The New York herald., 1922-02-18
Basis of Figures Given EX-
cludes Mortgages and Pro
yides Sample Formula.
UNTERMYER ARGUED CASE
West Goth Street Property
Claimed at 100000 Cut
to S523,250.

Inc question OF Wilal amount Oh
profit on their investments is "A fair
return to landlords was clarified for
both landlords and tenants yesterday
when the Appellate Division of the
Supreme Court, in n dictum forming
part of a decision in a dispute be-
tween sixteen tenants and the owners
Of an apartment house in West Ninety
sixth street, declared that per cent.
was a limit (which, we believe, inn
partial thinkers will agree should not
be exceeded"
The court did not lay it down as
law that a profit Of more than per
cent. may not be charged by land
lords at some time in the future or
by landlords at present in special
cases, but merely stated 1t as find
ing of fact at the present time and in
accordance with the permanent legal
principle that the charges of landlords,
like the charges of any person who
furnishes anything for money, must
be fair and reasonable.
The language, however. provides
standard which all courts dealing with
landlord and tenant cases in this State
sre certain to follow so long as ec-
onomc conditions remain about as they
are now The only dictnIn of a high
court which has supplied any standard
since the passage of the present rent
laws occurred in a decision of the APP
pellate Term of the Supreme Court in
Brooklyn, which stated that 10 per cent.
seemed a fair profit. The Appellate
H.
pellate Division. The case decided yes
terday was that of sixteen tenants
occupying apartments at 25l-255 West
Ninety-sixth street, which is owned by
The a. c. & NJ. II. Hall Realty Com
pany The case was before the Appel
late Division on review from the Ap-
pellate Term, which decided that the
tenants were within their rights in
resisting increases of rent which they
asserted were from 60 to 20 per cent.
higher than the rents they had been
paying prior to September 80, 1870. when
their leases had expired. The lower
court refused to disposses them for
refusing to pay more than reasonable
increases and refused to award TO the
landlord corporation the full amount
of rents for which il sued. covering the
three months following the expiration
of the leases The higher court in yes
terdays Judgment upheld the lower on
both rulings.
The Courts Decision.
The courts decision yesterday was
written by Justice Greenbaum, and
read:
I'VE would state that in our opinion.
In cases of this kind, the rental should
be based upon the fair percentage or
profits upon the fair valuation of the
premises as though they were unen-
numbered. by mortgages.
"It Is true that upon that basis an
owner Of the equity therein would re-
ceive a higher return upon his invest
rnent than the owner of an unencum-
bered fee. But, so far as the tenants
are concerned. the adoption of the
method of calculation based upon an
unencumbered fee valuation would re-
suit in the establishment OF fairly
uniform scale of rentals of similar prop
critics, and 1t would at the same time
obviate the necessity OF determining. in
the case of ownership of mortgaged
orennises. the cost of procuring loans,
brokers' commissions and other charges,
and simplify the trial Of this class of
actions.
I'VE also think II might not be amiss
70 express our views as to what would
he q fair percentage of return on the
fair value Of the property under existing
conditions. What such u percentage
should be is not readily determinable.
II would necessarily vary with market
fluctuations. or the rates of interest, or
returns on other classes of investments.
"There is. however, limit which we
believe impartial thinkers Will agree
should not be exceeded, giving due heed
to prevailing financial and industrial
conditions. 1t seems to us that the fair
net return on the valuation OF unencum-
bered properties, under existing circum-
stances should be per cent.
"ITpon the basis OF per cent. return
tipon an unencumbered fee valuation OF
the property at $523,250 the landlord,
upon the proofs in the instant case,
would be entitled for the year ending
September so, 1921. to net income OF
$3.50. To secure such ret income,
the gross rentals must aggregate $94,-
Os6, which Is reached by adding to the
desired net income of S42,5SO. the esti-
mated cost of maintenance or $5l,5O6.
Dividing the figure S94,0S6 by 55 the
total number of apartments In the build
ings 251-255 West Ninety-sxth street,
We obtain an average rental OF SLIGO
per year We have merely made the
foregoing demonstration upon the ad-
missible evidence. for the purpose of
establishing that the judgments appealed
from were not justified.
''In our opinion the judgments were
properly reversed. The determination
of the Appellate Term must be affirmed
with costs, and judgment absolute rem
dered against the plaintiff upon its stipu-
latio., with costs"
viking value of Property.
IN the matter OF determining "the fair
market value Of property" Justice
C;reenpaum said:
"The natural law OF supply and de-
ma,d is not applicable to an abnormal
period any more than would the law of
supply and demand be favorably consid-
cred by the courtg in justification of the
existence OF monopolies controlling the
necessities of life.
1T Is. of course. difficult TO formulate
an absolute rule for ascertaining the
uase upon which the fair rental return
10 the landlord Is to be calculated. At
20 time when the fair market value is
not ascertainable IT seems to us that
when it can be shown that there was an
existing market value of property be-
fore the period of abnormality set in
IL would be proper to accept such proof
II competently given. taking into con-
sideration at the same time the cost of