214 Conn. 505 | Conn. | 1990
Lead Opinion
In this appeal from a declaratory ruling of the department of housing (DOH) approving the legality of a rent increase for a moderate rental housing project located in New Haven, the trial court held the increase invalid for failure to comply with the requirements of § 8-79a-15 of the Regulations of Connecticut State Agencies.
The subordinate facts are not presently disputed. Beginning in late 1983, the defendants Johnson and Harp submitted applications to DOH with respect to a privately owned apartment complex of eighty-two units in New Haven for the purpose of converting it into a moderate rental housing complex pursuant to General Statutes §§ 8-69 through 8-74. The final application, submitted on September 19, 1984, proposed renovation of all apartment units for energy conservation and, for eighteen units, to provide access to the handicapped. The estimated completion date for the improvements was February 1,1986, and the projected rent upon completion of the renovations was $465 per month for each apartment.
On December 1, 1984, the individual defendants formed the defendant partnership, which was to purchase the apartment complex, known as Beechwood Gardens, and complete the project. On the same date the partnership submitted its “project financing plan and development budget” to DOH pursuant to General Statutes § 8-74. Attached to this document were two “project management” plans estimating annual income and expenses. The first estimate of yearly rental income of $326,400, was based upon a monthly rent of $425
. After obtaining this approval, the partnership purchased the Beechwood Gardens apartment complex and, on April 9,1986, substantially completed the proposed renovations. By a letter dated March 24, 1987, DOH permitted implementation of the $465 monthly rental upon execution of some additional documents. After these were submitted to DOH, the partnership notified all tenants of Beechwood Gardens that the monthly rent would be increased to . $465, effective August 1, 1987.
The plaintiffs filed a request with DOH for a declaratory ruling invalidating the rent increase. After a hearing, DOH on February 10,1988, issued a final decision in favor of the defendants, in which it was found that “during the development stage of this project, a rent of $465 per month had been approved by [DOH] to be implemented upon the final completion of the project.” The plaintiffs appealed from this decision seeking its reversal and other relief.
The trial court accepted the factual finding of the DOH hearing officer
The defendants have appealed from the judgment, claiming essentially that § 8-79a-15 is inapplicable to a rental increase that was endorsed by DOH as part of its approval of the entire project before the defendants had made their investment in it. The plaintiffs, presumably as an alternate ground upon which to sustain the judgment,
I
The regulation relied on by the trial court, § 8-79a-15, specifies certain procedures to be “followed by all developers for any proposed rent increases.” A thirty
The defendants concede that they never complied with this regulation but point out that its applicability is limited to “any proposed rent increases.” (Emphasis added.) The quoted phrase, they contend, does not include implementation of a change in a rent schedule previously approved by DOH. They also maintain that the trial court should have deferred to the DOH interpretation of the regulation as not applicable to the $465 rental charge.
The trial court, in interpreting the regulation to apply to all increases in rent, including those approved at the time the project was authorized, relied upon (1) “the plain meaning of the language of that regulation”; (2) the provision of General Statutes § 8-72
The court found support for its interpretation in the provision of § 8-72 declaring that “[e]ach developer . . . shall manage and operate its housing projects in an efficient manner so as to enable it to fix the rentals for dwelling accommodations at the lowest possible rates consistent with providing decent, safe and sanitary dwelling accommodations . . . . ” The fact that the initial rent was set at $425 per month while renovations were being completed, the “lowest possible” rate as determined by DOH in accordance with the statute, was regarded by the court as an indication that no higher rent was necessary. The assumption of the court that the $425 approved as the “lowest possible” rent during the renovation period would also be the
The court also referred for support of its interpretation to a provision of General Statutes § 8-74 (3) requiring a developer to submit for DOH approval “its rent schedules . . . and any changes therein and its proposed budget for each fiscal year, together with such reports and financial and operating statements as the commissioner finds necessary.” The plaintiffs argue that the purpose of this provision for annual DOH review of budgets would be undermined if the agency were permitted to approve future rent increases as part of the original project approval.
We are not persuaded that the provision for annual review of proposed budgets was intended to limit DOH at the time a project is approved to setting only rental charges that are to become effective immediately. Such annual surveillance of moderate rental housing projects with respect to financial operation serves many purposes, such as enforcement of rental charges previously approved, controlling various expenses, and generally safeguarding the continued financial viability of the projects, in which the state has a substantial interest
We conclude that the trial court erred in interpreting § 8-79a-15 of the regulations to apply to the implementation of a rental charge that had been approved by DOH when the project was first authorized but was not to take effect until completion of the project.
