Takings

A Takings Clause Lawsuit Against the CDC Eviction Moratorium

Thanks to the Supreme Court's decision in the Cedar Point case, this suit has much better odds of success than previous takings challenges to eviction moratoria.

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The Centers for Disease Control's enactment of a new, modified version of its eviction moratorium is not the only significant new legal development on this front. Last week, a group of plaintiffs led by the National Apartment Association (a trade association of owners and managers of rental housing) filed a takings lawsuit against the original version of the CDC moratorium. They argue that the moratorium qualifies as a taking requiring "just compensation" under the Takings Clause of the Fifth Amendment. The cover sheet indicates they are seeking an estimated $26 billion in compensation payments.

Prominent takings lawyer Robert Thomas has a helpful summary of the complaint at the Inverse Condemnation blog:

The Complaint alleges a physical invasion taking because it precludes "property owners from excluding [tenants] and leasing the rental homes to rent-paying persons, even as the property owners must continue paying taxes, utility payments, employee salaries, maintenance costs, the cost of capital, and other expenses." Complaint at 10. Alternatively, the property owners allege that the CDC order is an "illegal exaction because the CDC exceeded and contravened its statutory and regulatory authority and as a direct result exacted Plaintiffs' private property and property interests[.]" Id. at 2.

The just compensation sought "includes the amount of rental income Plaintiffs would have received in the absence of the physical occupation and taking or exaction of their property …" Id.

Previous efforts to challenge eviction moratoria on takings grounds have had little success. But, for reasons I summarized here, that may change as a result of the Supreme Court's recent ruling in Cedar Point Nursery v. Hassid:

A key reason why such claims faced bleak prospects is that Supreme Court precedent made it very difficult for property owners to prevail in a takings case if the government imposed a merely "temporary" physical occupation of their land. It was often difficult to tell the difference between a temporary occupation and a permanent one. But the CDC had a strong argument that the eviction moratorium was temporary, because each successive extension of the order included a specific time limit, generally only a few weeks in the future.

Cedar Point changes that. Now, at least a as a general rule, "a physical appropriation is a taking whether it is permanent or temporary." This makes potential takings challenges to the CDC order much stronger. A moratorium on evictions in situations where the property owner would otherwise have a right to remove the tenant pretty clearly imposes at least a temporary physical occupation against the owner's will. And the federal government isn't paying "just compensation" to affected landlords, as the Takings Clause requires.

While this case was filed against the earlier version of the CDC moratorium, it applies just as readily to the new one. The two are very similar. And, of course, the lawsuit against the original version is still valid, given that the plaintiffs are still entitled to seek compensation for losses incurred during the period when it was in effect.

Even after Cedar Point, issue isn't a complete slam dunk. The federal government can still make various arguments to try to avoid liability, such as the claim that the moratorium falls within the "police power" exception to takings liability, due to the fact that it was enacted for the purpose of controlling the spread of disease. But I am doubtful that courts will be willing to extend the police power exception so far, and hope they will not. At the very least, the plaintiffs have a substantial likelihood of success, far greater than before Cedar Point.

Prevailing on the takings claim won't necessarily get the NAA and other plaintiffs the massive $26 billion in compensation they seek. I don't know how they calculated that figure (the complaint gives little indication of their methodology), and it could easily be way off. Compensation will have to be calculated on a case-by-case basis, and may vary widely as between different property owners. Should the courts rule that the moratorium qualifies as a taking, it might take months—or even years—of additional litigation to determine how much compensation is due.

Regardless of the amount of compensation, this may well turn out to be an important case that sets a major precedent applicable to future eviction moratoria, and perhaps other regulations, as well. Anyone interested in takings and property rights issues would be well advised to keep an eye on it.

NEXT: The CDC's New Eviction Moratorium Has Virtually all the Same Flaws as the Old

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  1. “Thanks to the Supreme Court’s decision in the Cedar Point case, this suit has much better odds of success than previous takings challenges to eviction moratoria.”

    Why yes, indeed it does.

    1. Outside of the Commie filth agenda, whete is the evidence for the medical necessity of the eviction moratorium? You Commie filth need to cite the data showing reduced transmission from the moratorium. The CDC is a partisan, Democrat attack dog. Shut it down. Its work is rent seeking garbage.

      1. I have said, judicial review is void by Article I Section 1. When it could be useful to the country, the Court has failed, weaseled behind deference to executive discretionary power.

        Deny reality, accept a fake doctrine. Don’t use it when it could do some good. How much can this profession suck before it gets crushed and done over?

  2. I believe the moratorium a terrible idea but I suspect this case still isn’t going anywhere. The government is going to claim that because the owners have no guarantee of finding actually rent-paying tenants that they aren’t harmed even though no being able to evict the non-paying doesn’t even give the owners a chance to look for those who would pay.

