Landlords vs. tenants
Rent control battle will rear its head…again
by Timothy J. Carroll
Reporter staff writer
May 02, 2010 | 7191 views | 3 3 comments | 31 31 recommendations | email to a friend | print
AMENDMENTS – The council may consider new amendments to the town’s 1973 Rent Control Ordinance, and both sides agree that at least some changes are needed. Being discussed right now are statutes of limitations for determining legal rents, and possible vacancy decontrols.
AMENDMENTS – The council may consider new amendments to the town’s 1973 Rent Control Ordinance, and both sides agree that at least some changes are needed. Being discussed right now are statutes of limitations for determining legal rents, and possible vacancy decontrols.
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Hoboken’s Rent Control Ordinance has restricted landlords from hiking rents since 1973, but a group of property owners in town recently has been battling in court to change some aspects of the law.

In one corner, tenants say rent control enables a community to be diverse and allows middle-income residents to remain in town as prices on market-rate living spaces climb.

In the other corner, rental property owners want to make a profit off of their investment and don’t like the idea that tenants may be getting expensive settlements for rents that were incorrectly calculated in years past.
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“This is a mess of proportions I’ve never seen in rent control.” – Charles Gormally
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The ordinance and its enforcement have caused many an emotional tug-of-war over the last 37 years, and related issues are about to be considered again by the City Council due to landlords’ recent court cases.

Class action lawsuit

The Mile Square Taxpayers Association (MSTA), a local group of property owners, says that some landlords are being held liable for years of allegedly illegal rents that they claim were being calculated “arbitrarily” by the city.

They also say that people buying property in Hoboken can be held accountable for mistakes past landlords made.

A class action lawsuit filed this year by that group, on behalf of all of the rent-control property owners in Hoboken, claims the law was administered unconstitutionally in the 1980s, which affects the rents they can charge today.

As a result, “This is a mess of proportions I’ve never seen in Rent Control,” said Charles Gormally, the Roseland, N.J.-based lawyer for MSTA who is known statewide for arguing for the rights of property owners. “[The city is] going to pay millions of dollars as a result of this lawsuit.”

Since there is no statute of limitations on rent gouging, some tenants are being awarded over $100,000 when they challenge past overcharged rents.

One thing the landlords are particularly alarmed about: Even if a landlord just bought the property and was not around for those past rents, that landlord is still accountable for past damages.

While the MSTA is currently focusing on problems with rent calculations and the statute of limitations, they eventually would like to see landlords allowed to raise their rents with no limit after a current tenant leaves, said a group representative.

How it applies

Hoboken’s Rent Control Ordinance limits how much landlords can raise the rent each year on rental apartments. Usually the limit is 2 or 3 percent, based on the rise in the Cost of Living index.

A state law passed in 1987 exempted new construction from rent control, as long as the owner applies for an exemption before the building is occupied.

Landlords can apply for various exemptions, such as a 25 percent “vacancy decontrol” increase once every three years when the apartment is vacated legally.

Landlords can also apply to the city for other exemptions if they undergo a financial hardship or if they make significant upgrades to the premises. They can also charge tenants for a portion of tax increases and water bills. (For more, see sidebar.)

Fraudulent activity?

Cathy Cardillo, a Hoboken-based attorney and rent control defender, has been trying to intervene in the court matter and make her case that the landlords “deliberately avoided” the law and should be held accountable.

“These landlords actively committed fraud,” she said last week. “And now they’re blaming bad past practices.”

To even further complicate the matter, a state court decision in 2000 equates charging illegal rents with a violation of the Consumer Fraud Act. As a “per se” fraud violation, the state does not need proof of fraud, just proof that rents were illegal. Because of this, landlords found to be overcharging on rent are liable for up to three times the damages, in some cases upwards of $100,000 multiplied by three.

Cardillo and other tenant advocates claim landlords were willing to risk overcharging in the past until the stakes were raised by the fraud violation.

As far as new landlords being held accountable for illegal rents charged in the past, Cardillo said when buying the property, the onus is on the prospective buyer to find out if the rents were illegal before making a purchase.

