Court Opinion

ID: 4944132
Source: CourtListenerOpinion
Date Created: 2021-09-24 11:56:40.130424+00
Date Added: 2024-06-11T08:14:31.471306
License: Public Domain

REILLY, Chief Judge
(concurring) :
In my view the challenged regulations of the Council were fatally defective in assuming that the statutory right of landlords to be reimbursed in terms of higher rentals for recurring increases in such uncontrollable operating expenses as fuel prices, utility rates, and real estate taxes, was conditioned upon advance administrative approval obtainable only after an evi-dentiary hearing preceded by a published notice affording an opportunity for affected tenants to appear and present countervailing evidence.
Such a hearing is indeed required by § 4(d) (2) of the D. C. Rent Control Act of 1973, § 45-1623(d) (2) (Supp.I, 1974), as a condition precedent to the grant of an exemption from a rule which “would cause serious financial hardship to a landlord ..” But this provision should not be confused with the “pass-through” requirement which appears in § 3(a) of the Act, id. § 45-1622(a), and conditions the basic grant of authority to make rules stabilizing rents upon the establishment of a mechanism so that any ceiling imposed will reflect increases in operating costs.1 In short, the statute contemplates fluctuating ceilings on every piece of rental property, irrespective of whether it is a dwelling house, an apartment, or merely a single room in a lodging house. In view of the multiplicity and variety of rental units, it is readily apparent that the condition precedent to the imposition of any rule (i. e., rent ceiling) applicable to a given unit, viz., an allowance above the base period for interim increases in cost, is not satisfied by a system which first fixes the appropriate rental without taking into account the factor of the particular increased costs, thus forcing the owner to absorb such costs until he has convinced the Council in a series of mini-trials that an upward adjustment of the fixed rent is called for.
*334In the current period of inflation, the problem of coping with rising tax valuations on real estate, mounting fuel and utility costs, and higher wages, is one that is universal to all owners of rental property. This problem is obviously quite different from the unique situations with which the exemption section, 45-1623 (d) (2), supra] was enacted to cover. Congress presumably had in mind such unusual cases as apartments actually operating at a loss on the base date because of nonprofitable leases or rented buildings which had deteriorated so much that enormous rehabilitation expenses had to be incurred to make them legally tenantable, but felt that only evidence produced at an adversary hearing would justify so drastic a step as exemption from the general rules. As such cases would not be numerous, it plainly would not be administratively impracticable to compel the agency to hold hearings on those applications. But certainly the statute never contemplated that the exemption cases and the pass-through cases should be treated alike. Therefore, by adopting such cumbersome procedures as a necessary part of the pass-through process, the regulations were facially deficient as was amply proved by the evidence of the Commission’s inability to meet even its own 60-day deadline in processing applications for allowance of increased costs.
The Council has attempted to justify this flaw in Regulation No. 74-20 by pointing out that its base rent ceiling, which is 12.-32% above the rent in effect on February 1, 1973, for any given unit, takes into account the average increase in cost since that date and the date of the regulations. Appellants challenge this figure as being 2% below the real average and it was conceded by the government in oral argument that it does not take into account the cost of repairs required by Housing Code inspectors or rises in mortgage interest on buildings recently refinanced. In any event, it does not cover individual above-average costs, as Judge Nebeker observed in his opinion, nor increases since the publication of the regulation.
Conceivably, in a period of stable prices, stable wages, and stable taxes, the number of cases in which landlords would need higher rents to compensate them for higher costs would be so small that it could be said that the challenged procedures for the exercise of pass-through rights provided a workable scheme. But this is not such a period.
In my opinion, the fact that the statute (§ 45-1625(a)) provides judicial review in the Superior Court for the failure of the Rent Control Commission to act, is no answer to the problem. Congress did not direct the Superior Court to administer and enforce pass-through rights but, as has been pointed out, conditioned any rent control regulations upon the inclusion as an integral part thereof an effective procedure for passing on increased costs to tenants. It is not the business of this court to prescribe what this procedure should be. Conceivably a regulation requiring that a proposed rent increase could become effective only if accompanied by the filing of an explanatory statement of costs with both the Commission and the affected tenant would suffice, in view of the authority of that agency to audit and inspect any documents relied upon to support a challenged rent increase. This is the kind of procedure the Internal Revenue Service has relied upon with respect to tax returns and salary stabilization problems. As this case is being remanded to the Superior Court, however, that tribunal in framing its order might well consider after hearing the views of the parties, such amendments to the regulations as are necessary to effectuate the Congressional purpose.

. § 45-1622. * * *
(a) . . . except that any such rules so adopted to stabilize and regulate the amount of rent or benefits which a landlord is entitled to receive for the use or occupancy by any tenant of any residence shall provide means whereby increased costs incurred by such landlord and directly related to such residence shall be taken into consideration in determining the amount of such rents or benefits which such landlord is entitled to receive in connection with such use or occupancy under such rules. .