    1. I don’t think they’d have to show they’d have rented it out. It’s a government use of the property. Like when sewage overflows, that’s a compensable government occupation/use of the property (some cases have ruled). Same concept here I think (not that I mean to compare tenants to sewage, but you see the point maybe).

      1. Can’t some creative soul show that the CDC is a 3rd amendment violation? Yeah, soldiers, but it is part of the ‘War on Poverty’ or ‘War on Covid’ so the un-evictable are conscripts, right?

  3. I don’t know how to calculate damages– the rough justice, I believe, is to simply pay the landlords the rent they’re owed, then the government acquires the landlord’s claims against the tenants. If the government wants to pursue the matter, it can, although I suspect it would just forget about it. Then the landlord/tenant relationship is reset to zero, the tenant can either pay the next month’s rent or the eviction process starts.

    Some possible issue with gamesmanship– maybe a tenant and landlord will conspire to inflate how much a tenant owes and split the extra government cash– but honestly at this point the government did this to itself, they can figure it out.

    I don’t love putting this much liability on the taxpayer, but it’s even worse to just screw over the victims of the takings.

    1. Fair market value. Not necessarily what the rent actually was.

      1. Rental and lease contracts have a value. That’s a real fair market value, none of this government low ball twaddle.

        1. One potential exception to that being fair market value is when the landlord and tenant are not in an arm’s-length relationship, although I suspect few such leases result in eviction proceedings.

        2. That’s always the problem with eminent domain. Compensation is very often not “just.”

      2. You don’t have to ask what the market value of a property that actually sells is: It’s the selling price.

      3. Uh….no Darwinnie. There is a written contract. It specifies the rent. Follow the contract.

        Just because the federal government is trying to destroy our property rights, doesn’t mean we have to subvert contract law too.

        1. Except I imagine gov’t will argue: if you evicted the tenant, you’d have to re-rent. So what’s that value? I think it’s always been FMV. But it’s an interesting question you raise. I’m sympathetic to the landlord’s dilemma here. Gov’t needs to pay for all these free-rent benefits they’ve taken from the landlords and granted tenants.

          1. Rather like the government needs to pay health insurance companies for all the below cost health insurance they forced them to sell to people with pre-existing conditions. That’s the new model for government: Pushing expenses off budget by forcing private companies to cover them without compensation, or else.

        2. Sorry, HUD has established a “Fair Market Rent” for every type of unit in every standard statistical region of the country as part of the Section 8 Program and I can’t see them using that, much like “book value” is used for automobiles.

          This figure is often below what actual rents are because landlords charge more so as to exclude Section 8 tenants.

  4. This won’t overrule the moratorium, right? And individual plaintiffs will still have to prove they would have evicted successfully but for the moratorium. Would this ultimately lead to class actions?

  5. I have far less sympathy for tenants now than I did a year ago. The economy has recovered to the point where employers are having trouble finding workers. There are lots of jobs available. They’ve had months to make plans. Did they simply expect to continue living rent free indefinitely?

    1. Agree and I wonder what the exact status of non-payments are.

      For example, does someone owe 5 months from last year but are making payments now?

      Has some really been living rent free for 12+ months?

      I’m lefty on social issues but quite rightish on money matters and have diminished patience for people who cannot manage their own lives.

  6. Today’s headline – “Biden reinstates eviction moratorium”
    Alternate Universe Headline – “Trump defies federal courts. Dems say lawless action creates a constitutional crisis”.

    1. Lots of silence from the “rule of law” and “norms” crowd here.

      1. They’re waiting for the changes to become ‘precedent’ and ‘settled law’. For them, it is only a 24-hour waiting period.

      2. Yuuuuuup! Probably because they are SHOCKED that DACA man did this even though he isn’t tweeting mean things. They shouldn’t have be shocked, but they care about more mean tweets than the things that matter.

  7. The Congress has appropriated a bunch of money for “rent relief” which according to news reports is largely undistributed and possible in the hands of the states. Many states have also enacted eviction freezes either by executive action or statute.

    Couldn’t Landlords go after the states and this pot of money? After all paying money directly to landlords is how federal housing programs work.

    1. I don’t see how: Congress specified that the money had to go to the tenants, not the landlords. That’s why it’s largely undistributed: The tenants who were stiffing their landlords didn’t see any personal gain to be had from going to the trouble of obtaining money they’d probably be forced to give to their landlord.

      1. From the CFPB Website:

        right now, most federal emergency rental assistance programs accept applications from landlords.

        1. Well, that’s in contradiction to popular accounts. But I see that you’re right: In many places landlords can file the paperwork themselves, and maybe even get the money sent direct to them.

          Not quite as awful as it was being made out to be, though awful enough.

        2. From the CFPB Website:

          right now, most federal emergency rental assistance programs accept applications from landlords.

          One of the provisions in the statute is that the tenant has to agree to payment going directly to the landlord

  8. How many landlords can go for several months without rental income? What happens if the landlords miss their mortgage payments on the properties? How many landlords will lose ownership of their properties because of this?

