157 F.2d 917 | Emer. Ct. App. | 1946
The complainant is the owner of an .apartment building located at 405 West Adams Boulevard in the City of Los An-geles known as the Holton Arms Apartments. He petitioned for upward adjustment of the rents of 33 of the accommodations in the building under Section 5(a) (11)
The facts were fairly stated by the board of review in its report to the Administrator, as follows:
“The subject building is located in a district which a quarter century or more ago was one of the best residential districts in Los Angeles. Erected in 1918, ‘it bore,’ according to protestant, ‘the enviable reputation of being the most desirable and best appointed apartment house in Los Angeles’ during the early years of its history. Protestant purchased the property in 1919 and operated it for three years, catering to a wealthy clientele. The 5-room units were allegedly rented from $250 to $350 per month, with gross rentals of about $54,000 a year. In 1922 he sold the building, equipment and furnishings for $275,000, and did not reacquire the property until twenty years later.
“In the meantime the property suffered a sharp decline in fortune. Los Angeles rapidly expanded; other and more exclu
The circumstances which the complainant contends were peculiar in this-situation were, first, that the apartment building was vacant from 1937 to 1940, resulting in deterioration and loss of reputation, and, second, that the management of Mrs. Berry from 1940 to 1942 was incompetent, resulting in the filling of the apartment building with tenants at unduly low rents.
We do not think that the fact that the building was vacant for three years and thereby deteriorated and suffered loss of reputation was a- peculiar circumstance within the meaning of Section 2(c) of the Emergency Price Control Act, 50 U.S.C.A. Appendix, § 902(c), or Section 5(a) (11) of the Rent Regulation. On the contrary it is not uncommon for landlords, particularly in times of depressed rents, to withhold their accommodations from the rental market until conditions become more favorable. There is nothing to suggest that this is not what happened here. Indeed the complainant’s charge of mismanagement against Mrs. Berry is based principally upon the fact that when she took over the building in 1940 she proceeded too promptly to fill it up with tenants at too low rents.
Nor do we see any merit to the contentions that the deterioration of the building here involved was peculiar and that Mrs. Berry’s conduct of the building amounted to such reckless mismanagement as also to be a peculiar circumstance. We can add nothing to what the board of review said as to these contentions, as follows:'
“We do not think there is anything peculiar in the decline in rental value of Jlolton Arms. This apartment' building has merely experienced the fate of numerous other pretentious houses in our rapidly growing cities, which have suffered by the changing character of the surrounding neighborhood and by the deterioration and ■decay which are the common lot of all. A quarter century is a long span in the life of any apartment hotel; and unless such an enterprise keeps pace with the procession by constant modernization to meet the changing demands for public favor, it must inevitably fall behind. Added to normal deterioration in itse, Holton Arms also suffered a long period of abandonment and neglect.
“Nor do we see anything in the nature of the lease from Mr. Babcock to Mrs. Berry which would conduce to reckless management or unwarranted reduction in rents. From the owner’s viewpoint, a lease which immediately converted a nonproduc
“We have here the simple situation in which a landlord was faced with the choice of holding out for higher rents at the risk of many vacancies, or of renting the units at the highest rates then obtainable. The landlord elected the latter course in the exercise of business judgment which seems at the time to have been sound and proper, however it may be viewed in the light of subsequent events. In the leading case of Rockcliffe Realty Corporation v. Bowles, Em.App., 151 F.2d 339, 342, decided October 2, 1945, the Emergency Court of Appeals discussed at length the legislative history and meaning of the ‘peculiar circumstances’ amendment to the Housing Regulation. Holding that the amendment affords no ground for relief under circumstances similar to those here presented, the court said: “It is specially significant that not one of the examples thus given to Congress (indicating the scope of the proposed amendment) dealt with a type of case in which a landlord accepted a lower rent in order to avoid vacancies.”
“Even if the Babcock-Berry lease be regarded as the exercise of poor business judgment and the operations thereunder as mismanagement — which, in our opinion, is an unfair appraisal of the situation, it would still not present a case of ‘peculiar circumstances’ under the regulation. The Administrator, in interpreting section 5 (a) (11), has stated that cases involving ‘simple mismanagement or poor business judgment on the part of the landlord or the landlord’s agent’ do not fall within the definition of ‘peculiar circumstances.’ See Interpretation 5(a) (11)-I,B, Rent Regulation for.Housing with Official Interpretations (as revised July 1, 1945), at page 80.”
A judgment will be entered dismissing the complaint.
Section 5. Adjustments and other determinations—
(a) Grounds for increase of maximum rent. — Any landlord may file a petition for adjustment to increase the maximum rent otherwise allowable, only on the .ground that: * * *
(It) Peculiar circumstances. — The rent on the date determining the maximum rent was materially affected by peculiar circumstances and as a result was substantially lower than the rent generally prevailing in the defense-rental area for comparable housing accommodations on the maximum rent date.