Palisade West Associates v. Aranow , 119 N.J. Super. 322 ( 1972 )

Huot, J. D. C.

This is a landlord-tenant action wherein plaintiff seeks possession on the grounds of nonpayment of rent. Defendants concede that the rent reserved under a lease dated March 1, 1973 was not paid for the months of April and May 1973. However, defendants did tender for the months in question the amount of the rent reserved in their prior lease which expired March 31, 1973. The prior rent was $430 a month. The new rent is $476 a month. Additional parking charges are not involved in this contest.

The tenants raise the following defenses:

1. The landlord failed to comply with the notice requirements of section 301.501 et seq. of the rules and regulations of the Cost of Living Council. 6 CFR § 301.501 (12/30/71).

2. The rental increase charged by the landlord is in excess of that permitted by said rules and regulations.

3. They should be allowed a set-off against the rent for interest due them, which accrued on their security deposit under the expired lease.

The landlord admits that the notice to the tenants does not strictly comply with section 301.501 et seq., but argues that the section was complied with in substance if not in form. It also contends that it strictly followed the formula prescribed to arrive at the new rental of $476 a month. In regard to the third defense, the landlord contends that a tenant is not entitled to set-off interest due on money deposited as security in an interest-bearing account, as required by L. 1971, c. 223.

The notice given by the landlord and admittedly received by the tenants was dated January 26, 1972 and reads as follows:

OFFICE OF THE UNDERSIGNED

Suite 1002

147 West 42nd Street

New York, N. Y. 10036

Phone (212) 524-0563

Dated : January 26, 1972

Mr. (s) Martin Aranow Apt. 6-D

2185 Lemoine Avenue

Fort Lee, N. J. 07024

Dear Mr. Aranow:

As of the 29th of December, 1971, a statement was issued by the Price Commission outlining the procedures and regulations which are to govern rent increases during the President’s Freeze.

Please, therefore, consider this as notification that as of April 1, 1972 , your new rental will be $476.00 , and is within the allowed percentage of 8% plus 2.5% permitted within your ¡building.

Old Rent: $430.00

Increase: 46.00

New Rent: $476.00

The apartments for which renewals were written during the base rent period and upon which the computations for Bridge Plaza Towers were determined, are as follows:

4-H, 3-J, 8-J, 4-K, 4-Ij, 7N

All apartments wliich rent for $500.00 or more have been exempted from the above controls. For your further information, we have attached a copy of statement issued by the Price Commission.

Very truly yours,

FORT BRIDGE COMPANY

A. Stern

AS/ag

Enel.

Attached to said notice was a photostated article entitled “Price PaneFs Statement on Rules on Rent,” and contains the sub-legend “Special to The New York Times.” It purports to be from Washington on December 30. At the beginning of this article this introduction appears: “Following is the text of the supplemental guidance on rent regulations issued today by the Price Commission.” There then follows a press release explaining the action of the Price Commission, a copy of which is annexed hereto.

Section 301.502, “Notification”, provides in pertinent part:

In the case of a proposed rent increase to which the present lessee of the residence or other real property would be subject—

(a) Requirement of 30-daps’ notice.

The lessor must notify the lessee of the proposed rent increase at least 30 days before the date it is to become effective;

(b) Contents of notice. The notice shall be in writing and shall set forth —

(1) The amount of the monthly rent before and after the proposed increase;

(2) The percentage increase and dollar amount of the proposed increase;

(3) The effective date of the proposed increase;

(4) The amount of the proposed increase which is attributable to capital improvements, State and local real estate taxes, and State and local fees, levies and charges for municipal services, and any increase allowable under § 301.102(a) (1) ;

(5) The base rent and an explanation of the manner in which the base rent was determined, including identification of units involved and dates and amounts of transactions where applicable;

(6) The method of computation of the proposed increase; and

(7) The following statements:

(A) You have the right to examine the documentation which supports this proposed rent increase in order to satisfy yourself that the proposed rent increase is in accordance with the rent regulations prescribed by the Price Commission. This documentation is located at _______________________________________________: and may be inspected upon request between the hours of .......... through ......... on -------------------------------

(specify days of week).

(B) If you do not understand the basis for this increase or believe that the increase is not allowable under the rent regulations of the Price Commission, advise us and we will arrange a suitable meeting time with you at a location convenient to your residence to discuss the proposed increase and explain its justification.

. (C) It is hereby declared under the penalties of perjury that the foregoing statements and facts are true to the best of my (our) knowledge and belief; and that the increase in your rent is not in violation of the Economic Stabilization Regulations.

The first question presented to the court is whether the letter of January 26, 1972 and the photostatic attachment comply with the requirements of section 301.502. This court has authority to entertain the defense of noncompliance with Price Commission regulations. Brookchester Inc. v. Matthews, 118 N. J. Super. 565 (Cty. D. Ct. 1972).

Subsection (a) and subdivisions (1), (2) and (3) of subdivision (b) were complied with by the notice. The notice was given January 26, 1972, which is more than 30 days before the increase would become effective. It was in writing. It set forth the amount of the rent before and after the proposed increase. It set forth that the increase was a total of 10.5% (8% allowed percentage and 2.5% permitted within that building) and the dollar amount of the increase.

However, the notice did not set forth the information required by subsection (b) (4). Nor did it set forth the base rent nor the manner in which the base rent was determined; nor the dates and amounts of transactions involved in the determination as required by subsection (b)(5), although it did identify certain units used in such determination (only one of which appears to be proper for such use).

