AvalonBay sues City of Hoboken & their rent leveling board over rent control exemption

AvalonBay is suing the City of Hoboken and their Rent Leveling and Stabilization Board over their rent control exemption after the latter unanimously rejected their appeal in October.

By John Heinis/Hudson County View

“The Property has been exempt from rent control from its conception in the early 2000’s and the City has treated it as exempt since that time,” the 37-page, eight-count lawsuit filed in Hudson County Superior Court on Friday, says.

“Notwithstanding the City’s prior agreements and repeated conduct confirming and ratifying the Property’s exempt status, in 2023, Mayor Ravi Bhalla commissioned a covert investigation — done without any notice to Avalon or any opportunity for Avalon to participate in the process — at the conclusion of which Mayor Bhalla unilaterally declared the Property to be subject to the City’s rent control and rent leveling ordinance.”

The rent leveling board rejected an appeal by AvalonBay, a 217-unit complex located at 800 Madison St., back on October 11th, after determining that they did not file their letter of exemption in a timely manner, as HCV first reported.

This came a little more than two months after five tenants of the AvalonBay filed a lawsuit, where they were represented by the law firm of Hoboken’s tenant advocate, over “unconscionable” rent increase of up to 28.2 percent.

The current lawsuit from AvalonBay says that the city has been involved with the development of the building “since its nascency” and a 2011 settlement agreement between the developer (Frank Raia, who filed for bankruptcy) and the city indicated that the property would consist of 217 “market rate” units.

“In September 2009, during the pendency of its bankruptcy case, the Developer completed construction of a multi-family residential building on the Property. As a matter of law, upon completion of the building, it was ‘exempt’ under the RCEA [rent control exemption law] from the City’s Rent Control Ordinance,” the lawsuit contends.

“In October 2010, the Developer filed with the City its Statement pursuant to the RCEA. The City accepted the Statement without objection and continued to treat the Property as exempt from the Rent Control Ordinance. In April 2013, the City again acknowledged the Property’s exempt status” after an exemption determination by the city.

Through their attorneys, from Greenberg Taurig, LLP and Griffin Alexander, PC, AvalonBay also contends that the city’s rent regulation officer responded to an Open Public Records Act (OPRA) request in November 2013 that indicated there were no records of any rent control violations.

They also assert that a 2022 legal rent calculation request from an AvalonBay tenant resulted in no action since it was deemed to be exempt.

“At no time since the completion of the building on the Property has the City received the annual rent registration statements required of all non-exempt buildings, nor has the City requested that Avalon or the previous owners file such annual rent registration statements or sought penalties for not filing them,” the lawsuit continues.

“The reason, of course, is that the City recognized that the Property is exempt.”

Attorneys for the plaintiff also allege that if the rent leveling board’s decision stands, the value of the property will diminish, as well as noting they have spent $2.6 million in capital improvements – which would not have happened if the building, which was purchased for $129 million in 2016, was subject to rent control.

Furthermore, AvalonBay questions the proceedings from the rent leveling board hearing, claiming they were denied factual information related to the case, further stating that tenant advocate Kevin Weller was “improperly” permitted to speak.

At the hearing, Weller contended that since he was a member of the New Jersey Tenants Organization, he was permitted to speak and the board allowed him to do so.

“Although the City ordinance specifically empowers the Board to incorporate equitable considerations in its determinations, the Board did not consider the plain text of the RCEA, the history of the Property’s exempt status, the City’s acceptance of the Statement, the 2013 Exemption Determination, its own September 2022 actions in acknowledging the exempt status of the Property, or the 14-year history of the Property’s owners not filing annual rent registration statements,” the court filing contends.

“Nor did the Board consider the impact on Avalon which, as a result of, and in reliance upon the City’s own public records and its long history of the treatment of the Property as exempt, purchased the Property at what, had the Property been non-exempt, would be a significantly inflated price.”

They also take umbrage with the fact that the approved resolution did not reference the 2013 exemption determination or the 2022 rent calculation request, also declaring the final determination was political.

“The Mayor’s and the Chair’s position were motivated not by the facts or by the law, but by their respective political aspirations. Indeed, at the time of the October 2023 Hearing, Board Chair Rafi Cordova was in the midst of a hotly contested election for the City’s First Ward Council seat, on which Mayor Bhalla’s control of the City Council was dependent.”

They further state that Board Counsel Ramon Rivera, who also sent a letter in April indicating that his firm had been retained to investigate their exemption, seeking $660,000 in fines for “failing to comply” with their resolution that had not received final approval.

This letter was circulated to media outlets before Bhalla then announced his candidacy for Congress in the 8th District two days later, the same day that the board approved the final resolution affirming their October decision against AvalonBay.

They are claiming breach of contract by the city, estoppel, constitutional violations, including due process, along with the city and board taking arbitrary, capricious, and unreasonable actions (which are also improper).

For these reasons, they seek to make the board’s actions against them null and void, along with costs of suit, attorneys’ fees, and whatever other relief the court deems just and equitable.

A city spokeswoman declined to comment on pending litigation.