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Apartment Owners Score a Win over Rent Control

Years of battling to loosen a highly restrictive law result in a ballot-box victory for landlordsMorristown-property owners in Morristown have won a major victory through a ballot issue that overhauls the town’s rent-control laws. This past election day, residents passed by a 60%-to-40% vote a referendum giving property owners a free hand to increase rents whenever a new tenant moves in—a system called vacancy decontrol.

That measure, sought by the Morristown Property Owners Association, ended two decades of efforts to change the rules.

This may be the first time in New Jersey that an ordinance authorizing vacancy decontrol was passed by referendum, says Charles Gormally, a partner at Roseland law firm WolfBlock who represented the apartment owners. Gormally’s client was a group of a half-dozen large owners of multifamily properties, including the Kushner group’s Westminster Management of Florham Park, and Kriegman & Smith of Roseland. Together, they have about 2,500 rental units in Morristown across 30 properties.

Morristown is among some 90 municipalities in the state that have rent-control laws. These laws cap the size of allowable annual increases; in Morristown the limit is 4% and applies to buildings put up before 1981. But most rent-control laws include vacancy decontrol. Morristown was one of 22 towns that don’t allow property owners to increase rents when tenancy changes.

Gormally says a rent-controlled, two-bedroom apartment in Morristown fetches landlords between $800 and $950 a month while the prevailing market rate would be between $1,300 and $1,400. While the new rule will protect current tenants and their dependents, landlords will be allowed to raise rents to market levels when vacancies arise. About one-fifth of the rental apartments in Morristown have vacancies every year.

The vacancy-decontrol law was badly needed because landlords weren’t able to pass on rising operating costs, especially fuel and insurance bills, says Jeffrey Smith, vice president of Kriegman & Smith. Now, he says, “We can make capital improvements to the properties, safe in the knowledge that over time these investments will be safe.” Kriegman & Smith has 140 rental units in Morristown and some 4,000 in the state. Smith says the day after the election, his firm began moving on plans to replace windows, storm doors and sliding doors that will cost “hundreds-of-thousands of dollars.”

Morristown’s rental-apartment owners had tried unsuccessfully over the years to procure a vacancy-decontrol law. Three years ago they filed a lawsuit that is pending at the Morris County Superior Court. Five months ago, in preparation for the referendum, they took their case to tenants in a campaign that included newspaper and TV ads, posters and meetings.

Opposition came from the Morristown Tenants’ Association, which criticized the vote, saying the outcome would benefit only the landlords. “I’m disappointed, and in the long run I think the tenants will realize it’s a mistake,” Nancy Jemas, a former co-chairwoman of the association and a tenant in a Morristown apartment, told the Daily Record.

Gormally says the landlords’ ballot question won support from both renters and owner-occupants of single-family homes. He says many tenants who had been opposed to decontrol changed their minds when they realized that it would not affect their existing situation. Meanwhile, homeowners voted in favor hoping that rising rents would increase the value of their dwellings.

“When property values rise, you spread out the tax burden throughout the town, so it’s a relief for owners of single-family homes,” says Gormally. He estimates the property tax savings of about $350 will annually accrue to such homeowners over time.

Landlords have been working at securing vacancy-decontrol in other towns as well. Teaneck enacted a decontrol law in October; Gormally is representing landlords in a lawsuit challenging rent-control laws in Hopatcong.

Smith says va-cancy-decontrol laws don’t necessarily have the effect of pushing up rents, and that landlords are still bound by the dictates of supply and demand. “In certain areas, especially in parts of Pennsylvania, we will lower rents,” he says. “We don’t take the maximum amount of increase allowed annually if the market doesn’t demand it.”

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