As we move through 2022 with the COVID-19 pandemic not fully quelled, many real estate practitioners have begun to review early lessons from the pandemic to better navigate today’s changing real estate landscape.
At the February 2021 Midyear Meeting of the American Bar Association (ABA), the Solo, Small Firm and General Practice Division (GPSolo) hosted a CLE that examined some of the issues and challenges attorneys were likely to face as counsel for landlords and tenants in the COVID-19 era. Panelists Larry B. Feinstein and Evan L. Loeffler of Seattle and Oscar Rivera of Miami provided practical advice on issues such as residential evictions and alternatives, lease modifications, and bankruptcy. In many ways, these issues remain unsettled. Also, in the wake of a string of federal and state court cases, these unsettled issues have created professional opportunities for general practice, solo, and small firm practitioners to establish themselves as experts in residential eviction law.
Likewise, the pandemic has caused attorneys to become even more involved in social justice causes and has encouraged advocacy groups and other interest groups to push states to fix gaps in the housing safety net for residential renters and protect a landlord’s right to control property. The landlord’s right to control the leased premises is inherent in the “bundle of sticks” principle that a landowner is entitled to control, use, benefit from, and transfer ownership of the property, along with other rights of entitlement. Under this principle, for example, the landowner has the right to enjoy income generated by the property and exclude or prevent other persons from using the owned property.
The GPSolo CLE presentation was held as a benefit to the Division’s real estate practice members in light of the unprecedented action taken by Congress under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act). The CARES Act imposed a 120-day eviction moratorium on properties that participated in federal assistance programs or were secured by federally backed mortgage loans (see Pub. L. 116–36, § 4024 (Mar. 26, 2020)). The CARES Act expired on July 24, 2020, and was followed by an order of the Centers for Disease Control and Prevention (CDC) on September 4, 2020 (CDC Order, “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19,” 85 Fed. Reg. 55,292 (Sept. 4, 2020)). At that time, the CDC imposed a nationwide federal moratorium on residential evictions for nonpayment of rent and related fees, effective July 25, 2020. The CDC extended its orders three times between March and July 2021. The moratorium did not apply if it superseded state law and did not apply in any state that had enacted a state moratorium on residential evictions. This original order was set to expire on December 31, 2020, but the order was extended by Congress under Section 502 of the Consolidated Appropriations Act of 2021 (Pub. L. 116–260, § 502 (Dec. 27, 2020); CARES Act (Pub. L. 116–36, § 18001(a)(2) (Dec. 21, 2020)). The moratorium was extended through October 3, 2021, to cover those areas experiencing a “substantial transmission” of COVID-19 cases (86 Fed. Reg. 43,244 (Aug. 6, 2021)).
According to the CDC, the order was intended to halt growing homelessness and overcrowded housing conditions in shelters and other places of refuge. In June 2021, it was estimated that 4.2 million adults reported being at risk for eviction or foreclosure, most of them low-income adults with families (Ken Sweet & Michael Casey, Millions Fear Eviction as US Housing Crisis Worsens, AP News (June 16, 2021)).
In response to the demand for legal services, various state legal aid organizations and state bar associations established pro bono hotlines to respond to the sudden demand and as part of states’ access-to-justice initiatives. For example, the nonprofit organization Iowa Legal Aid was enlisted by the Iowa governor to help with a COVID-19 legal hotline that assisted Iowans with legal issues related to the pandemic. In October 2020, approximately 200 attorneys volunteer their services on the COVID-19 legal hotline. Iowa Legal Aid saw a 35 percent increase in eviction filings statewide between March 2020 and September 2020. In Polk County, where the state capitol is located, the number of eviction cases increased by about 61 percent. Many regarded the moratorium as a benefit for tenants and landlords, particularly because of the federal rental assistance funds made available to the state. Others balked at what they regarded as a federal encroachment on personal rights and state laws. That ongoing tension was the beginning of the end of federal moratorium protection.
The CDC’s collective orders followed President Joe Biden’s executive order directing the CDC to take measures to limit the spread of the virus. Under the CDC order, a residential tenant could obtain eviction protection and postpone eviction proceedings by submitting a signed declaration of eligibility to their landlords. Similarly, the CARES Act eviction moratorium prevented landlords from commencing forcible entry and detainer proceedings arising from a covered tenant’s nonpayment of rent and related fees.
For those reasons, the CDC declaration was a staple in the real estate practitioner’s arsenal. The declaration was used invariably where facts sufficiently showed a tenant met the annual income limit of $99,000 and other eligibility criteria set forth in the order. For residential tenants, the impact of the moratorium was the federally protected right to remain in possession of a leased dwelling for months—up to two years in some instances.
