HAMILTON TOWNSHIP — In a decision that will ripple through the state, a licensing fee for apartments in Hamilton Township has been ruled improper and unenforceable.
The state Superior Court Appellate Division decision reversed a trial court's decision in a case involving Timber Glenn Phase III LLC. The appellate court determined the town’s licensing fees practice for residential rental property owners was improper and unenforceable.
“If this decision represents the law of the land, then people are going to lose their jobs. There won’t be a need for the program or people like inspectors doing this work,” said township attorney Robert Sandman.
Sandman said probably about 200 municipalities in the state have an ordinance like this. The township’s ordinance was created for the safety of tenants and to protect landlords as tenants were destroying property, he said.
Municipalities across the state have ordinances charging per-unit licensing fees.
These fees were a way for municipalities to enhance their revenue stream and subsidize their expenses in the local building departments, said attorney Charles Gormally, of Brach Eichler, who represented the New Jersey Apartment Association in the appeal. Sandman denied the township was using the fees to add revenue.
“The decision found the state Legislature had not authorized municipalities to charge these fees and municipalities continued to adopt these ordinances across the state,” said Gormally.
The Appellate Division decision concluded the township’s licensing “ordinance falls outside the authority granted to municipal governments under the Licensing Act.”
Timber Glenn Phase III owns apartment buildings in the township’s Mays Landing section with 498 rental units, according to the decision.
Many towns across the state use either licensing or registration ordinances, which can include substantial fees for apartments units, said Gormally.
The Appellate Division decision will negatively affect municipal revenues, but multi-family property owners will see some relief in expenses on licensing fees.
In most multi-family properties, any additional expense incurred by a property owner will ultimately be passed to the tenant, Gormally said.
“If you’re operating a 200- to 300-unit building and you have a $100 licensing fee each year, that’s quite an expense for the property owner,” he said.
The township’s ordinance required the license to be renewed and a $100 per unit fee paid annually. After the first year, that fee was reduced to $85 and now is at $65 after estimated and performance cost reductions. Failure to obtain or renew the license prohibited the owner from renting the unit.
This decision means property owners will be able to stabilize rent in the long term, Gormally said.
He said even though the township tried by adopting amendments to the ordinance to make it less invasive for multi-family property owners, at its core it still charged a per-unit fee.
“The township removed some parts of the ordinance, like the annual inspections and its fees, but left behind the licensing fees that the Legislature never authorized them to charge,” he said.
Sandman said the ordinance by its very terms does not permit the municipality to profit. The ordinance was adopted after a township Smart Growth program was launched, Sandman said.
The Smart Growth program suggested imposing the licensing fees to provide accountability and safety, he said.
During the first year of the Smart Growth program,
The licensing fee went from $100 in the first year of the Smart Growth program to $85 in the second year. It is now $65. The ordinance is evaluated every six months, said Sandman.
“When you’re starting a Smart Growth program you have to estimate certain factors to determine what the cost will be. It’s not accurate to say we are using this ordinance to pad our revenue,” he said.
Contact: 609-513-6686 DWeaver@pressofac.com Twitter @ACPressWeaver