Further, the notice did not set forth the method of computation specified by subsection (b)(6), nor did it contain the statement which subsection (b) (7) requires.

There is no doubt that the information made obligatory by subsections (b) (4), (5), (6) and (7) of 301.502 was not contained in the notice. The landlord, however, contends that the photostat attached to the notice gives sufficient information to be considered substantial compliance with the regulation, and that subsection (b) (4) is satisfied by the notice stating that the new rent “is within the allowed percentage of 8%, plus 2.5% permitted within your building.”

The 2.5% is allowed by section 301.102. The failure to indicate any increase attributable to “capital improvements, State and local real estate taxes” and the like may be fairly read as negativing any portion of the increase for those items. In this case no claim is made for such increase and, therefore, the failure to include such information in the notice cannot be violative of the regulation.

The determination of compliance with subsection (b) (5), (6) and (7), however, presents a different situation. The photostat attached to the notice explains how to compute an increase in rent, but neither it, nor the notice, tells the tenants that the landlord used such method or what numbers were used in the formula. The photostat sets forth the tenants’ right to question the increase and to see the landlord’s documentation. However, it does not set forth the location of those documents, the times when they are available for inspection, or the opportunity to have a meeting with the landlord. Neither the notice nor the photostat contain a declaration “under the penalty of perjury” as to the truth of the statements in the notice.

Subsequent to the receipt of the notice the tenants wrote the landlord by letter dated February 2, 1972 expressing a belief that the landlord may be in error and requesting to see the rental record books. By letter dated February 7, 1972 the landlord advised the tenants of the availability of the rental books and its willingness to permit inspection by them. Thereafter, by letter dated March 1, 1972 the landlord advised the tenants as follows:

OFFICE OF THE UNDERSIGNED

Suite 1002

147 West 42nd Street

New York, N. Y. 10036

Phone (212) 524-0563

March 1, 1972

Mr. Martin Aranow Apt. 6-L

2185 Lemoine Avenue

Fort Lee, N. J. 07024

Daer Mr. Aranow:

We did make an attempt to determine which leases were signed during the base period and found that the leases which would be eliminated because they may have been signed earlier, would, in all fairness, have to be replaced by others which, although signed during the base period, have a later renewal date.

This would mean going through all the files and the formula determined from such a search would still be an arbitrary one, since the signing dates are not always available. As you can see, it is an impossible situation.

In all probability the percentage rate would not be much different from what we have determined, since increases were made at about the same rate right along.

As you can understand, we are quite anxious to comply with Federal regulations and though the latest rulings are quite complicated and apparently open to interpretation, we feel that our “formula” is an equitable one.

Very truly yours,

PALISADES WEST ASSOCIATES

A. Gellis

AG/s

Enc.

P.S. We are enclosing the lease you requested. Please sign and return with your check to cover additional security, $66.00.

These subsequent communications, the landlord contends, should be considered as supplemental compliance with the notice requirement and a cure to whatever defects may have existed in the original notice. Certainly, all communications were 30 days before the effective date of the rent increase. However, these supplemental advices were the result of the letter of defendants dated February 2, 1972. The court takes judicial notice that the defendant Martin Aranow is president of the New Jersey Tenant Organization and recognizes the validity of his claim, as expressed in the letter of February 2, 1972, that he has “more than an average knowledge of the guidelines.” Defendants’ position and personal knowledge cannot be a determining factor in the interpretation of the rules and regulations, for the law must apply equally to all tenants. What the law requires of a landlord and a tenant must be the criteria, not the personal knowledge of each individual. If a tenant’s familiarity with the requirements were to excuse a landlord from compliance with the regulations, then the landlord’s lack of such knowledge should also excuse him from compliance. Obviously, this may not be.

The notice of January 26, 1972, with the attached photostat, fails to strictly comply with the requirements of section 301.502. Is this failure fatal to a rent increase?

Section 301.501 provides:

No person may increase a rent, with respect to any transaction after December 28, 1971, involving a lease or implied contract of occupancy of a residence or other real property, unless he has complied with this subpart, regardless of whether the increase is otherivise allowable under this part. [Emphasis added]

The sub-part referred to pertains to the procedures for rental increases of which section 301.502 is a part. The underlined words express the policy of the Price Commission and is reaffirmed in section 301.102:

(a) Gene,ral. When a residence or other real property becomes occupied after December 28, 1971, a person may charge, offer to charge, or give notice of intent to charge, a monthly rent in excess of the base rent, after notification pursuant to § 301.501, only to the extent that the monthly rent does not exceed the sum of the base rent, plus * * * [Emphasis added]

The words are clear. There is no ambiguity or need for interpretation. The notice must be given, must contain each element set forth in section 301.502 and must contain the statement in the words required by section 301.502 (b)(7)(A), (B), (C).

This determination makes it unnecessary to consider the other defenses.

The notice given to the tenants herein did not comply with the regulations. The rent increase is invalid. The complaint seeking possession is dismissed without prejudice to the rights of the landlord to seek further compliance with the rules and regulations pertaining to rent increases.

The tenants have deposited the sum of $952 with the clerk of the court pending this determination. The clerk will forward $860 to the tenants' landlord as the rent due for April and May 1972, and return $92 to them.