II
In attacking the finding of the DOH hearing officer that approval of the $465 rent upon completion was included in the DOH authorization of the entire moderate rental project on December 21,1984, the plaintiffs contend that there is no substantial evidence to support that finding. They maintain that the signature of the deputy commissioner indicating approval on that date of the “project financing plan and development budget” does not signify approval of the proposed rent of $465 for the eighty-two apartment units upon completion. The hearing officer could reasonably have found otherwise, however, since the $465 proposed rent was indicated in several other documents contained with the “project financing plan and development budget” in the defendants’ final proposal, which was approved on that date. Section 8-74 requires approval
The plaintiffs also refer to a document obtained from the DOH file after the decision of the hearing officer indicating approval of $425 as the rent for eighty-two units on March 5,1985, following the project approval on December 21, 1984. There is no reference to this document in the memorandum of decision, nor do the plaintiffs claim that it was ever called to the attention of the trial court. The plaintiffs have attempted to import this document into the record by attaching it to an affidavit filed while this appeal from the judgment of the trial court was pending,
We conclude that there is sufficient evidence in the record to sustain the finding that the $465 rent had been approved by DOH as part of the project authorization on December 21, 1984, to become effective on completion of the project.
There is error, the judgment is set aside and the case is remanded with direction to dismiss the plaintiffs’ appeal.
In this opinion Covello, Hull and Santaniello, Js., concurred.
“[Regulations of Connecticut State Agencies] Sec. 8-79a-15. Rent increase
“The following procedures shall be followed by all developers for any proposed rent increases: These regulations do not apply to rent increases based on circumstances such as family income or composition.
“(a) A 30 day written notice mailed to all tenants that a change in the rent schedule will be considered by the developer, at its next meeting, (include the date and time of the meeting) and may result in a rent increase.
“(b) Advise tenants that they may submit written comments to the developer within the 30 day period, and that they may review any documents supporting the proposed rent increase which will be on file at the office of the developer. Also, tenants may attend the meeting and make comments at that time.
“(c) At the end of the 30 day period, the developer shall submit within 15 days to the commissioner, its recommended management plan plus all tenant comments.
“(d) Within 30 days after receipt of the developer’s recommendation the commissioner will approve, disapprove, or request modification of the rent increase or any portion thereof.
“(e) If the rent increase is approved by the commissioner, the developer must then give the tenants at least 30 days written notice prior to the effective date of the rent increase.”
The department of housing, which was a party to the appeal in the trial court, has not appealed from the judgment.
In the trial court the plaintiffs claimed that the hearing officer was disqualified because of his prior involvement with the Beechwood Gardens project as an agency employee. The trial court, after hearing evidence on
The only issues set forth in the preliminary statement of issues filed by the plaintiffs as appellees pursuant to Practice Book § 4013 (a) (1) are: (1) whether the trial court correctly determined that compliance with § 8-79a-15 of the Regulations of Connecticut State Agencies was required before the $465 rental charge could be effective; and (2) whether the appeal to this court “is without substantial justification so that counsel fees should be awarded pursuant to [General Statutes] § 4-184a.” Our reversal of the judgment is a sufficient response to the latter claim. Because the defendants claim no prejudice from the failure to include a challenge to the findings of the hearing officer in the plaintiffs’ preliminary statement of issues, and have filed a reply brief responding to the plaintiffs’ attack upon the finding, we consider this belatedly raised issue on the merits. See Practice Book § 4013 (a) (1) and (b).
In concluding that the trial court’s interpretation of § 8-79a-15 of the Regulations of Connecticut State Agencies was erroneous, we are not persuaded that the court disregarded the principle of judicial deference to interpretations of statutes and regulations made by agencies charged with their enforcement. See E.I.S., Inc. v. Board of Registration, 200 Conn. 145, 148-49, 509 A.2d 1056 (1986). The memorandum of decision acknowledges this principle, but properly notes that the degree of such deference is limited when there is no record of consistent agency practice in regard to the particular regulation relied upon, as in this case.
