Verbal arguments in a class action suit challenging the legality of the fair net income standard ended yesterday in Middlesex District Court. The case began May 10.

The action was taken under the Massachusetts Rent Control Act, passed in September 1970, which rolled back rents to March 1970 levels. The fair net income standard is a system of rent increases exercised by William J. Corkery, Cambridge rent control administrator, which allows him to grant rent increases to provide equity with market values.

The Rent Control Act specifies that increases or decreases may be granted only in cases of increased or decreased operating costs, taxes or capital improvements.

Attorneys will now submit supplementary written arguments to the court, which has announced no date for a final decision.

Unauthorized Standards in Cambridge

Charles R. Nesson, professor of Law, and several Law School students represented 12 Cambridge tenants formally listed in the suit. He challenged Corkery's standard as "unauthorized and inconsistent with the Rent Control Act."

Nesson cited in court yesterday figures showing that since Corkery adopted the fair net income standard, net cash flow increased, on the average, from 35.6 per cent to 49.2 per cent of the gross income. Net cash flow is the amount of the gross income remaining after expenses but before payments of interest on mortgages.

The total dollar amount received by the landlord increased, on the average, by 46.7 per cent, Nesson said.

Calling the actions of the Rent Control Administration "inflationary." Nesson said that it is "no wonder" profits of some landlords are high, because they are receiving the increases that rent control is designed to eliminate.

George McLaughlin, attorney for the Cambridge Property Owners Association, said in court yesterday that landlords' claimed expenses had been open to the "scrutiny of the tenants" during the Rent Control Administration hearings.

Supporting the idea that "landlords are entitled to a fair return," McLaughlin said that the Rent Control Administration decisions allowed landlords "a reasonable return on their investments," and criticized attempts to "deprive landlords of reasonable profits."

Nesson told the court that "the question is whether administration guidelines are consistent with the statutes." He alleged that "the facts demonstrate a clear inconsistency."

Citing 106 examples representing proceedings before the Rent Control Administration, Nesson said that in the average case, rents had increased about 18.6 per cent over the rolled back levels.

Exception Proves The Rule

McLaughlin called these instances "unusual."

Nesson said that in 16 per cent of the 106 cases, the increase was 30 per cent or greater; in 32 per cent of the cases, the rents increased by 20 per cent or more; and in 40 per cent of the cases, rents rose by 15 per cent or more.

Rents of some people rose by more than 40 per cent, Nesson added, in a "very dramatic demonstration of the percentage increase tenants have faced."

"The impact on the rentpayer of this sudden increase is inconsistent with the emergency preamble" in the state Rent Control Act, Nesson said. The preamble recognized an emergency housing shortage and attempted to halt inflationary increases because of the high demand for housing.

Nesson added that in '73 per cent of the cases (before the Rent Control Administration), landlords got what they asked for.