News for the Homefront: Why relief may still be coming for landlords despite a missed opportunity in the Supreme Court

DISCLAIMER: NOT LEGAL ADVICE. FOR INFORMATION ONLY. DO NOT RELY ON ANY ADVICE YOU RECEIVE ON THIS FORUM. Legal advice comes after a complete review of the facts and relevant documents. An attorney-client relationship, with all the privileges associated with it, can only be formed through a written engagement letter which cannot occur in this forum. Mr. Howell is licensed to practice in the Commonwealth of Virginia only and his thoughts are rooted in Virginia Law or general legal principles, not any other specific state’s laws. You should speak with an attorney licensed in your state, to whom you have provided all facts before you take steps that may impact your legal rights.

It truly has not been easy to be a landlord in the age of COVID-19. In March of 2020, the CARES act instituted a nationwide ban on evictions for non-payment of rent from properties subject to federally-backed loans. Thereafter, 43 states and Washington D.C. adopted moratoria of their own. After congress failed to enact a new CARES Act eviction moratorium, the Center for Disease Control issued its own unprecedented moratorium on September 4, 2020. Despite the nebulous legislative basis advanced by the CDC, and despite several Federal Court decisions declaring it unconstitutional, the Court left the CDC eviction moratorium in effect until at least July 31, 2021. As a result of this moratorium, landlords have been largely unable to evict tenants for non-payment of rent for more than fifteen months, costing landlords nationally an estimated 13 billion dollars each month over that span.

For those who are unfamiliar with the moratorium, I will offer a brief summary. The current moratorium forbids landlords from evicting tenants for non-payment of rent. It does not prevent landlords from pursuing eviction for tenants who engage in criminal activity, threaten the health and safety of other tenants, damage property, or who breach other contractual obligations they may have to the landlord that are unrelated to paying rent on time. In order to qualify for the protection offered by the moratorium, a tenant is required to provide to his or her landlord a sworn declaration that the tenant (1) “has used best efforts to obtain all available government assistance for rent or housing”; (2) satisfies certain income requirements; (3) cannot pay rent “due to substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary out-of-pocket medical expenses”; (4) that the tenant is “using best efforts to make timely partial payments that are as close to the full payment as permitted”; and (5) that the tenant “has no other available housing options”.

To address their mounting losses, the Alabama Association of Realtors recently brought action in Federal District Court seeking a ruling that the CDC was without authority to institute the moratorium. Unfortunately for landlords, the usually property-rights friendly Supreme Court declined to strike the law down, with one of its newest justices bucking expectations and voting with the centrist Chief Justice and the four liberals on the Court to leave the moratorium in place. This case represents a major missed opportunity for the Supreme Court to set some limitations on the runaway federal government. However, the concurring opinion in the case should be a source of at least some hope for landlords that the CDCs most recent extension of the moratorium to July 31, 2021 will likely be the last.

For a ruling affecting so many in our country, it has received very little media coverage outside of traditional legal analysts, such as SCOTUS Blog, whose more far-reaching analysis of the case can be found here ( https://www.scotusblog.com/2021/06/divided-court-leaves-eviction-ban-in-place/ ). Given the relative lack of coverage, we wanted to offer a brief analysis for landlords who just want the need-to-know facts and do not want to read a lengthy legal treatise. The bottom line of the ruling was that the CDC’s eviction moratorium, which is set to expire on July 31st, remains in force. While Justices Thomas, Alito, Gorsuch, and Barrett would have granted the application of the Realtors and landlords, Chief Justice Roberts and Justices Sotomayor, Kagan, Breyer, and Kavanaugh declined to do so. Unfortunately for landlords, this ruling means that for the next month (unless the moratorium is extended yet again) they will still be unable to evict tenants who fail to pay their rent on time if the tenants qualify for protection under the CDC’s moratorium. However, the news is not all bad. Justice Kavanaugh’s concurrence did broadcast the Court’s impatience with Congress’s failure to act in this respect. Thus, there are good reasons to hope this extension of the moratorium will be the last.

Justice Kavanaugh, (whose brief concurrence can be seen here https://www.supremecourt.gov/opinions/20pdf/20a169_4f15.pdf), stated that while he agreed that the CDC was without authority to initiate the moratorium, he nonetheless favored leaving the ban in place until its expiration date next month, as it would “allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds”. He also noted his opinion that “clear and specific congressional authorization (via new legislation) would be necessary for the CDC to extend the moratorium past July 31.” Justice Kavanaugh also noted, in a cautionary tone, that his decision was reliant upon the Government’s representation that it did not intend to extend the moratorium any further.

Three things from Justice Kavanaugh’s concurrence are worthy of note:

First, if Justice Kavanaugh agrees that the moratorium was without authority, it begs the question why it was not struck down then and there. If a measure is unconstitutional, it stands to reason in our system of government that no other consideration, no matter how pragmatic, should permit it to stay in place. This Supreme Court will be called upon in the coming years to decide a cascade of cases challenging policies that caused pandemic-related losses. Hopefully, this decision is colored by the once-in-a-lifetime pandemic event we have suffered over the past eighteen months rather than a bellwether of things to come.

Second, Justice Kavanaugh’s reference to the more orderly distribution of the $46 billion in available relief rings hollow to many of the nation’s 10 to 11 million landlords who have been losing an estimated $13 billion each month for fifteen months. While these relief funds are a helpful, constitutionally required measure, simple math should tell us they are insufficient to compensate landlords for their losses. As of February, one report estimated that roughly 10 million tenants were behind on their rent, owing their landlords over $57.3 billion (see https://www.moodysanalytics.com/-/media/article/2021/averting-an-eviction-crisis.pdf). This is just the latest in a long train of government decisions seemingly based on the faulty assumption that landlords everywhere are always better situated to weather financial losses than tenants.

The cause of these faulty policy assumptions is obvious to political observers: polling results. When most people think of landlords, they imagine real estate investors with vast holdings and may sympathize less with them than they do with tenants facing eviction. When polls reveal a significant population with these assumptions who are likely to vote in November, their erroneous assumptions can and often do inform unreasonable policies. However, despite erroneous assumptions to the contrary, as the attorney for the appellant noted in his brief, many landlords are “individuals and small businesses” depending on rental income to pay the mortgage on their properties. In our experience, especially in Hampton Roads, this also includes many military service members and their families who are temporarily renting out their primary residence while they serve out their orders in other locales. For these landlords, many of whom depend on rental income to pay their mortgages and are already several months behind, only the precarious foreclosure moratorium stands between them and losing their own home.

Third and finally, we will end with the small bit of good news from the decision. The Supreme Court’s reluctance to take on this issue seems, in part, based upon the understanding that the CDC intends for this moratorium to be lifted at the end of July. Moreover, in his concurrence, Justice Kavanaugh, a deciding vote in this case, indicated that if the moratorium gets extended yet again, it better be with the approval of Congress rather than through the CDC issuing an order on its own. From this, it would not be a stretch to imagine that if the CDC unilaterally extends the moratorium without congressional approval, the Court will not be nearly as friendly if it is faced with this issue a second time. Whether you believe Congress can get much of anything done at this point is up to you, but I personally rate that prospect as unlikely.

For all these reasons, while the Court’s timid posture towards this blatantly unconstitutional measure should concern friends of the rule of law and constitutional government nationwide, there are good reasons to be confident August will bring an end to this inequitable moratorium. Our firm will be following this issue closely, so please check back with us the first week of August for the final word on this fascinating yet frustrating situation.

Hang in there, landlords! Relief may be coming soon.