Court Rules U.S. Must Face Claims for COVID-Era Eviction Losses

Court Rules U.S. Must Face Claims for COVID-Era Eviction Losses

Summary:  A recent federal appeals court ruling has revived the possibility that landlords may receive compensation for financial losses suffered during the COVID-19 eviction moratoriums. The ruling allows landlords to sue the U.S. government under the Fifth Amendment’s “takings” clause. This could set a powerful precedent and reopen legal discussions around more extensive local and state moratoriums, including those in California.

During the COVID-19 pandemic, California implemented some of the most extensive eviction moratoriums in the country. While intended to protect tenants facing legitimate financial hardship, these policies placed a significant financial burden on rental housing providers, many of whom were forced to cover mortgage payments, property taxes, and operating costs without rental income. Although the state eventually implemented the COVID-19 Rent Relief Program, many housing providers received only partial aid or none at all, leaving them to shoulder substantial losses.

Recognizing these harms, the California Rental Housing Association (CalRHA) filed a lawsuit against the State of California under the Fifth Amendment's “takings” clause, arguing that the moratorium constituted an unlawful seizure of private property without compensation. Unfortunately, the federal court dismissed the case as moot after the state’s moratorium was lifted—without addressing the core constitutional claim.

The Apartment Association of Greater Los Angeles (AAGLA) also filed lawsuits against both the County of Los Angeles and City of Los Angeles asserting violations of the “takings” clause, which resulted in a favorable ruling against the County whereby the court ruled the County’s eviction moratorium ordinance was “unconstitutionally vague” and the court required the County to either stop enforcement of its ordinance or correct the vague provisions. Unfortunately, in the lawsuit against the City of Los Angeles, the federal district court ruled unfavorably against the Association due to the City’s police powers during times of emergency.

Recently, a new development at the federal level could reopen the conversation on eviction moratoriums:

• A federal appeals court recently ruled (7-3) that the U.S. government must face legal claims from landlords seeking compensation for losses related to the COVID-19 eviction moratorium enacted by the CDC in 2020–2021.
• The court found that rental housing providers may sue under the Fifth Amendment's “takings” clause, arguing the moratorium effectively seized private property without compensation.
• The decision may be appealed to the Supreme Court, but if upheld this could result in billions in compensation to impacted rental property owners.

While this case pertains to the federal eviction ban, it could be a powerful precedent for claims related to pandemic-era restrictions imposed by California and many local jurisdictions, which went far further.

Read the news story here: Story Link.