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Block 268, LLC v. City of Hoboken Rent Leveling and Stabilization Board

401 N.J. Super. 563, 952 A.2d 473 (App. Div. 2008)

RENT CONTROL; CONDOMINIUMS — Rent control exemptions run with the property and not with the property owner and conversion of a building to a condominium project does not necessarily frustrate the purpose of rent control statutes especially where existing renters are permitted to remain.

Two tenants moved into a building that had been converted from industrial to residential use and was exempt from municipal rent control ordinances. Roughly a year and a half after they moved into their unit, the landlord converted the building to a condominium but allowed existing renters to remain in their apartments. Just before the conversion became effective, the tenants’ lease expired. They had exercised their option to renew, but refused to sign a lease on the grounds that their unit was subject to rent control. They went to the municipality’s rent control board, which found that their unit was subject to rent control. In an action brought by the landlord against the board, the lower court reversed the board’s decision and found that rent control ordinances did not apply to the unit.

On appeal, the Appellate Division agreed with the tenants that an official for the landlord may not have been technically authorized to file for the rent control exemption from the rent control board, but found that the results were inconsequential. The tenants’ argument, that the filing for the rent control exemption was fatally flawed because it did not include information on the building’s mortgage, also was rejected. The Court pointed out that applicable rent control statutes allowed the exemption (upon which the building owner relied) to run to the earlier of thirty years or when the amortization of original mortgage on the buildings ran out. The tenants argued that the transfer of title from the landlord’s predecessor to the landlord negated the exemption was also rejected since such exemptions run with the property and not with the property owner. The Court also disagreed with the tenant’s argument that the building’s conversion to a condominium frustrated the purpose of the rent control statutes by diminishing the supply of available rentals. Instead, it found that the renovation of the building from industrial to residential use increased the number of available rental units in the municipality. It also found that since the landlord allowed the existing renters to remain, the purpose of rent control statutes was not frustrated. As a result of the Court’s findings and conclusions, the lower court’s reversal of the board’s decision to remove the rent control exemption was affirmed.


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