Property Owners and Managers Ass'n v. Town Council of Parsippany-Troy Hills
| Decision Date | 12 May 1993 |
| Docket Number | PARSIPPANY-TROY |
| Citation | 264 N.J.Super. 523,624 A.2d 1372 |
| Parties | PROPERTY OWNERS AND MANAGERS ASSOCIATION, Plaintiff-Respondent, v. TOWN COUNCIL OFHILLS, Township of Parsippany-Troy Hills, and Mayor Frank Priore, Defendants-Appellants. |
| Court | New Jersey Superior Court — Appellate Division |
John H. Dorsey, Boonton, for defendants-appellants (Dorsey and Fisher, attorneys; Mr. Dorsey, of counsel and on the brief and reply brief).
Charles X. Gormally, Roseland, for plaintiff-respondent (Brach, Eichler, Rosenberg, Silver, Bernstein, Hammer & Gladstone, attorneys; Mr. Gormally, of counsel and on the brief; Steven L. Fox, on the brief).
Before Judges J.H. COLEMAN, SHEBELL and A.M. STEIN.
The opinion of the court was delivered by
SHEBELL, J.A.D.
The issue presented is whether a municipality, in the absence of a rent control ordinance, may require property owners to remit property tax reductions and rebates to tenants. We conclude it may not.
On February 26, 1991, the Township of Parsippany-Troy Hills (Township) adopted Ordinance 91:10 (Ordinance) providing that owners of multi-residential apartments with six or more rented units must refund 75% of any successful tax appeal judgments to their tenants. Owners must also turn over 75% of any refund received as a result of litigation where the owners show that the Township failed to provide a municipal service for which the owner incurred costs or paid taxes. Under the Ordinance, the owners may retain the remaining 25% to offset expenses of obtaining the relief. In addition, where taxes are reduced without litigation below the level paid for the year 1990, the owner must grant the tenants 100% of such decrease by crediting the full amount of the reduction against the next six monthly rental payments or by paying the tenant directly. Originally exempted from the rebate requirement were "[o]wner-occupied two- and three-family dwellings and dwellings with less than six (6) rented units." The Township amended this provision so that only owner-occupied two- and three-family dwellings would be exempted.
On April 11, 1991, plaintiff Property Owners and Managers Association (POMA) filed a complaint in lieu of prerogative writ seeking various forms of relief, including a declaration that the Ordinance was unconstitutional. It also sought compensatory and punitive damages and attorney fees pursuant to 42 U.S.C. § 1988. After defendants filed their answer, POMA filed a motion for summary judgment requesting the court to declare the Ordinance unconstitutional on equal protection and due process grounds. POMA also asserted that the Ordinance was invalid because it exceeded the powers granted to the Township.
On December 13, 1991, the Law Division judge declared the Ordinance to be unconstitutional. On March 9, 1992, an order was entered memorializing this oral decision. Thereafter, the Law Division judge granted defendants' motion for a stay of judgment.
Defendants filed a notice of appeal. Plaintiff responded with a motion to dismiss the appeal on the basis that the order did not dispose of all issues. We granted plaintiff's motion to dismiss the appeal.
Defendants then moved in the Law Division to dismiss all damage claims on the basis that POMA was a non-profit unincorporated association representing apartment owners and could not seek damages on behalf of its individual members. Plaintiff filed a cross-motion seeking permission to file an amended complaint naming the individual members of POMA as additional plaintiffs.
On May 10, 1992, the court entered an order granting plaintiff's cross-motion to file an amended complaint. The judge severed the damage claims from the constitutional issues and certified the order declaring the Ordinance unconstitutional as a final judgment pursuant to R. 4:42-2. Defendants filed a notice of appeal on May 20, 1992. We now affirm the order voiding the Ordinance.
In the mid-1960s, approximately twenty-five garden apartment complexes were constructed in the Township. These garden apartments ranged in size from 150 to 1000 units. POMA represents the owners of the garden apartments and their interests in approximately 6,788 rental units.
In Parsippany Hills Assocs. v. Rent Leveling Bd., 194 N.J.Super. 34, 476 A.2d 271 (App.Div.), certif. denied, 97 N.J. 643, 483 A.2d 169 (1984), we outlined the Township's history of rent control. In April 1985, following a non-binding municipal referendum, all rent control in the Township was abolished, including a provision requiring tax reductions or rebates to be shared with tenants. Since 1985, rents have been unregulated.
