## Facts

- Troy Ltd. bought an apartment complex in Springfield, New Jersey in 1979.
- In 1981, Troy initiated conversion of the complex from rental apartments to condominiums by filing a master condominium deed.
- Troy and East Coast Condo Tech, Inc. completed a transaction in which East Coast would purchase the units and Troy would hold mortgages; the closing occurred about one month before the effective date of a new state tenant-protection statute.
- New Jersey enacted the Senior Citizens and Disabled Protected Tenancy Act in 1981, providing qualifying senior and disabled tenants “protected tenancy” for up to 40 years, limiting eviction based on condominium conversion.
- Section 14 of the Act applied the protected-tenancy provisions to certain conversions pursued since 1979, allowing otherwise qualifying tenants to obtain protected status even where conversion activity predated the Act’s effective date.
- Senior tenants at the complex sought protected status, which would prevent their eviction for purposes of the conversion.
- The developers sued state officials and tenant class representatives in federal court, seeking declaratory and injunctive relief, alleging unconstitutional impairment of contracts and an uncompensated taking.
- The district court granted partial summary judgment for the developers, holding § 14 unconstitutional as applied, and certified an interlocutory appeal.

## Issues

1. Whether § 14, as applied to the developers’ conversion project, violated the Contract Clause by substantially impairing preexisting private contractual rights.
2. Whether § 14 effected an unconstitutional taking without just compensation by restricting the owners’ ability to recover possession for condominium conversion.

## Decision

- The Third Circuit reversed the partial summary judgment for the developers.
- The court held § 14 did not violate the Contract Clause because any impairment of private contracts was justified by a legitimate public purpose and the means were reasonable and appropriate.
- The court held § 14 did not constitute a compensable taking because it was a regulatory restriction on eviction and occupancy, not a transfer of ownership or physical occupation, and owners retained significant property rights.
- The case was returned for further proceedings consistent with the holding that § 14 is constitutional.

## Legal Principles

- For state regulation affecting private contracts where the state is not a contracting party, Contract Clause review focuses on (1) whether there is a substantial impairment and, if so, (2) whether the law serves a legitimate public purpose and is reasonable and appropriate to that purpose.
- In a heavily regulated field such as landlord-tenant relations, parties’ investment-backed expectations are informed by existing and foreseeable regulation, reducing the weight of claimed reliance on prior legal conditions.
- Retroactive economic regulation is not per se unconstitutional; its validity turns on whether the retroactive reach is rationally related to the statute’s remedial goals.
- Restrictions on eviction and continued occupancy are generally treated as police-power regulation rather than a taking where owners retain core incidents of ownership (e.g., possession subject to regulation, rent collection, sale subject to tenancy, and eviction for good cause).
- Regulatory-takings analysis considers the character of the government action, economic impact, and interference with reasonable investment-backed expectations; a targeted tenant-protection measure that adjusts benefits and burdens of economic life typically does not require compensation.

## Conclusion

The Third Circuit upheld New Jersey’s retroactive protected-tenancy provision for senior and disabled tenants in condominium conversions, concluding that the statute permissibly adjusted private contractual rights to address tenant displacement and did not go so far as to effect a taking requiring just compensation.


Troy Ltd. v. Renna, 727 F.2d 287 (3d Cir. 1984)