EXTON REALTY v. RENT LEVELING BOARD OF THE TOWNSHIP OF NORTH BERGEN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0110-09T1

EXTON REALTY,

Plaintiff-Appellant,

v.

RENT LEVELING BOARD OF THE

TOWNSHIP OF NORTH BERGEN,

Defendant-Respondent.

_________________________________

June 22, 2011

Argued January 31, 2011 - Decided

Before Judges Sabatino and Alvarez.

On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4319-08.

Alan Zark argued the cause for appellant.

Donald A. Caminiti argued the cause for respondent (Breslin and Breslin, P.A., attorneys; Mr. Caminiti, on the brief).

PER CURIAM

Plaintiff Exton Realty, a landlord, appeals a May 14, 2009 order dismissing its action in lieu of prerogative writs against defendant, the Rent Leveling Board of the Township of North Bergen ("the Board"), and a subsequent order of the trial court denying reconsideration. For the reasons that follow, we affirm.

This matter arises out of contentions that plaintiff charged rents in excess of the rates allowable under the township's rent leveling ordinance. Plaintiff owns a multifamily apartment building in North Bergen. Within that building are five rent-controlled units occupied by tenants who receive subsidies under the federal Section 8 voucher program.1 The federal program is administered in the township by the North Bergen Housing Authority ("the Housing Authority"). The five tenants in question pay only a portion of the rent to plaintiff, and the remainder is paid to plaintiff by the Housing Authority with federal funds. Apparently the tenants' portion is below the township's rent limitations, but the additional Section 8 subsidy places the total rent above those limitations.

A landlord in North Bergen may seek an exemption for affordable housing units from the township's rent control limits by completing and submitting an application pursuant to Section 10A of Ordinance No. 467-93. In order to receive such an exemption, the landlord must provide an affidavit confirming that the unit for which the exemption is sought is 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 requires the landlord to supply other relevant information, and to pay a processing fee. The landlord must also file additional documents annually with the Board showing its continuing eligibility for the exemption.

It is undisputed that plaintiff did not apply for, or obtain, an exemption from the Board during the relevant time frame. Plaintiff apparently wished to pursue such an exemption, but its building manager did not file an 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 Board granted the RUPA applications, but that did not relieve plaintiff of the obligation to keep its rents within the prescribed limits.

In July 2007, the Housing Authority filed administrative complaints with the Board, alleging that plaintiff had been overcharging rent in five subsidized units since 2000. According to the Housing Authority, it had paid plaintiff over $85,000 in excessive Section 8 subsidies for these five units in the years 2000 through 2007. The Housing Authority sought to recoup those overpayments.

Plaintiff requested a hearing before the Board to contest the allegations of overcharging. Apart from its denial of liability on the merits, plaintiff also contended that the Housing Authority lacked standing to complain of any rent control violations. Plaintiff 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 plaintiff and in favor of the Housing Authority. The Board memorialized its ruling in a resolution dated June 16, 2008, declaring that the rents charged by plaintiff for the subsidized units in question exceeded the levels allowed under the rent leveling ordinance. The resolution further noted that plaintiff had not filed an application for an exemption.

Meanwhile, the Housing Authority began withholding from plaintiff the Section 8 subsidies the agency was receiving from the federal government. That withholding prompted plaintiff and two of its principals to file a complaint in the Law Division, Docket No. HUD-L-4244-07, against the Housing Authority and several of the agency's officials, seeking to recover the monies that had been withheld. After judgment in that case was entered by Judge O'Connor in favor of the defendants and while a new trial motion was pending, that lawsuit settled. Under the terms of the settlement, plaintiff and its principals agreed to dismiss the complaint in Docket No. HUD-L-4244-07 in exchange for a lump sum disbursement of $15,000 from the Housing Authority.2 The $15,000 was thereafter disbursed to plaintiff, 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 plaintiff's subsidized units would be subject to rent control in the future.

The issue of plaintiff's ongoing duty to comply with the rent leveling ordinance was litigated in the present case after plaintiff filed an action in lieu of prerogative writs against the Board, Docket No. HUD-L-4319-08. Plaintiff claimed that the Board's resolution denying it relief was arbitrary, capricious, and inconsistent with the law. Plaintiff further argued that the resolution was invalid because of the Housing Authority's alleged lack of standing to bring complaints before the Board. Plaintiff also 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 judge hearing the present case, Judge Shirley Tolentino3 entered a final judgment in the Board's favor on May 14, 2009. That same day, Judge Tolentino issued a written opinion detailing her reasons. She concluded that the Board had correctly found that plaintiff was overcharging for the five units in question, and that no request for a certificate of exemption had been filed. Judge Tolentino also rejected plaintiff's various arguments as to lack of standing, due process, and defense counsel's alleged conflict of interest. Plaintiff moved for reconsideration, which Judge Tolentino denied in an order dated July 17, 2009.

On appeal, plaintiff argues that the trial 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 opposes these arguments, and also contends that plaintiff's notice of appeal was untimely.

