Appellate Division Rules That Municipalities Cannot Mandate Licensure of Apartments for Rentals of 175 Days or More

The Appellate Division of the New Jersey Superior Court issued a long awaited decision in Timber Glen Phase III v. Township of Hamilton, reversing a trial court ruling that allowed a Hamilton Township (Atlantic County) apartment licensure ordinance to stand. At dispute in the case was a licensing scheme which imposed an annual $65 per unit licensing fee on owners of apartments in the township. In this long awaited decision, the appellate division sided with the apartment firm, Timber Glen, as well as the New Jersey Apartment Association, New Jersey Builders Association, and the New Jersey Realtors, who each filed an amicus brief and argued before the court. Timber Glen and the amici had argued that a 1998 statute limiting the licensure of apartments to leases of less than 175 days (seasonal rentals) was dispositive and that Hamilton exceeded its statutory authority when it required owners of non-seasonal rentals to obtain a license and pay a fee.

 

In its decision, the appellate court looked at the bill statement of the 1998 licensure statute, which stated that the “bill would limit the authority of a municipality to license the rental of commercial and residential real property” and “would effectively limit that authority to seasonal leases, such as weekly rentals in shore municipalities,” and concluded that it “serves as powerful evidence of the objectives and intentions of the Legislature with respect to licensing residential units.” Additionally, in weighing an older and broader grant of licensing authority against the 1998 statute, which the township relied upon to make the argument that a municipality could license apartments, the court applied the principle “expresso unis est exclusion alterius,” or “the inclusion of one excludes the other,” writing, “we understand the very specific addition of [the subsection added by the 1998 amendments], which limits licensure to residential rentals of ‘less than 175 consecutive days,’ precludes licensure of residential rentals for 175 days or more.” This 1998 amendment, the court wrote, “must be considered purposeful and made while cognizant” of the older and broader grant of licensure authority. Accordingly, the court ruled that “the Legislature chose to limit municipal licensing authority to short-term lease arrangements” and ruled that the Hamilton ordinance mandating licensure of leases of more than 175 days is ultra vires, i.e. outside the municipality’s authority, and is therefore unenforceable.

 

The New Jersey Apartment Association joined the case as amicus curiae in support of the position of the apartment firm, Timber Glen. NJAA was represented by Sean A. Smith, Esq., and Charles X. Gormally, Esq., of Brach Eichler LLC. Many municipalities have adopted licensure schemes in efforts to boost nontax revenues. These ordinances increase costs for apartment firms and are ultimately passed on to residents in the form of increased rent, decreasing the affordability of rental housing.

 

Click here for the complete decision.