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Exton Realty v. Rent Leveling Board of the Township of North Bergen

A-0110-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

RENT CONTROL — A housing or rent assistance entity that actually pays the rent or part of the rent for a rent-controlled tenant has standing to present overcharge claims to a rent control board.

A landlord owned five rent-controlled units occupied by tenants who received subsidies under the federal Section 8 voucher program. The five tenants in question paid only a portion of the rent to the landlord, and the remainder was paid to the landlord by the municipal housing authority using federal funds. The tenants’ portion was below the municipality’s rent control limitations, but the additional Section 8 subsidy placed the total rent above those limitations.

Under the municipality’s law, a landlord could apply for an exemption from the rent control limits for affordable housing units. The landlord would have to provide an affidavit confirming that the unit for which the exemption was sought was vacant and that the tenant who most recently occupied the unit was not coerced or harassed to move out of the unit. The application also required landlords to supply other relevant information and to pay a processing fee. Additional documents had to be filed annually to show continuing eligibility for the exemption.

It was undisputed that the landlord neither applied for, nor obtained, an exemption during the relevant time frame. The landlord apparently wished to pursue such an exemption, but its building manager failed to file the exemption application or the required affidavit of non-harassment. Instead, the building manager submitted applications for a Rental Unit Preservation Allowance (RUPA), apparently on the mistaken belief that it was the proper form to obtain a rent control exemption. The municipal rent leveling board granted the RUPA applications, but that did not relieve the landlord of the obligation to keep its rents within the prescribed limits.

The housing authority filed administrative complaints with the municipal rent leveling board, alleging that the landlord had been overcharging rent on all five subsidized units for a number of years. According to the housing authority, it had paid excessive Section 8 subsidies for these five units and sought to recoup those overpayments. The landlord requested a hearing before the board to contest the allegations of overcharging. Apart from its denial of liability on the merits, the landlord also contended that the housing authority lacked standing to complain of any rent control violations. The landlord noted that the tenants who would have had such standing were not parties in the case before the board.

After several days of hearings, the board ruled against the landlord and in favor of the housing authority. It memorialized its ruling in a resolution declaring that the rents exceeded the levels allowed under the rent leveling ordinance. The resolution further noted that the landlord had not filed an application for an exemption. Meanwhile, the housing authority began withholding the Section 8 subsidies it was receiving from the federal government. That withholding prompted the landlord and two of its principals to file a complaint in the Law Division against the housing authority and several of the agency’s officials, seeking to be paid the monies that had been withheld. After judgment was entered against the landlord, and while a motion for a new trial was pending, that lawsuit settled. Under the terms of the settlement, the landlord and its principals agreed to dismiss the complaint in exchange for a lump sum payment. The funds were thereafter disbursed to the landlord, and its complaint against the housing authority and the other defendants in that case was consequently dismissed. The settlement apparently did not resolve, however, whether the landlord’s subsidized units would be subject to rent control in the future.

The issue of the landlord’s ongoing duty to comply with the rent leveling ordinance was litigated after the landlord filed an action in lieu of prerogative writs against the board, claiming that its resolution denying relief was arbitrary, capricious, and inconsistent with the law. The landlord further argued that the resolution was invalid because of the housing authority’s alleged lack of standing to bring complaints before the board. Further, it contended that the board’s decision was preempted by federal law, that the board had denied it due process, and that the board’s attorney had a conflict of interest because some of his law partners represented housing authorities in other municipalities. After considering the board’s opposition and various trial proofs, the lower court entered a final judgment in the board’s favor. That same day, the lower court issued its written opinion, concluding that the board had correctly found that the landlord was overcharging for the five units in question, and that no request for a certificate of exemption had been filed. It also rejected the landlord’s various arguments as to lack of standing, due process, and the board’s counsel’s alleged conflict of interest.

On appeal, the landlord argued that the lower court misapplied the rent leveling ordinance, erred in rejecting its contentions concerning due process and standing, and lacked sufficient evidence in the record to sustain the board’s determinations. The board opposed these arguments, and also contended that the landlord’s notice of appeal was untimely.

The Appellate Division found that the lower court did not err in upholding the municipality’s decisions. The landlord was indisputably charging rents above those allowed under the local rent leveling control ordinance and had not applied for an exemption. The fact that the manager apparently filled out the wrong form to pursue an exemption did not invalidate the board’s decision. In fact, the board had given the landlord a RUPA allowance, exactly the relief it had applied for. The board was not responsible for the landlord’s error. It was not estopped from requiring that the landlord submit a proper application for a certificate of exemption, supported by the necessary affidavit and other information.

Further, the Court found that the housing authority had standing to present overcharge claims to the board. In general, New Jersey courts are more permissive than federal courts with respect to standing. The housing authority, as the payor of the subsidized portion of the rent remitted to plaintiff, had a sufficient interest in the legality of the overall rent charged to bring that potential illegality to the board’s attention. The ordinance that created the municipal hearing board broadly granted to it, among other things, all the powers necessary and appropriate to enforce the provisions of the ordinance. The ordinance contained no provision requiring that a dispute about alleged overcharging could only be brought before the board by a tenant or a landlord. Given these considerations, the lower court did not err in recognizing the housing authority’s standing.

Lastly, the Court found that the municipality was not preempted under federal law from enforcing rent limitations. Rather, federal law recognizes the ability of state or local agencies to impose even more stringent limits on the overall rent charged for a unit occupied by a tenant receiving a federal subsidy. Finding that the landlord’s remaining contentions lacked merit, the Court affirmed.


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