For counsel representing residential landlords, the declaration was a bane because it was subject to capricious use by a tenant and because a landlord could not challenge the declaration for its veracity or on few, if any, other grounds. Consequentially, another unintended impact of the moratorium was the initiation of a wave of litigation across the country. Given prevailing congressional and public discord on the authority of federal agency and the executive branch of government relative to the states, landlord groups filed at least nine civil actions challenging the CDC eviction halt order as of March 2021, according to the National Housing Law Project (National Housing Law Project, CDC Eviction Moratorium—Revised Analysis (Mar. 30, 2021)).
In one of those cases, Terkel v. Centers for Disease Control & Prevention (No. 6:20-CV-00564 (E.D. Tex.)), the central issue was the authority of Congress to suspend residential evictions in the states. The U.S. District Court for the Eastern District of Texas granted Terkel’s request for a declaratory judgment. In federal district court, the government had maintained that the expiration of the August 6, 2021, version of the eviction moratorium rendered the controversy moot because the government voluntarily ceased enforcement of the eviction moratorium before it expired on October 3, 2021. In granting the declaratory judgment, the court found that Congress does not have the authority to stop residential evictions in state courts because such authority is not among the limited powers granted to the federal government in Article I of the Constitution. The CDC appealed. The U.S. Court of Appeals for the Fifth Circuit dismissed the CDC’s appeal “on terms . . . fixed by the court” as permitted under the federal rules (Terkel v. Centers for Disease Control & Prevention, No. 21-40137 (5th Cir. 2021)). The Fifth Circuit stated that the “dismissal does not abrogate the district court’s judgment or opinion, both of which remain in full force according to the express concession of the government during oral argument and in briefing” (Id.).
For real estate practitioners, and, more broadly, for attorneys whose practice specialties overlap with residential real estate law, the Fifth Circuit left unsettled a critical issue: whether the government has the constitutional power under the Commerce Clause to invade individual property rights by limiting landlords’ use of state court eviction remedies. To this author, the question appears not to have been answered squarely in Alabama Association of Realtors v. Department of Health & Human Services, an August 2021 case in which the U.S. Supreme Court found that the plaintiffs were “virtually certain to succeed on the merits of their argument that the CDC has exceeded its authority” by imposing the nationwide moratorium on evictions due to substantial or high levels of COVID-19 transmissions (Alabama Association of Realtors v. Department of Health and Human Services, 21A23 (Aug. 26, 2021)). To the extent that the question was answered, another question arose: What are the boundaries of Congress’s authority to enact the very sort of legislation that the Court said the CDC lacked?
This open question presents a challenge to the real estate practitioner as counselor: whether existing state laws sufficiently address a landlord’s and tenant’s right to eviction protection in a pandemic, or endemic, as some have now begun to refer to COVID-19 in 2022. It is also unknown whether Congress has the political will to enact legislation that would help either the residential tenant or the landlord, or, ideally, both.
As the attorneys Rivera, Feinstein, and Loeffler all opined in their CLE presentation, the patchwork of state laws concerning tenants’ and landlords’ rights during the pandemic has resulted in a spike in evictions in some cities, such as Milwaukee, Tampa, and Houston. The Pew Charitable Trusts estimates that eviction filings in those and eight other U.S. cities increased significantly after the CDC moratorium ended. Pew reports that evictions in Columbus, Ohio, were 21 percent higher in December 2021 than the average eviction filings in 2012, 2013, and 2015 (Kristian Hernández, Evictions Rise to Pre-Pandemic Levels, Pew Charitable Trusts (Feb. 1, 2022)).
Without the federal or CDC moratorium, real estate practitioners will have to look to state courts and raise actual or technical violations of the state’s landlord-tenant act in order to stave evictions for residential tenants. Some estimates indicate that if 4.2 million adults were evicted, the total economic impact to tenants could reach $11.6 billion, including $5 billion in increased debts and $6.6 billion in lost earnings. The estimated impact on landlords is just as much, at $10.7 billion to $11.3 billion, including $8 billion in lost rent and repairs and $2.6 billion in forcible entry and detainer costs (Samantha Batko & Amy Rogin, The End of the National Eviction Moratorium Will Be Costly for Everyone, Urb. Inst. (June 24, 2021)). The Congressional Research Service cited research that estimated the total rental arrears were $57 billion as of the end of January 2021. Congress in 2021 appropriated a total of $46.5 billion in emergency rental assistance to assist households that were unable to pay rent or utilities (Emergency Rental Assistance Program, U.S. Dep’t Treasury (last visit May 17, 2022)).
Policy makers, housing advocates, and others have pushed for expanded or new eviction diversion programs in light of the COVID-19 pandemic’s effect on at-risk renters and low-income persons. Eviction diversion programs are designed to shift the pre-eviction action away from immediate forcible entry and detainer actions by focusing the tenant and landlord on housing counseling, legal assistance, emergency rental assistance, negotiation, mediation, arbitration, and other legal support with limited or no court involvement.
The U.S. Department of Justice, through the Associate Attorney General, issued a letter on June 24, 2021, encouraging state court justices and state court administrators to consider establishing eviction diversion programs.
