Hutton Pk. Gardens v. West Orange Town Council

• Decision Date: 11 December 1975
• Citation: 350 A.2d 1,68 N.J. 543
• Parties: HUTTON PARK GARDENS, A PARTNERSHIP, PLAINTIFF-RESPONDENT, AND HUTTON LAFAYETTE APARTMENTS COMPANY AND ROCKLEDGE REALTY COMPANY, PLAINTIFFS-INTERVENORS, v. TOWN COUNCIL OF THE TOWN OF WEST ORANGE AND THE TOWN OF WEST ORANGE, A MUNICIPAL CORPORATION, DEFENDANTS-APPELLANTS. HARVEY J. COSDEN AND JACOB SCHNEIDER, SOLE TRUSTEES, TRADING AS WAYNE TERRACE APARTMENTS; WILSON R. KAPLAN, TRADING AS WAYNE VILLAGE; ESQUIRE ESTATES, INC., A NEW JERSEY CORPORATION; POVERSHON CONSTRUCTION COMPANY, A NEW JERSEY CORPORATION, AND SOUTHFIELD HOMES, INC., A NEW JERSEY CORPORATION, ALL TRADING AS MANCHESTER VILLAGE, PLAINTIFFS-APPELLANTS, v. TOWNSHIP OF WAYNE, A MUNICIPAL CORPORATION AND MUNICIPAL COUNCIL OF THE TOWNSHIP OF WAYNE, DEFENDANTS-RESPONDENTS.
• Court: New Jersey Supreme Court

68 N.J. 543

350 A.2d 1

HUTTON PARK GARDENS, A PARTNERSHIP, PLAINTIFF-RESPONDENT, AND HUTTON LAFAYETTE APARTMENTS COMPANY AND ROCKLEDGE REALTY COMPANY, PLAINTIFFS-INTERVENORS, v. TOWN COUNCIL OF THE TOWN OF WEST ORANGE AND THE TOWN OF WEST ORANGE, A MUNICIPAL CORPORATION, DEFENDANTS-APPELLANTS. HARVEY J. COSDEN AND JACOB SCHNEIDER, SOLE TRUSTEES, TRADING AS WAYNE TERRACE APARTMENTS; WILSON R. KAPLAN, TRADING AS WAYNE VILLAGE; ESQUIRE ESTATES, INC., A NEW JERSEY CORPORATION; POVERSHON CONSTRUCTION COMPANY, A NEW JERSEY CORPORATION, AND SOUTHFIELD HOMES, INC., A NEW JERSEY CORPORATION, ALL TRADING AS MANCHESTER VILLAGE, PLAINTIFFS-APPELLANTS, v. TOWNSHIP OF WAYNE, A MUNICIPAL CORPORATION AND MUNICIPAL COUNCIL OF THE TOWNSHIP OF WAYNE, DEFENDANTS-RESPONDENTS.

The Supreme Court of New Jersey.

Argued May 27, 1975.

Decided December 11, 1975.

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Mr. James A. Ospenson argued the cause on behalf of defendants-appellants Town Council of the Town of West Orange and The Town of West Orange.

Mr. Sheppard A. Guryan argued the cause on behalf of plaintiffs-respondents, Hutton Park Gardens, and on behalf of plaintiffs-appellants, Harvey J. Cosden, et al., (Messrs. Lasser, Lasser, Sarokin & Hochman, attorneys).

Mr. Paul A. Rowe argued the cause on behalf of plaintiffs-intervenors, (Mr. Charles Applebaum, on the brief; Messrs. Greenbaum, Greenbaum, Rowe & Smith, attorneys).

Mr. Robert S. Moraff argued the cause on behalf of defendants-respondents Township of Wayne and Municipal Council of the Township of Wayne.

Mr. Murray J. Laulicht argued the cause for amicus curiae Apartment Management Company in A-171 only, (Messrs. Laulicht and Gregory B. Reilly on the brief; Messrs. Lowenstein, Sandler, Brochin, Kohl & Fisher, attorneys).

Mr. Richard F. Aronsohn argued the cause for amicus curiae New Jersey Builders Association and Apartment House Council of New Jersey Builders Association, (Messrs. Aronsohn and Robert J. Schmitt, Jr. on the brief; Messrs. Aronsohn, Kahn & Springstead, attorneys).

Mr. Kenneth E. Meiser, Assistant Deputy Public Advocate argued the cause for amicus curiae New Jersey Public Advocate, (Messrs. Meiser and Howard H. Sims on the brief, Mr. Stanley C. Van Ness, Public Advocate, Division of Public Interest Advocacy, attorney).

Mr. Laurence B. Orloff submitted a brief on behalf of amicus curiae Leone Management Corporation, et al., (Messrs. Hannoch, Weisman, Stern & Besser, attorneys).

The opinion of the Court was delivered by PASHMAN, J.

Having held that regulation of rents is within the powers delegated by the Legislature to municipalities under N.J.S.A. 40:48-2, Inganamort v. Fort Lee, 62 N.J. 521 (1973), this Court is now presented with various questions concerning when and how municipalities may exercise that power.