General Statutes § 8-72 provides in part as follows: “Each developer or housing authority shall manage and operate its housing projects in an efficient manner so as to enable it to fix the rentals for dwelling accommodations at the lowest possible rates consistent with providing decent, safe and sanitary dwelling accommodations, and no housing authority or non
General Statutes § 8-74 provides in part as follows: “No moderate rental housing project shall be developed until (1) the housing authority or, in the case of a developer, the commissioner of housing has held a public hearing which has been advertised in a newspaper having a circulation in the municipality or municipalities concerned at which hearing the question of the suitability of the proposed site may be raised, taking into consideration, among other matters, the nature and character of the area and neighborhood involved; (2) the commissioner of housing has approved the site, after having given due consideration to the public hearing, the plans and layout and the estimated cost of development, and (3) the commissioner has approved the proposed methods of financing, the proposed rents and income limits for admission and continued occupancy and a detailed estimate of the expenses and revenues thereof. During the period of any grant or loan contract entered into under part I or III of this chapter or this part, the developer shall submit to the commissioner for his approval its rent schedules and its standards of tenant eligibility and continued occupancy, and any changes therein and its proposed budget for each fiscal year, together with such reports and financial and operating statements as the commissioner finds necessary.”
This affidavit was filed in support of the plaintiffs’ claim for attorney’s fees pursuant to General Statutes § 4-184a. See footnote 4, supra.
General Statutes (Rev. to 1987) § 4-183 (f) provides as follows: “The appeal shall be conducted by the court without a jury and shall be confined to the record. In cases of alleged irregularities in procedure before the agency, not shown in the record, proof thereon may be taken in the court. The court, upon request, shall hear oral argument and receive written briefs.”
General Statutes (Rev. to 1987) § 4-183 (e) provides as follows: “If, before the date set for hearing, application is made to the court for leave to present additional evidence, and it is shown to the satisfaction of the court that the additional evidence is material and that there were good reasons for failure to present it in the proceeding before the agency, the court may order that the additional evidence be taken before the agency upon conditions determined by the court. The agency may modify its findings and decision by reason of the additional evidence and shall file that evidence and any modifications, new findings, or decisions with the reviewing court.”
DOH regulations require a 2% surcharge for tenants whose income exceeds the Moderate Income Guidelines.”
Dissenting Opinion
dissenting. Because I believe that the majority opinion establishes an unwarranted precedent by sanctioning a procedure that allows a developer of a moderate rental housing project to increase rents by not complying with the spirit if not the letter of § 8-79a-15 of the Regulations of Connecticut State Agencies, I dissent.
The majority opinion recognizes that “[t]he defendants concede that they never complied with this regulation but point out that its applicability is limited to ‘any proposed rent increases.’ (Emphasis added.)” The quoted phrase, the defendants contend, and the majority agrees, does not include implementation of a change in a rent schedule previously approved by DOH. Apparently, however, DOH had some misgivings about the developers’ noncompliance with the regulation because on March 24,1987, Michael T. Duffy, sen
Thus, this “retroactive” approval of the developers’ management plan enabled the developers to circumvent § 8-79a-15 of the regulations. Clearly, § 8-79a-15 of the regulations does no more than give the tenants of a moderate rental housing project an opportunity to have their views considered in the determination by
This determination by the majority allows a moderate rental housing project developer to bank and stack rent increases in the developer’s application and thus completely bypass the tenants’ right under § 8-79a-15 to have their views considered in conjunction with the proposed rent increase. To the poor tenant, I am unpersuaded that there is difference between “any proposed rent increase” and a “previously approved rental increase.” The tenant pays more money regardless of the characterization of the “rent.” It is significant to note that a letter
In addition, by endorsing the procedure used by the developers to circumvent the spirit if not the letter of § 8-79a-15, the majority speculates on the inducements for investors to place capital into moderate rental housing projects. The majority states: “DOH may well have decided that it was necessary to approve rental charges to become effective after completion of the planned rehabilitation so that investors would have some assurance of the ultimate income that the project would generate. New would be inclined to invest in a project without being able to calculate with reasonable confidence the return likely to be realized. Nothing in § 8-74 can reasonably be construed to preclude DOH from establishing a lower rent for the development stage of a project, when tenants may be greatly inconvenienced by construction operations and not all of the costs must be paid from rental income, and a higher rent upon completion of the work, when these conditions have changed.” In my view, however, § 8-79a-15 is a consumer-oriented regulation. It gives a tenant a minimum input in a moderate rental housing project rent
In sum, I do not believe that the construction of § 8-79a-15 given by the majority is warranted. The majority’s construction of this regulation sanctions a moderate rental housing project developer’s action of banking and stacking rent increases in the project application, thereby emasculating the tenants’ right to a hearing and to notice under § 8-79a-15. I therefore dissent.
