KING PLAZA RESIDENTIAL v. ALEXANDER SANCHEZ

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

KING PLAZA RESIDENTIAL,

Plaintiff-Appellant,

v.

ALEXANDER SANCHEZ,

Defendant-Respondent.

_____________________________

September 26, 2014

Argued September 16, 2014 Decided

Before Judges Reisner and Koblitz.

On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Middlesex County, Docket No. LT-2544-13.

Bruce E. Gudin argued the cause for appellant (Ehrlich, Petriello, Gudin & Plaza, attorneys; Erin R. Ehrlich, on the brief).

Respondent has not filed a brief.

PER CURIAM

Plaintiff King Plaza Residential, a landlord, appeals from a June 22, 2013 order dismissing its complaint seeking to evict defendant Alexander Sanchez (tenant or defendant) for his refusal to sign a new lease with what the landlord claimed were reasonable new terms.1 Having reviewed the record in light of the applicable legal standards, we affirm.

I

Plaintiff provides affordable housing rental units to financially eligible tenants. In May 2008, the tenant and landlord signed a one-year lease pursuant to which defendant rented a one-bedroom apartment for $857 per month. The lease, by its terms, provided that the landlord would pay the sewer and water utilities, while the tenant would pay for electricity and heat. On November 27, 2012, the landlord served defendant a notice to quit, terminating the old tenancy and offering him a new lease. The new lease purported to cover October 28, 2011 to September 30, 2012, a time period that had already expired. The new lease also required the tenant to pay the water and sewer charges previously paid by the landlord. The tenant refused to sign the lease, and after serving the tenant with a notice to quit, the landlord filed a complaint seeking possession of the apartment.

At the hearing, plaintiff presented testimony from its managing member, Edward Trujillo. According to Trujillo, plaintiff constructed and operated the apartment building under an agreement with the Housing Mortgage Finance Agency (HMFA). In exchange for receiving tax credits, plaintiff must provide affordable rental units for at least twenty-five years, and must operate the building in compliance with HMFA requirements. According to Trujillo, he had been trying unsuccessfully to convince defendant to sign a new lease since 2011. In his direct testimony, Trujillo did not describe the terms of the proposed lease or offer any explanation as to why the new terms were reasonable.

On cross-examination, Trujillo testified that Perth Amboy, where the building is located, has a rent control ordinance limiting rent increases to five percent per year. However, the HMFA places more stringent limits on plaintiff's ability to raise the rent. Trujillo gave, as an example, that one year, the HMFA would only permit a two percent increase, and another year the agency would not permit any increase. He admitted that, even if HMFA approved an increase, it could only be imposed at the beginning of a new lease term. Although Trujillo claimed that he had documents from HMFA concerning its approval of the proposed new lease, he did not bring any documentation with him. He testified that "from 2012 to 2013 . . . there was a small increase, I think to $870 or something like that," from the prior rent of $857.

Trujillo admitted that defendant signed a document renewing the lease from April 1, 2010 through April 30, 2011, presumably on the same terms as his old lease.2 Thereafter, when defendant and his wife ended their relationship, and she moved out of the apartment in October 2011, plaintiff asked defendant to sign a new lease. Trujillo admitted that the old lease provided that the landlord would pay the water and sewer bills. He stated that the landlord had approval from HMFA to require the tenants to pay the water and sewer bills, but a prior property manager had mistakenly checked the wrong provisions on about "50 or 60" leases, thereby obligating the landlord to pay the charges. He claimed that the landlord thereafter obtained the HMFA's approval to issue renewal leases requiring the tenants to pay the water and sewer charges. Trujillo claimed that all of the tenants except defendant agreed to pay the water and sewer charges when they renewed their leases. However, plaintiff did not present any documents to corroborate that testimony.

When defense counsel pointed out that the signed April 2010 renewal lease with defendant did not change the provision for payment of the utilities, Trujillo responded that "my main interest is not the water and sewer." Trujillo also asserted that because the water and sewer charges were a "pass through," HMFA did not consider those charges in calculating the allowable percentage by which plaintiff could increase the rent. However, again, he admitted he brought no documentation to support that contention. He also admitted that, apart from the issue of the lease, plaintiff viewed defendant as a problem tenant and "my people in my office don't want to deal with him anymore."