West Orange adopted a rent control ordinance, No. 247-72, in October 1973. It has since amended the ordinance twice (Ordinances Nos. 276-73, 287-73), each time imposing additional restrictions on the freedom of landlords within the municipality to raise rents. In its present form, the ordinance recites the existence of a limited supply of rental housing in the municipality and receipt of complaints concerning rising rents and deteriorating conditions of rental units. It establishes rent charges as of February 1, 1973 as the base rent and provides that rent increases at the expiration of a lease or a tenancy are limited to the annual percentage increase in the Consumer Price Index (CPI) for the New York metropolitan area computed by the United States Department of Labor for the period from 90 days prior to the commencement of the lease to 90 days prior to its termination.¹ Tenants may additionally be surcharged for the portion of any tax increase equal to the percentage of the square footage of the building which they occupy. The ordinance, however, places a ceiling on such rent increases and surcharges equal to 5% of the existing rent. It also permits a landlord to apply to the municipal rent leveling board for a rent surcharge up to 10% of the existing rent where he has made major capital improvements or increases in services or for a hardship rent increase of up to 10% if he cannot meet his mortgage obligations or maintenance costs. It places a ceiling on the aggregate of all such additional increases and surcharges equal to 10% of the existing rent.

Plaintiff-respondent Hutton Park Gardens filed a complaint in lieu of prerogative writ in the Superior Court in Essex County in which intervenors Hutton Lafayette Apartments Company and Rockledge Realty Company joined challenging the West Orange ordinance and particularly the 5% ceiling on annual rent increases imposed by the most recent amendment² as confiscatory, arbitrary and unreasonable. The case was heard on cross-motions for summary judgment on the issue of whether the ordinance was facially unconstitutional.

The principal evidence at this hearing was the affidavit of Richard Segal, manager of apartments owned by plaintiff-intervenors Hutton Lafayette Apartments Company and Rockledge Realty Company. He estimated that operating costs of apartments owned by Hutton Lafayette would increase by 15% of the average existing rent during 1974 and of apartments owned by Rockledge Realty by 5-7% during the same period.

The trial court held the ordinance facially unconstitutional, granted summary judgment for parties plaintiff, and enjoined enforcement of the ordinance.

The history of rent control in Wayne Township is similar to that in West Orange. Wayne Township adopted a rent control ordinance, No. 22-1972, in May 1972. The ordinance has since been amended three times (Ordinances Nos. 129-1972, 106-1973, 51-1974). In its present form, the ordinance declares the existence of a housing crisis in Wayne Township. It establishes the rents as of May 1972 as base rents and limits rent increases over those rents to 50% of the percentage increase in the Consumer Price Index during the period from 120 days before the prior lease was entered into to 120 days before it expires. It permits landlords to apply to the municipal rent leveling commission for rent increases to alleviate hardships such as inability to meet mortgage payments or maintenance costs, or to reimburse them for major capital improvements. These increases are limited to 15% of the tenant's existing rent charge. It also permits him to apply for permission to impose an additional surcharge to pass through to the tenant a portion of increases in local taxes equal to the percentage of rooms in the building occupied by the tenant.

Plaintiffs, various apartment owners in Wayne Township, filed a complaint in lieu of prerogative writ in the Superior Court in Passaic County challenging the restriction of annual rent increases to 50% of the increase in the CPI³ as confiscatory, arbitrary and unreasonable. The trial court heard the issue of the facial constitutionality on cross motions for summary judgment and entered judgment for the municipality. The Appellate Division affirmed in an unreported opinion.

We granted certification⁴ in both of these cases, as well as in Brunetti v. New Milford, 68 N.J. 576 (1975) and Troy Hills Village v. Parsippany-Troy Hills Tp. Council, 68 N.J. 604 (1975), also decided today, to consider the limitations imposed by the federal and state constitutions upon municipal efforts to regulate rents. These questions have been the subject of much litigation since this Court's decision in Inganamort v. Fort Lee, supra.⁵

I

We first consider plaintiffs' contentions that the ordinances are generally arbitrary and unreasonable, that is, that they violate principles of substantive due process.

Municipal rent control is, of course, but one example of the larger and more pervasive phenomenon of governmental regulation of prices under the police power. For constitutional purposes, rent control is indistinguishable from other types of governmental price regulation. Despite the permanence and concreteness of real property, and the special place accorded it by the common law as expounded by the early commentators, its commercial use is no less subject to regulation under the police power than other, more ephemeral, goods and services. Block v. Hirsh, 256 U.S. 135, 41 S.Ct. 458, 65 L.Ed. 865 (1921).⁶ The renting of residential property is as much an essential enterprise as the retail sale of food-stuffs, the extraction and processing of natural resources, the operation of a railroad, or the conduct of a banking business, cf. Javins v. First Nat'l Realty Corp., 138 U.S. App. D.C. 369, 428 F.2d 1071, 1079 (D.C. Cir.1971), and equally subject to public regulation when the need arises. Bowles v. Willingham, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892 (1944); Block v. Hirsh, supra; Jamouneau v. Harner, 16 N.J. 500 (1954), cert. denied 349 U.S. 904, 75 S.Ct. 580, 99 L.Ed. 1241 (1955). To ascertain the limitations imposed by the state and federal constitutions upon municipal efforts to regulate rents, it is therefore appropriate to consider the constitutional limits on governmental regulation of prices generally.

Governmental regulation of prices has a long, although somewhat checkered, legal history in this country.⁷ For present purposes, however, we need look no farther back than the decision of United States Supreme Court in Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934), a case concerning regulation of milk prices. In that case, breaking free of the tangled and restrictive body of decisional law concerning price regulation which it had developed over the preceding half-century, the Court held that state regulation of prices enacted to promote the general welfare is not per se violative of the due process clause in the federal constitution:

We may as well say at once...