prior fifteen years. Thus, the cost of living increase was omitted for seven years. The current landlord appealed to the board.

The municipality’s rent stabilization ordinance required landlords of apartments covered by the ordinance to file an annual registration statement. Under the ordinance, failure to do so is punishable with a fine or by jail. Before the board held its hearing, it adopted an amendment to the ordinance. That amendment provided that landlords who fail to file the required annual rent registration statement would be prevented from filing any application for a permitted rent increase based on that year. This restriction also applied to current landlords whose predecessors had failed to file registration statements. At the hearing that followed, the board upheld the administrator’s calculations based on the amendment.

On further appeal, the lower court rejected the board’s retroactive application of the amendment. It reversed and remanded the matter to the board for a recalculation of the legal rent, instructing it to include all of the prior years, regardless of whether rent registration statements were filed.

The board appealed. A statute may be applied retroactively if: (a) the legislation clearly expressed such intent; (b) the statute is ameliorative; (c) the statute is curative; or (d) the expectations of the parties warrant such retroactive application. With that in mind, the Appellate Division held that the amendment did not express an intent to be retroactive. It simply provided that the amendment would take effect immediately. Intent may be implied if retroactive application is necessary to make a law workable; however, in this case, the Court found no reason to imply such intent. Second, the “ameliorative” prong only applies in criminal cases. Third, under the “curative” prong, an amendment may be applied retroactively if it is intended to clarify rather than change the law. This particular amendment created additional limitations on landlords not contained in the original ordinance. Therefore, it did not clarify the law, but changed it. Finally, the Appellate Division concluded that the expectations of the parties did not warrant retroactive application of the amendment. When the landlord purchased the property and inquired into the “legal rent” for the apartment units, the statement it reviewed showed the base rent for the two apartments to be approximately double what the administrator eventually set. When the landlord filed its required rent registration statement for the year, its statement showed the rent for the apartments to be based on the previous, higher amount. Therefore, the landlord could not have reasonably expected the administrator to drastically reduce each payment based solely on the previous landlord’s failure to file rent registration statements.

By adopting the amendment and applying it retroactively, the board ratified the same arbitrary and unreasonable determination made by the administrator from which the landlord initially appealed. So, the Court found that the board penalized the landlord for its predecessor’s inaction and concluded that this retroactive application resulted in manifest injustice to the landlord. For that reason, the Court rejected the board’s retroactive application of the amendment.

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