In reviewing this matter, we bear in mind general principles that govern civil actions in lieu of prerogative writs brought under Rule 4:69 to contest decisions by municipal bodies. Although the contexts vary, courts ordinarily apply a presumption of validity to administrative decisions by municipal agencies. See Vineland Constr. Co. v. Twp. of Pennsauken, 395 N.J. Super. 230, 255-56 (App. Div. 2007), appeal dismissed as moot by 195 N.J. 513 (2008); Bryant v. City of Atlantic City, 309 N.J. Super. 596, 610 (App. Div. 1998). The municipal decision generally is sustained if it comports with the law, is supported by substantial credible evidence in the record, and is not shown to be arbitrary or capricious. See, e.g., Cell S. of N.J. v. Zoning Bd. of Adjustment, 172 N.J. 75, 81-82 (2002); ERETC, L.L.C. v. City of Perth Amboy, 381 N.J. Super. 268, 277 (App. Div. 2005). This approach to municipal decisions challenged in the trial courts under Rule 4:69-7 parallels the deference that we accord on appeal to final decisions made by state administrative agencies. See, e.g., In re Herrmann, 192 N.J. 19, 27-28 (2007) (applying similar principles upholding agency action based upon substantial credible evidence and not clearly shown to be arbitrary, capricious, or unreasonable).

The Board's decision in this matter meets these standards, and the trial court did not err in upholding it. Plaintiff was indisputably charging rents above those allowed under the local ordinance, and plaintiff had not applied for a possible exemption from those requirements. The fact that plaintiff's manager apparently filled out the wrong form to pursue an exemption does not invalidate the Board's decision. The Board, in fact, gave plaintiff exactly the relief it had applied for: a RUPA allowance. The Board is not responsible for plaintiff's error. It is not estopped from requiring that the landlord submit a proper application for a certificate of exemption under Section 10A, supported by the necessary affidavit and other information. See Cnty. of Morris v. Fauver, 153 N.J. 80, 104 (1998) (repeating the well-settled maxim that estoppel against governmental defendants is disfavored).

We also concur in the trial court's determination that the Housing Authority had standing to present claims of overcharging to the Board. In general, our State is more permissive than the federal courts with respect to standing. See People for Open Gov't v. Roberts, 397 N.J. Super. 502, 509 (App. Div. 2008). The Housing Authority, as the payor of the subsidized portion of the rent remitted to plaintiff, has a sufficient interest in the legality of the overall rent charged to bring that potential illegality to the Board's attention. The township ordinance that created the Board, broadly grants to it, among other things, "all the powers necessary and appropriate . . . [t]o enforce the provisions of th[e] Ordinance[.]" Ordinance No. 467-93, Section 8(e). The ordinance contains no provision requiring that a dispute about alleged overcharging can only be brought before the Board by a tenant or a landlord. Given these considerations, the trial court did not err in recognizing the Housing Authority's standing.

We also reject plaintiff's argument that the Board's authority to enforce the township's rent limitations has been preempted by federal law under the Section 8 program. To the contrary, 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. See 24 C.F.R. 982.509 (2010) (providing that "[i]n addition to the rent reasonableness limit [imposed] under this subpart, the amount of rent [payable] to [the] owner also may be subject to rent control limits under State or local law").4 We do not read the cases cited in plaintiff's brief to mandate a contrary conclusion. We instead apply the plain language of Section 982.509 of the federal regulation, a provision that is not discussed in plaintiff's letter brief on appeal.

We have considered the balance of plaintiff's contentions, and conclude that they lack sufficient merit to warrant discussion in this written opinion. R. 2:11-3(e)(1)(E). We therefore affirm the orders issued by the trial court, substantially for the cogent reasons set forth in Judge Tolentino's letter opinion of May 14, 2009, as amplified by our own comments above.5

We do add one caveat. During oral argument before this court, the question arose as to whether plaintiff could prospectively seek hardship relief for the units in question under Section 9 of Ordinance No. 467-93, in order to assure its future receipt of a sufficient rate of return. Although we render no advisory opinion on the subject, nothing in this opinion should be read to foreclose such a prospective application for hardship relief, subject, of course, to the pertinent substantive and procedural requirements.

Affirmed.

1 The system of subsidized housing assistance known as "Section 8" was established by the Housing and Community Development Act of 1974, codified at 42 U.S.C.A. 1437f (2006). The program is administered on a national level by the United States Department of Housing and Urban Development ("HUD"). A main objective of the program is to assist "low-income families in obtaining a decent place to live." Id. at 1437f(a). The federal government will typically enter into contracts with local public housing authorities which will, in turn, make assistance payments enabling eligible participants to obtain housing. Id. at 1437f(b).

There are two main programs under the umbrella of Section 8, the voucher program and the certificate program. HUD Housing Choice Voucher Program, 24 C.F.R. 982.1(a)(1) (2010). In the voucher program, which is apparently applicable here, a "payment standard" is calculated based on the typical cost of a leased unit in the local housing market. If the rent for a program participant in the given unit is less than the payment standard, the participant generally pays thirty percent of his or her adjusted monthly income. If the rent is more than the payment standard, then the participant's share of the rent will be adjusted upward. Id. at 982.1(a)(4)(ii). The local housing authority enters into a separate contract with the building owner to pay the balance of the fair market rent as established by HUD. Id. at 982.311.

2 Following oral argument in the present appeal, at our request, counsel supplied this court with several of the pertinent documents from the litigation before Judge O'Connor, along with some explanatory correspondence.

3 Judge Tolentino has since passed away.

4 The record includes a November 21, 2007 letter from HUD to the Housing Authority's Executive Director confirming the applicability of that regulation and North Bergen's ability to apply rent control limitations to subsidized units. Among other things, the letter states that, under federal standards, "the rent charged [for the subsidized unit] must be reasonable in comparison to the rent for comparable unassisted units."

5 Our disposition on the merits makes it unnecessary to address the Board's contention that the notice of appeal was untimely.