Defendant testified that about a month prior to November 27, 2012, Trujillo handed him a lease and asked him to sign it, telling defendant that the terms were the same as the old lease. Because he does not speak English, defendant asked for a copy of the lease to "study" it before signing it. After some delay, he obtained a copy and concluded that the terms were unreasonable. The proposed lease required him to pay the water and sewer charges, purported to require him to pay for an extra parking space, which the judge in a prior litigation had ruled he did not have to pay for, and appeared to prohibit him from occupying the apartment with his pregnant fiancée. Defendant also testified that the proposed lease was back-dated, in that it covered time periods that had already passed. Although he was not willing to sign the new lease, defendant testified that he did agree to pay a rent increase, pursuant to a notice of rent increase he received in August 2012. He began paying the increased rent on October 1, 2012.3

In a May 16, 2103 oral opinion, the trial judge found that the primary disagreement between the parties was over the landlord's attempt to require defendant to pay for the water and sewer charges. He understood Trujillo's testimony as stating that the HMFA would permit a maximum rent increase of two percent a year. He adopted that percentage as "the standard for what is conscionable and unconscionable." The judge reasoned that "a change in who pays the water bill is a significant change in the terms of the deal." He stated that it made no difference whether the prior property manager "made a mistake or didn't make a mistake" in preparing the original lease. "[T]his was the lease prepared by the landlord. . . . And that mistake created a baseline that the plaintiff is stuck with as a matter of law."

The judge recalled Trujillo's testimony as stating that the average water and sewer bill ranged from $20 to $50 per month4, which was more than two percent over the $857 defendant had been paying. The judge concluded that was an unreasonable rent increase and therefore dismissed the complaint.

II

By way of background, the Anti-Eviction Act permits a landlord to evict a tenant where: "The landlord or owner proposes, at the termination of a lease, reasonable changes of substance in the terms and conditions of the lease, including specifically any change in the term thereof, which the tenant, after written notice, refuses to accept." N.J.S.A. 2A:18-61.1(i). In a dispossess action under section 61.1(i), "the burden of proving reasonableness" is on the landlord. 447 Associates v. Miranda, 115 N.J. 522, 531 (1989). Since the Act is remedial legislation, it is to be liberally construed. Id. at 529.

Even a month-to-month tenant cannot be evicted for refusing to pay an unconscionably large rent increase. N.J.S.A. 2A:18-61.1(f). Moreover, in determining whether the landlord has demanded an unreasonable change in the lease terms, additional payments such as late charges, or in this case, extra utility charges, must be considered. 447 Associates, supra, 115 N.J. at529-30.

In interpreting the reasonableness of a lease change, courts have properly looked to the circumstances of the case and to the interests of both the landlord and the tenant. . . . "Each case must be governed by its own facts. The result must be just and fair to the landlord as well as the tenant."

[Id. at 534 (internal citations omitted).]

On this appeal, our review of the trial judge's decision is limited. We consider whether his factual findings are supported by sufficient credible evidence, and whether in light of those facts, his decision is consistent with applicable law. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). We owe no deference to a trial court's legal interpretation. Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995). Because appeals are from orders, not from opinions, we may affirm a trial court's decision if the evidence supports it, even if our rationale is different from that of the trial court. Ellison v. Evergreen Cemetery, 266 N.J. Super. 74, 78 (App. Div. 1993).

On this appeal, plaintiff argues that: the trial judge failed to consider the landlord's factual assertions concerning HMFA's requirements; Trujillo did not testify that HMFA set a two percent cap on rent increases; and requiring defendant to pay the utility charges was not a "rent" increase, even though plaintiff concedes that the proposed new lease "would call these items 'additional rent.'" None of these arguments persuades us to overturn the trial court's decision.