In the preamble to the new Ordinance, the Township sets forth its reasons for enacting "Subchapter 10-10 entitled 'Tax and Rental Rebates.' "
WHEREAS, as a result of a municipal referendum held on April 16, 1985, the Township's rent control ordinance was abolished, including those provisions which provided for tenants to share in tax reductions or rebates; and
WHEREAS, in the ensuing years without rent control being imposed rents have risen on the average of approximately 8% per year in the Township's 27 garden apartment complexes, some of which have been converted into condominiums while taxes have risen on an average of 5.16% (not including fire district taxes) per year over the same time period or more specifically on a year-to-year basis as follows:
% Rent Increase % Tax Increase
1985 8.5% (1.3)%
1986 8.5% 11.2%
1987 13.5% 1.9%
1988 7.0% 7.6%
1989 7.0% (1.4)%
1990 4.0% 10.4%
WHEREAS, it is generally accepted as a matter of public policy that tenants pay taxes whether directly or indirectly, and this principle has been the basis upon which the Tenants' Property Tax Rebate Act, N.J.S.A. 54:4-6.2 et seq. was adopted in 1976 and the basis upon which the courts of this State for nearly 20 years have upheld municipal ordinances which require owners of multifamily rental complexes to share with their tenants the benefit of real property tax reductions effectuated either by way of property tax relief programs or by way of successful tax appeals. (See Inganamort v. Bor. of Fort Lee, 120 N.J.Super. 286, 301-302 (Law Div.1972); aff'd 62 N.J. 521 (1973) (50%); Leone Management Corp. v. West N.Y. Bd. of Comm'rs, 130 N.J.Super. 569 (App.Div.1976) (75%) and Parsippany Hills Associates v. Rent Leveling Board, supra (75%); and
WHEREAS, during the campaign conducted by the Parsippany-Troy Hills Property Owners Association known as POMA for the successful repeal of the Township's rent control ordinance, there was an implicit, if not explicit, representation by the owners of the various garden apartment complexes that if rent control was abolished, the owners would not file real property tax appeals, a representation accepted by the Mayor and other elected officials, who then endorsed the concept of eliminating rent control with the thought that the Township would not in the future be pressured financially with tax appeals because the owners would be able to achieve economic rents; and WHEREAS, for a period of years, the owners of the garden apartment complexes adhered to their representation and no significant number of tax appeals were filed for the years 1986, 1987 and 1988, but in 1989, all of the garden apartment complexes, represented by POMA as well as others, filed tax appeals and have now routinely done so for the year 1990 and will probably do so for the year 1991; and
WHEREAS, none of these tax appeals nor has a suit involving solid waste collection yet been adjudicated, but if in fact the owners are successful to the extent represented by their attorneys, they will receive an enormous windfall in terms of tax refunds; and
WHEREAS, it cannot be effectively argued that in light of the fact that for five years the property owners have not had their rent increases limited by regulation, that all costs for solid waste collection and real estate taxes paid by the property owners have been indirectly paid by the rents collected from the tenants and not from the owners' capital or equity; and
WHEREAS, it would be inequitable not to require the owners to permit the tenants to share in any tax rebates or other refunds received from the Township that result in the refund of monies which indirectly represents the refund of rents; and
WHEREAS, the garden apartment complexes, which are represented by POMA have also instituted litigation entitled, Property Owners and Managers Association v. Mayor & Town Council of Parsippany-Troy Hills and Township of Parsippany-Troy Hills, Docket No. MRS-L-840-90, in which they seek to compel the Township to refund to them either the cost of solid waste collection incurred by them or taxes paid to the Township allegedly for solid waste collection, but for which POMA alleges the service has never been made available.
Section 10-10.6 sets forth the penalties an owner will incur for refusing to remit 75% of tax rebates to tenants.
Failure of any landlord to comply with the terms of this section, namely to make the refund to the tenant in one of two ways set forth above, shall be a violation of this ordinance and shall subject the landlord to a fine of $1,000.00 and/or thirty (30) days in jail. Failure to refund to each or any tenant, as specified, shall be considered a separate violation of this ordinance.
Section 10-10.7 provides a "hardship" exception to the above penalties.
In the event that a landlord shall believe that Sections 10-10.3 and 10-10.4 creates a hardship in that a 25% allowance for expenses for processing appeals and other types of litigation is inadequate, may upon written notice to all its tenants, apply to the Township Council for relief on the basis that the allowance for expenses is inadequate.
Plaintiff asserts that the Ordinance was enacted because of litigation...
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