Whenever, during the existence of a housing state of emergency, a landlord shall determine that reasonable and necessary operating expenses (computed in accordance with the provisions of this chapter) are greater than 60% of the gross maximized annual income of a housing space or dwelling unit in common ownership and operation by the same landlord, then such landlord may make application to the Board for an increase in rent on account of hardship.
A. Hardship application.
(1) The landlord shall file a hardship application with the Board as provided in this section, together with all certifications required herein, including a certification by the landlord and/or his agent to demonstrate that the landlord is entitled to an increase in rents based on hardship.
(2) The application shall include the amount of increase and percentage of increase requested, together with all necessary information and documentation to support the request for a hardship increase, including but not limited to:
(a) Documentation showing at least three years of income and expenses;
(b) Three years of federal and state income tax returns;
(c) Certified financial statements of the landlord; and
(d) Such other books, records and reports as the Board shall request in order to properly consider the application.
(3) At the time the landlord files a hardship application in accordance with this section, the landlord simultaneously shall notify, in writing, all tenants affected by the hardship application that such application has been filed and is available to any tenant requesting the same.
(4) A landlord's application filed pursuant to the requirements of this chapter shall be accompanied by an application fee as provided in Chapter
111, Fees.
(5) Escrow deposit.
(a) A hardship application filed pursuant to this chapter shall be accompanied by an escrow deposit computed by multiplying the number of proposed affected housing spaces by $5 per housing space, but in no event shall the escrow deposit be less than $1,000;
(b) The total escrow deposit collected pursuant to Subsection
A(5)(a) above shall be placed in an escrow account by the Township Clerk, to be applied to the payment of any services rendered by an accountant, auditor, real estate appraiser or other professional retained by the Board pursuant to the provisions of this chapter to aid or assist in the Board's review and consideration of a hardship application submitted pursuant to this section; and
(c) The balance, if any, of the amount deposited in the escrow account after payment to such persons shall be returned to the party depositing the money in escrow upon final decision of the Board.
B. Landlord certification. In any application for an increase of rent on the basis of hardship, the landlord shall specifically certify that:
(1) The dwelling and all housing space or dwelling units therein are in a safe and sanitary condition and in substantial compliance with all local and state health and building codes. By way of verification as to compliance with the aforesaid codes, the applicant shall, within 30 days of the date of filing of any application for relief pursuant to this section, submit a report of inspection conducted by the Rent Control Officer. The aforesaid report of the Rent Control Officer shall set forth either that the dwelling or dwelling units are in substantial compliance with the Regulations for the Maintenance of Hotels and Multiple Dwellings or shall set forth the circumstances and regulatory provisions serving as the basis for noncompliance with the aforesaid regulations;
(2) The landlord is in substantial compliance with all state and local laws pertaining to tenant's rights; and
(3) All rentals collected and charges imposed, including those arising out of any nonresidential use, result from arm's-length transactions.
C. Compliance by landlord. If, at any time during the course of consideration of an application for an increase in rent due to hardship pursuant to the provisions of this section, the Board shall determine that the landlord is not in substantial compliance with any or all of the above, the Board may temporarily withhold further consideration of the application for a hardship increase until such time as the landlord has corrected any such deficiency. The time period for the Board to make a decision as set forth in Subsection
F below will be extended if the Board makes a determination that the landlord is not in substantial compliance with the above provisions.
D. Gross maximized annual income. In computing gross maximized annual income under this chapter, the following limitations shall apply in all cases:
(1) Income and expenses arising out of a nonresidential use, including that for professional or commercial space, shall result from arm's-length transactions; and
(2) No loss caused by a nonresidential use may be considered.
E. Reasonable and necessary operating expenses. In computing reasonable and necessary operating expenses under this chapter, the following limitations shall apply in all cases:
(1) Property taxes shall be limited to amounts actually paid, including those in escrow for appeal;
(2) Repairs and maintenance shall be reasonable and necessary;
(3) Legal and auditing expenses shall be limited to reasonable and necessary costs of the operation of the property and shall be itemized on the application; provided, however, that no legal expenses or auditing expenses shall be allowed as a deduction which do not directly result from the landlord-tenant relationship;
(4) Management fees shall be limited to actual services performed in the rental of residential housing space and shall not exceed 6% of gross maximized annual income;
(5) Salaries not included in management fees shall be limited to actual services performed and amounts for similar positions in the area, including rental value, if included in income and expenses and wages and benefits paid;
(6) Advertising expenses shall be limited to actual costs that are reasonable to ensure occupancy and personnel employment needs of the landlord;
(7) Utilities, including but not limited to gas, electric, water and oil, shall derive from arm's-length transactions, and the landlord shall demonstrate that all reasonable efforts to conserve energy and fuels have been used;
(8) Insurance shall be prorated over the duration of any insurance policies and shall not include the landlord's life, medical or other personal policies;
(9) No penalties or fines of any kind, nor interest on such penalties and fines, shall be allowed;
(10) No allowance shall be made for debt service (principal and/or interest) in the computation of operating expenses, except that as permitted by §
189-11F.
F. Public hearing; time of decision.
(1) The Board shall hold a public hearing within 45 days of receipt of a completed hardship application, or 30 days in the event of federal- or state-involved housing.
(2) The Rent Control Board Secretary shall notify the landlord of the date of public hearing at least 14 days before the date set by the Board. At least 10 days before the hearing date, the landlord shall provide, in writing, notice of said hearing to all tenants affected by the hardship application.
(3) If, due to no fault of the landlord, the Board cannot hear the application within 45 days and reach a determination 30 days thereafter, the landlord shall be entitled, upon notice to the tenants affected, to collect the amount requested, provided that the amount does not exceed 10% above the current rent. If the amount exceeds 10% above the current rent, the landlord shall be limited to only 10% until the determination has been reached by the Board; provided, however, that the Board may proceed to stay the increase by resolution if, in fact, the delay has been contributed to or caused by the conduct of the landlord or if the landlord agrees to such stay.
(4) Any increase paid by the tenant pursuant to Subsection
F(3) above shall be paid without prejudice, and if the Board determines that a lesser amount of increase or no increase should be allowed, the tenant paying the increase shall be permitted to an immediate deduction or offset against rents becoming due and owing equal to all excess rents paid after written notice to the landlord of the amount involved.
(5) If, after a full hearing, the Board shall determine that the landlord is in full compliance with the provisions of this chapter, it shall permit a rental increase sufficient to establish the sixty-percent relation of fair net operating income, and any increase granted under a fair net operating income formula shall be prorated to all of the units of housing space within the dwelling based upon the number of rooms per unit or unit space.
G. General limitations.
(1) A hardship increase shall be for a period not less than one year;
(2) A hardship increase shall be paid in equal monthly payments for the term approved by the Board and shall be payable on the same date as the payment of the rental charge;
(3) No more than one hardship increase shall be granted in any one twelve-month period, except in demonstrated extraordinary circumstances beyond the landlord's control occurring subsequent to an approved hardship increase;
(4) No hardship increase shall be granted for any housing space if the dwelling or any part thereof shall be subject to violations issued by any government agency prior to the filing of the application seeking the increase; provided, however, that the Board may waive this provision upon a showing by the landlord that the landlord has attempted to rectify the violation but has been unable to do so due to conditions beyond his reasonable control; and
(5) A hardship increase shall not be considered rent for purposes of computing rent or rent increases under §
189-8 or
189-9 nor for the computation of rental security deposits.