    1. What was preventing that was the related foreclosure moratorium, which is *not* being extended….

      Things will get interesting and I suspect that a lot of landlords who have each property set up as a corporation will use the bankruptcy reorganization laws (Chapter 12?) to delay foreclosure from banks which really aren’t eager to acquire a property that has real expenses but is not producing income.

      IANAA let alone a bankruptcy one, but the rent due is accounts payable and on the balance sheet as such, *can* it be subrogated to the banks?

  9. Whose property is it?

    At the moment, the tenant has possession.

    It’s not just that the maxim that possession is nine tenths of the law has particular force here. It’s that postponing the day that the landlord retakes possession affects only a future interest. It does not physically intrude on a present one.

    Think about the implications of the plaintiff’s claims. If they are right, then every time a court grants a continuance or a stay in a case, indeed every time law imposes a notice requirement before going to court or, to make the point even more bluntly, a court doesn’t hold a hearing and make a ruling on the day the complaint is filed, the state is taking the property of the party who will ultimately prevail but has to wait.

    In our legal system, the wheels of justice tend to work slowly and people have to wait for their rights to be vindicated all the time, and often a lot of time. How could such a system of justice operate if every minute justice was defered constituted a taking?

    There is no precedent for considering all the many delays that happen in our justice system, notice periods, stays, continuances, calendaring, time between hearings and the issuance of opinions, etc. etc., etc., takings. Cedar Point provides little support for such a swreping revolution.

    And I don’t see how the CDC moratorium can be meaningfully distinguished from the many notice requirements and wait times before filing, scheduling delays, etc. common in landlord-tenant cases, and indeed all property cases.

    1. The tenant possesses no property he occupies someone else’s property for an agreed upon fee. Which is being violated by the moratorium.

  10. What’s to stop a Federal judge in some backwater local from issuing an injunction on this ? That seemed to be how things worked in the Trump days.

    1. Activist Obama judges don’t care about law or constitution. Originalist judges do and ins some cases RINO judges just go along with the activists to get along.

      So this only works in one direction

      1. What about activist Biden judges? Do they care about the law? Or is it only those you-know-who judges who are appointed by you-know-who who are destroying our Way Of Life?

        1. Biden judge = Obama judge, RINO judge = any judge who was appointed as the best most conservative judge ever but practices otherwise, e.g. Kavanaugh, Barrett

  11. Once you decide that because there is a virus or basically any emergency the executive could dream up the constitution goes out the window anything and everything is fair game.

    Expect more

    1. Yes, don’t you just hate it when the President invents national emergencies out of thin air?

      1. Cuomo’s gun emergency is some thin air. The threat of a climate emergency and a racism emergency more thin air. Are we really still in a Covid emergency? What exactly do we need our government betters to edict for us?

        Where is that clause in the constitution that it can be suspended? Of course faux libertarians , like most Reason writers and many commenters, are actually authoritarians at heart

        1. LOL, you don’t think much when you type, do you?

    2. It is because of the secret Amendment 0 to the constitution – “Any time the executive branch, at its sole discretion, decides that an emergency of any kind exists, the entire body of this constitution and any subsequent amendments are suspended until the executive branch decides to reinstate it.”

  12. But yes, of course, at this point any regulation that involves property is a taking. Congratulations libertarians, all your Ayn Rand dreams have come true!

    1. I mean, if your property is appropriated for another’s use and enjoyment without compensation or ability to evict, then it has literally been taken.

      1. Yes, if that happened it would be.

        1. If a tenant occupies your property without payment or possibility of eviction, that’s what has happened.

          1. Yes. But if a tenant occupies your property while accumulating more debt that you can still recover from them, that’s not what has happened.

  13. The biggest problem with damages and the takings claim in general is that as I understand it the tenants still owe the money for rent as usual, they just can’t be evicted for non payment. That will bring up some questions that aren’t usual in takings cases. If the government does have to pay does that mean the tenants don’t? How does the right to sue tenants for back rent impact this? Since they aren’t losing the right to the rent but only the rent at the moment they contracted for it does that mean the only loss and thus compensation should be the future value of the money (e.g interest)?

    I’m sure there will be more unusual questions on top of the normal ones that will be asked like is it a taking in the first place. I hate the moratorium but think if this was done by a state then the much more natural constitutional violation would be the Contracts Clause which doesn’t apply to the federal government. So the Takings Clause seems like a secondary violation, if it is one, but the only option against the federal government. I’m sympathetic to the to the landlords policy wise and role of government wise, but I’m not sure the Takings argument is great when they are removing your right to exlcude but requiring payment still by the occupier even if everyone knows that back rent will likely never be recieved. And that the answer is just to use the normal judicial process to recover back rent when the moratorium is over

  14. Ignored in the Mortatorium is the dubious belief that the eviction mortatorium has any meaningful effect on reducing the transmission of covid.
    As noted, the studies showing a reduction in the transmission are deeply flawed.

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