It may be hard for prospective buyers to request the status of rents in a building they intend to buy. But they could ask the current property owner to get the information from the city and give it to them.

Cardillo said the vast majority of rent determinations done by the city’s Rent Control office are actually done on behalf of the landlords/property owners, not the tenants.

Tenants often fear retribution from landlords if they challenge the rent, Cardillo said.

City Council plans changes

A subcommittee of the City Council created solely to handle the issues of rent control held a series of meetings beginning last fall to examine the law and its administration.

Advocates from both sides of the issue submitted testimony, recommendations, and personal opinions to the committee and the three-member panel is now preparing to recommend amendments to the ordinance for a council vote in the near future.

According to Councilwoman Beth Mason, who is chairing the committee, three recommendations were submitted to the city’ attorney for vetting a month ago.

The potential changes have not been made public yet, but last week Mason gave the Reporter a partial overview.

The first recommendation, she said, is to clarify the wording of the ordinance and bring the legal definitions in the city’s law in line with definitions used in the state’s rent control laws.

The specifics of these changes will determine how advocates on both sides react to the changes. Both sides agree that the law can be better worded.

How long are landlords liable for the past?

The second recommendation, Mason said, is to implement a statute of limitations on rent control regulations.

Mason has recommended six years, which is the typical term of limitation for legal contracts.

Most importantly, the limitation will minimize the liability for landlords, which is now unlimited. In 2005, the City Council approved a two-year statute of limitations, but then repealed the amendment when local rent control activists like Dan Tumpson collected more than 1,500 signatures in support of a voter referendum to overturn the council’s vote.

Tumpson’s move mirrored similar moves over the last 30 years, when Hoboken governing bodies have attempted to modify the law and were beaten back by advocates who held petition drives.

Now that the question of the limitations is resurfacing, and Tumpson and other rent control advocates want at least one other component to any limitation. Tumpson and Cardillo agree that tenants should be notified each year of their rights under rent control, the process for determining a legal rent, and when their rights expire, i.e. after six years, as proposed by Mason.

Making tenants – especially newcomers to town – aware of the laws is something that has long been championed by tenant advocates, but right now, most newer tenants have no idea if they are covered, or what the laws are.

By state law, any landlord who rents to a tenant in Hoboken must provide that tenant with a booklet about their renting rights. However, there is no enforcement to check whether landlords comply.

Cardillo said that if a tenant is being unwittingly overcharged, then they should not lose their right to recoup that money; once they are made aware of their rights and when those rights expire, Cardillo said, it is incumbent upon the tenant to do something.

Proof of increases

Since it has not been cleared by the legal department, Mason could not speak about the third recommendation to the council, but Councilman Ravi Bhalla, who is also a lawyer who formerly represented the city’s Rent Leveling Board, also sits on the committee. He said he will recommend at least one other change.

Some landlords claim that 25 percent vacancy decontrol increases awarded in the past are not being recognized now.

The legal rent increases are granted when an apartment is vacated, as long as it was vacated freely by the tenant and not under duress or harassment. Landlords claim that because a certain form – a vacancy decontrol form – has not been kept in the file at the Rent Control office, they are now losing the benefit of the rent increases retroactively and unfairly.

Because these past increases are not being recognized, the present-day legal rent is severely reduced, according to the landlords.

There are also claims that the Rent Leveling Board, who hears appeals of rent control issues, had in the past accepted other proof that an apartment was vacated, such as a new lease, rather than the forms.

Bhalla said he hopes the council will amend the law to accept alternative proof of vacancy for landlords, but only if the landlord also provides proof that the former tenant left the apartment freely.

Would like unlimited increase

Rent control defenders are somewhat worried that the landlords will go after other issues related to rent control other than just the statute of limitations.

In fact, MSTA and the landlords funding the organization – as part of their lawsuit – are asking the city to stop making rent calculations until the law is changed or their lawsuit is finalized.

Another change that the MSTA is considering recommending to the council is to take away the limit of an increase granted during vacancies, according to MSTA representative Ron Simoncini.

Then, landlords could charge any amount for their apartments once a tenant leaves. Currently, there is a vacancy decontrol limit of 25 percent every three years.

