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Carlyle Towers v. Rent Review Board of the Borough of Caldwell

A-6381-04T3 (N.J. Super. App. Div. 2006) (Unpublished)

LANDLORD-TENANT; RENT CONTROL — Even if a rent control board’s definition of a major capital improvement is narrower than commonly seen, a court will give deference to that board provided that the board’s interpretation is reasonable.

A landlord owned an apartment building and made on waterproofing, windows, and air conditioning improvements. Following the improvements, the landlord applied for a capital improvement surcharge with the municipality’s rent board. At a hearing the landlord testified that the surcharge would be applied to the tenants whose rents were below market rates and only to the extent that they did not exceed market rates. The board rejected the rent increase application, finding that the items of improvements listed by the landlord did not constitute “major capital improvements” as defined by the municipal’s rent control ordinance.

The landlord filed a complaint against the board. The lower court affirmed the board’s decision in denying a surcharge for waterproofing, but reversed with respect to the air conditioning and windows. It then applied a twenty-year useful life for the windows and air conditioning. The board appealed the lower court’s decision, challenging the reversal of the board’s determination in rejecting the surcharge for the windows and air conditioning. The board contended that its interpretation of a major capital improvement under the municipal’s rent control ordinance was reasonable. The landlord cross-appealed the lower court’s decision.

The Appellate Division found that if an item is a replacement, had been previously provided, or was required to be provided by law or by the lease, then it did not fall under the municipality’s definition of a major capital improvement. In this case, the windows and air conditioning were required by law and by the lease. Since the two items were previously provided in the building, these two improvements constituted replacements. The Court noted that although the board’s definition of a major capital improvement was narrower than other municipalities, it would give the board deference provided that its interpretation was reasonable. Further, the Court rejected the landlord’s cross-appeal challenging the lower court’s determination that the waterproofing did not constitute a major capital expense, agreeing with the board’s finding that waterproofing constituted upkeep, maintenance, and repair.

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