The Urban Institute reported that 29 states, including Colorado, Florida, Illinois, Iowa, and Washington, implemented eviction diversion programs as of summer 2021. For example, Colorado’s COVID-19 Eviction Defense Project provides legal representation and other services to renters, operates a rental assistance innovation fund, collects data and performs research, and advocates for changes in policy on housing matters (Office of Housing Counseling Webinar: Building an Eviction Diversion Program, U.S. Dep’t Hous. & Urb. Dev. (Dec. 16, 2021)). In some states where eviction diversion programs exist, the programs may be limited to just one county or a limited number of counties. In Pinellas County, Florida, the Pinellas County Eviction Diversion Program provides mediation, housing assistance referrals, and other services. In Polk County, Iowa, the seat of the state capitol, the eviction program was the only such program in the state. The county accepted $21.8 million of federal funding to assist households that were unable to pay rent and utilities due to the pandemic. According to Polk County, between 80 to 100 persons applied for assistance daily. Because funding needs were greater than the rental assistance allocation, the county’s emergency rental assistance portal closed as of September 30, 2021, but rental assistance applications submitted before February 8, 2022, may continue to be processed.
In Washington State, the Eviction Resolution Pilot Program (ERPP) was enacted in April 2021 and has dispute resolution centers in 41 counties, including King, Pierce, Spokane, and Walla Walla. Under the pilot program, landlords must participate in the ERPP process before an eviction for unpaid rent may proceed to court.
In December 2021, the U.S. Department of Housing and Urban Development (HUD)sponsored a program that specifically examined the role of local housing counseling agencies during the pandemic and looked at some of the ways federal, state, and local policy makers could build effective eviction protection and diversion programs and partner with courts. HUD indicated that the most common components of eviction diversion programs were alternative dispute resolution (ADR) and rental assistance. Using data prepared by Urban Institute, HUD indicated that 47 states now have some form of diversion program. And, in particular, 29 states have created 12 court-based programs, 23 states created ADR programs, 13 states created legal assistance programs, and seven new housing counseling programs, three financial counseling, and 21 rental assistance programs have been created with federal funding.
At its February 2022 Midyear Meeting, the House of Delegates passed ABA Resolution No. 612, ABA Ten Guidelines for Residential Eviction Laws, by a reported vote of 251 to 103. In addition to a comprehensive report on the impact that COVID-19 has had on the crisis of evictions, specific support for each of the ten guidelines is followed by thorough commentary, research, and analysis. Through the resolution, the ABA urges all federal, state, local, territorial, and tribal legislative, judicial, and other governmental bodies to implement the following ten guidelines concerning residential evictions:
The proponent of the resolution was the Standing Committee on Legal Aid and Indigent Defense, chaired by Hon. Bryant Y. Yang, Commission on Domestic and Sexual Violence, Commission on Homelessness and Poverty, and Section of Civil Rights and Social Justice. The resolution was referred by a total of 15 ABA commissions, divisions, sections, and standing committees, including the GPSolo Division.
Another key lesson for the real estate practitioner then and now is the need to move beyond form-based leases and draft better leases with the particular real estate client in mind. For example, instead of the standard 12-month lease, an initial lease of six months with additional six-month option periods could be considered. The often-overlooked force majeure clause could be drafted with terms that address landlords’ and tenants’ rights in a pandemic.
Another lesson learned is the need for the tenant and landlords to cooperatively apply for tenant rental assistance. According to the National Low Income Housing Coalition (NLIHC), an estimated $25 billion out of $50 billion in rental assistance has not been distributed by states to applicants across the country (Treasury Emergency Rental Assistance (ERA) Dashboard, Nat’l Low Income Hous. Coal. (last updated May 17, 2022)). Arkansas has established four rental assistance programs across Pulaski, Washington, Benton, and Arkansas Counties, according to NLIHC. But even those counties have begun to impose restrictions on eligible persons effective January 1, 2022, by limiting applications to first-time applicants, for example. The same number of programs has been established in Iowa, including the Iowa Rent and Utility Assistance Program (IRUAP). Funding under IRUAP is limited and, in Iowa, may be granted only for past-due rent and utility payments. New York has nine such programs, but because demand exceeds federal funding, emergency rental assistance applications are reviewed only if additional funds become available, subject to limited exceptions.
Pew also reports that, as of late January 2021, 53 emergency rental relief programs were paused in 23 states and the District of Columbia, and at least 18 similar programs were closed in Arkansas, California, Florida, Michigan, and Texas. Pew also reports that other programs, such as in California, have closed in order to centralize relief with a state-run program. Still, state funding, while limited, can result in a win for a residential landlord as an alternative to an eviction proceeding.
To be sure, the COVID-19 pandemic has impacted the real estate practitioner as well as practitioners across various law specialties. The pandemic also has laid bare the need to shore up national laws on eviction protections for the tenant and landlord alike while preserving the rights of states to enact laws that provide similar protections for their state’s citizens.