In its first point, plaintiff relies on Trujillo's testimony that, with the HMFA's approval, the rent was set at a low level on the understanding that the tenants would pay for the water and sewer charges. Plaintiff further argues that a few dozen leases were mistakenly drafted with language placing that burden on the landlord instead of the tenant, and the HMFA approved its course of action in correcting that mistake. Plaintiff further argues that if defendant does not pay the water and sewer charges, plaintiff will be out of compliance with some unspecified HMFA requirement.

Notwithstanding plaintiff's arguments, the trial judge was not bound to accept Trujillo's self-serving, uncorroborated testimony. Not only did Trujillo fail to support his claims with any written documentation from the HMFA, or any leases demonstrating that other tenants paid the water and sewer charges, but also at one point in his testimony, he stated that his "main interest is not the water and sewer." Further, Trujillo did not testify that the HMFA required that the tenants pay the sewer and water charges; and even if he did, it would have been a simple matter to produce a copy of an HMFA regulation, policy or other document to that effect. He produced nothing.

We agree with the trial judge's perception that this lawsuit was not motivated by a genuine concern over which party pays the sewer and water charges, but was an attempt by the landlord to get rid of a perceived "difficult" tenant. Indeed, the record contains the transcript of a prior landlord-tenant case, in which plaintiff unsuccessfully attempted to evict defendant for refusing to pay for a parking space. In that case, the judge held that defendant was not obligated to pay for the space.

Moreover, even assuming that the landlord made a unilateral mistake in drafting defendant's lease, that does not change the analysis as to whether the proposed new lease was reasonable or the proposed increase was unconscionable. N.J.S.A. 2A:18-61.1(f), (i). For a low income tenant paying $857 a month in rent for a one-bedroom apartment, a proposed additional monthly charge of $20 to $50 is a substantial increase.5 Further, plaintiff did not contradict the tenant's testimony that he had already agreed to pay a rent increase starting October 1, 2012. As previously noted, we infer that increase corresponded to the $870 that Trujillo testified was the rent charged for a one-bedroom apartment in 2012. Although it was the landlord's burden to prove the reasonableness of the new lease, Trujillo did not testify as to the specific percent increase the HMFA allowed in 2012. However, a rent increase from $857 to $870 is about 1.5 percent, and it may fairly be inferred that the landlord charged as much as the HMFA would permit.

We agree with plaintiff that Trujillo did not state that the HMFA invariably capped rent increases at two percent a year. He testified that the HMFA sometimes would not permit any increase, and sometimes allowed up to the five percent permitted by the municipal rent control ordinance. However, even if the HMFA did not invariably limit rent increases to two percent a year, on this record requiring an additional charge of $20 to $50 per month, on top of the 2012 rent increase from $857 to $870, would be unreasonable. In fact, if the water and sewer charges were as much as $50, it would far exceed the five percent allowed by the municipal ordinance.

Plaintiff admits that its new lease would characterize the utility charge as additional "rent." Its argument -- that this proposed new financial burden on the tenant is not really rent -- is without sufficient merit to warrant further discussion. R. 2:11-3(e)(1)(E). In summary, we affirm because plaintiff did not carry its burden of proving that the proposed new lease was reasonable in its terms. See 447 Associates, supra, 115 N.J. at 531. Additionally, as defendant noted in his testimony, the lease offered to him in November 2012 was backdated to cover the previous year (October 28, 2011 to September 30, 2012), apparently requiring him to pay a higher rent for a period of time that had already passed.

Affirmed.

1 On April 24, 2014, while this appeal was pending, we denied the landlord's motion for an order directing the tenant to pay rent during the pending appeal. That issue was not adjudicated by the trial court and was not the subject of this appeal. We noted that if the rent was not paid, the landlord had the right to institute a separate action for non-payment of rent, under N.J.S.A. 2A:18-61.1(a).

2 Although that document was admitted in evidence, plaintiff has not provided it to us in its appendix.

3 Plaintiff did not provide us with a copy of the Notice of Rent increase, although it was admitted in evidence at the trial. We infer that this increase raised the rent from $857 to $870, as Trujillo had testified. That amounts to approximately a 1.5 percent increase.

4 Plaintiff's brief does not contest that figure, but characterizes it as an estimate rather than a firm number.

5 Defendant's yearly income is listed on a tenant income verification form as about $32,000.