Tenant advocates have argued that if landlords could charge any amount for their apartments once a tenant leaves, it would give them a lot of incentive to find ways to push the tenants out, by harassment, not making repairs, or other ways. However, the city requires that the vacating be voluntary, so tenants have to certify when they leave that the vacancy was no forced or due to harassment, in order for landlords to raise the rent.

Also, the units, once decontrolled, would no longer represent affordable housing, but rather market-rate housing.

Legalizing potentially illegal rents?

Another change the MSTA wants would limit the duration of look-back that the city uses to determine a legal rent. The law currently allows the city to look back to 1973 (when the law was enacted) to calculate the current legal rent, although records for most apartments begin in 1984 when a citywide registration was conducted.

Gormally said this should be reset to 2006 or so, but Cardillo said this would automatically legalize potentially illegal rents.

Tumpson said he does not want to see these changes because they will hurt the tenants. He also hopes the council will hold a special meeting to discuss any potential changes before putting the amendments on an agenda for a vote.

“We’ve gone out in the street something like five times for this,” he said. “If they weaken the rights of the tenants, we are going to have to go out on the streets again.”

Those backing the landlords, like Gormally, say the council may lack the “political courage” to effect necessary changes because it may mean ruffling the feathers of the tenant advocates.

Timothy J. Carroll may be reached at tcarroll@hudsonreporter.com.

SIDEBAR

What is rent control?

Hoboken’s Rent Control Ordinance, passed in 1973 and revised several times since then by the City Council, limits how much landlords can raise the rent each year on rental apartments, with some exemptions.

A state law passed in 1987 exempted new construction from rent control, as long as the owner applies for an exemption before the building is occupied.

The city has 8,000 units registered in their system, according to Rent Control Officer Suzanne Hetman.

In Hoboken, rent controlled units are usually limited to a 2 or more percent rent increase annually, determined by the annual rise in the Cost of Living Index.

Landlords can apply for a 25 percent increase once every three years when the apartment is vacated legally, or when they have made upgrades to the premises.

Also, landlords can apply to the city for rent increases for such things as tax hikes, utility costs, and general hardship, meaning they are not getting a fair return on their investment.

The city does not automatically monitor rent increases to rent controlled apartments; rather a tenant must request a free rent calculation at City Hall.

If a renter thinks their rent is inordinately high, or they suspect price gauging, they can call the city’s Rent Control Office and request a rent calculation. Tenants can find out what they should have been paying, if they were being overcharged, and get reimbursed for years of overcharges from their landlords.

Government funded or regulated housing like the Marine View properties or the projects falls under separate laws. Commercial property and student housing is also exempt.

For more information or to find out if your apartment is rent controlled, call the city Rent Control office at (201) 420-2396. – TJC

Comments
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Fairplay1
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August 18, 2010
Interesting to note that a board member of Mile Square Taxpayer's association, Tom Foley, was just arrested by the FBI two weeks ago for for defrauding a bank of millions of dollars. http://hoboken411.com/archives/48248

with credentials like that, I don't need to hear anything more.
TommyLover
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May 03, 2010
Why do they call themselves a taxpayers association? Their application for membership asks for dues equal to "$100 per unit up to $30,000." Is this group open to all or just all developers? They list a budget of $130,000 for 2009 with board members seeding $65,000 (these figures are from their website). How are middle and working class tenants going to defend themselves from this group? It's a pretty unfair fight. This article makes it clear MSTA has lots of access to the our council. Good luck tenants - it would be nice to see Hoboken remain economically diverse - I know my neighborhood has gone pretty suburban white bread over the years. Will Hoboken become a city governed by the well-off for the well-off? Hope not.

GaryGar
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May 03, 2010
Thank God this sort of reporting still exists in Hoboken - getting into some depth rather than just reporting on day-to-day meetings like some of the more recent internet news sites. We clearly need both here, and this is a good story on an issue that is sure to be explosive. I hope to see some honest debate on it now that it's in the forefront. I have seen anonymous signs around town from tenants. I know there must be more to say. Clearly this is a thorny issue that's been around for a while and needs honest discussion.