“Mr. Wendell C. Harp
General Partner
Renaissance Beechwood Gardens Management, Inc.
74 Dwight Street
New Haven, CT 06511
Dear Mr. Harp:
Re: Meeting at Department of Housing on February 18, 1987 and subsequent meeting at Beechwood Gardens on March 10, 1987.
This letter contains important issues that must be addressed by the Management of Beechwood Gardens in order to assure conformity to State regulations and procedures. The Department appreciates meeting with you to address these issues. We feel that these meetings were very helpful and much was accomplished. However, we expressed our strong concern with regard to the management operations of this complex. The following is a reiteration of the discussions that took place during our meetings and our directives on the actions we want you to pursue.
Financial Statements
No management financial statements had been completed as of February 18, 1987. However, subsequent to that date a staff member from our accounting section has met with your accountant and financial statements through December 31,1986 were received February 24, 1987. We expect that the financial statements for March 31,1987 will be submitted in a timely fashion. As we pointed out, these statements are critical to Department of Housing for review of the operation and financial status of your complex.
Rents/Management Plan
It was determined during our post-occupancy review that the rental being charged to all new tenants and for those tenants occupying the 18 rehabilitated units was $465. You indicated during the meetings that it was your understanding that the $465 rental charge was approved during the development stage for all of the units. It was acknowledged that this rent charge was an issue to be determined after reviewing our files.
It has been determined through a review of our files that you had submitted a management plan for development and 2 project management plans for operations. One of the project management plans was for 64 units at $425 which would be used during the construction phase of the complex. The other project management plan for operations, which you submitted, was for 82 units at $465 which would be used at time of completion of the complex. Since it was your understanding that both these project management plans were approved, you implemented the rental charge of $465 as of April 1986. It was also determined during our March 10,1987 meeting
In order to submit a new management plan, due process must be performed by the management of the complex. That is, if you would like to propose a rental increase above the $465, you would have to execute the following procedures:
(1) A 30 day written notice mailed to all tenants that a change in the rent schedule will be considered by the developer at its next meeting, (including the date and time of the meeting) and may result in a rent increase.
(2) Advise tenants that they can submit written comments to the developer within the 30 day period, and that they may review any documents supporting the proposed rent increase which will be on file at the office of the developer or management agent. Also, tenants may attend meeting and make comments at that time.
(3) At the end of the 30 day period, the developer shall submit within 15 days to the Department its recommended management plan plus all tenant comments.
(4) Within 15 days after receipt of the developer’s recommendation, the Department will approve, disapprove or request modification of the rent increase or any portion thereof.
(5) If the rent increase is approved by the Department, the developer must then give the tenants at least 30 days written notice prior to the effective date of the rent increase.
Therefore, the management plan which you recently submitted could not be considered at this time. Once you have revised this management plan based upon the information in this letter and once you have followed the above procedure, please submit a new management plan for review and approval.”
You also requested whether you could have the fee waived until the final audit. Our regulations are clear that the management fee will begin at the time a Certificate of Occupancy is issued.
Post-Occupancy Review (dated February 5, 1987)
During our meeting of 3-10-87 you indicated that a response was sent to DOH dated January 11, 1987. However, in reviewing this letter, it is our feeling that this letter is in response to one sent to you on 12-12-86 from Michael Duffy with regard to a proposed management plan and rental increase.
We hope that the above will resolve any past or current concerns with regard to the management of Beechwood Gardens. We also hope that the management of Beechwood Gardens will be strengthened to prevent similar gaps in implementing state rules and regulations in the future. With continuous communications between Beechwood Gardens and this Department, a good working relationship may be established. If we can be of any further assistance, please contact this office at 566-3329.
Very truly yours,
[s] Michael T. Duffy
Senior Director
Management Division”
“June 24, 1987
Mr. Kevin Mullane
600 Whalley Avenue New Haven, CT 06511
Re: Notice of rent increase effective August 1, 1987 and requirement for execution of apartment lease
Dear Mr. Mullane:
Effective as of August 1,1987 the required* lease rent for your apartment will be $465 (four hundred sixty five dollars) per month. If you are renting a garage the cost will be $20 per month for the garage rental. The subject increase is being executed in conformity with applicable department of housing regulations. Additionally, you are required to execute a one year lease effective as of the August 1,1987 date. In accordance with the provisions of the lease you must provide evidence of income from your employer. Accordingly we request that you obtain a statement on your employer’s letterhead stating your current annual income.
Sincerely,
Isl Bruce Lebow
Senior Property Manager”