It is axiomatic that the pandemic has taken its toll on all areas of life and the economy. Many small and medium-sized businesses have endured economic strain by not only the virus but the government’s attempts to slow the pandemic. Many times we hear about the particular economic impact on small businesses and particularly restaurants or retail businesses.  However, the pandemic, and more particularly the government’s response, has had a less emphasized, yet still significant economic impact on those individuals and small/medium-sized businesses that invest in residential rental property as an income-producing asset.  Many such individuals and businesses have faced the loss of rental income as residential tenants failed to pay rent.  Typically the remedy for these situations was for these landlords to exercise the right to evict non-paying tenants.  However, that right was eliminated as a result of the federally mandated moratorium preventing evictions.

Since September 4, 2020, the Center for Disease Control (“CDC”) has imposed a nationwide federal moratorium on the eviction of residential tenants for nonpayment of rent. This CDC moratorium was an extension of the CARES Act eviction moratorium that spanned from March 27, 2020, through July 24, 2020, however, the CDC moratorium extended the reach of the CARES Act eviction freeze from just rental properties backed by federal financing to all residential properties nationwide. The CDC eviction moratorium was renewed several times and was extended by the CDC until July 30, 2021. As discussed below, the CDC moratorium was the subject of litigation that reached the United States Supreme Court. And while the Supreme Court’s decision in June allowed the moratorium to remain in place, Justice Kavanaugh’s reasoning, in his position as the swing vote on this question, was primarily because it was set to expire at the end of July, only one month from the date of the Court’s decision. On August 3rd, 2021, the CDC issued a new moratorium on residential evictions that, although limited, is immediately under attack.

By way of background, the CDC’s original eviction moratorium that expired July 31, 2021 was previously challenged in the courts, and in May 2021, the U.S. District Court for the District of Columbia struck down the CDC’s nationwide eviction ban concluding that the ban exceeded the limits Congress placed on the authority of the CDC. The District Court applied the Chevron analysis to the CDC’s action relative to the statute under which the CDC issued its order. In a Chevron analysis,  in determining if an agency’s construction of a statute exceeds the authority given by that statute, the Court analyzes two questions: (1) has Congress spoken directly about the issue, and (2) if it has not, is the agency’s interpretation based on a permissible construction of the statue? The District Court found that the statute upon which the CDC relied to issue the moratorium, 42 U.S.C. §264(a),  gave the CDC’s Secretary authority to “make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession…[f]or purposes of carrying out and enforcing…may provide for such inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings, and other measures, as in his judgment may be necessary.” The District Court then, using tools of statutory construction, analyzed the enabling statute the CDC was relying on for its decision and found that the statutory listed measures the CDC could take were not exhaustive because the statute also allowed for “other measures.” The District Court further reasoned, however, that such ‘other measures’ are ‘controlled and defined by reference to the enumerated categories before it’ [and] “consequently, like the enumerated measures, these ‘other measures’ are limited in two significant respects: first, they must be directed toward ‘animals or articles,’ 42 U.S.C. § 264(a), and second, those ’animals or articles’ must be ’found to be so infected or contaminated as to be sources of dangerous infection to human beings’  The Court summarized that “any regulations enacted pursuant to § 264(a) must be directed toward ’specific targets ‘found’ to be ‘sources of infection.’ The District Court ultimately decided that: “The national eviction moratorium satisfies none of these textual limitations. Plainly, imposing a moratorium on evictions is different in nature than “inspect[ing], fumigat[ing], disinfect[ing], sanit[izing], … exterminat[ing] [or] destr[oying],” 42 U.S.C. § 264(a), a potential source of infection.Alabama Ass’n of Realtors v. United States Dep’t of Health & Hum. Servs., No. 20-CV-3377 (DLF), 2021 WL 1779282, at *5 (D.D.C. May 5, 2021).

Thus, the District Court found that because the nationwide eviction moratorium was not akin to inspecting, fumigating, disinfecting, sanitizing, exterminating, or destroying a  potential source of infection, and because evictions were not classifiable as “animals or articles” the broader portion of the statute “other such measures, as in his judgment may be necessary” could not be relied upon to grant the authority to enact a nationwide eviction moratorium. The Court further reasoned that allowing it to do so could grant limitless authority to the CDC so long as the determination that any given measure was “necessary” was made.

The decision by the District Court was appealed to the U.S. Court of Appeals for the District of Columbia,  and pending the outcome of that appeal, the order vacating the CDC moratorium was stayed in Alabama Ass’n of Realtors v. United States Dep’t of Health & Hum. Servs., No. 20-CV-3377 (DLF), 2021 WL 1946376 (D.D.C. May 14, 2021). Thus, the CDC moratorium remained in effect. The stay was then challenged by a motion to vacate the stay pending appeal, which was denied. Alabama Ass’n of Realtors v. United States Dep’t of Health & Hum. Servs., No. 21-5093, 2021 WL 22216461 (D.C. Cir. June 2, 2021). Both Court of Appeals’ decisions indicated that refusal to vacate the stay was because the Court of Appeals’ believed the CDC moratorium was within the statutory authority granted to it.

On June 29, 2021, the United States Supreme Court issued its decision on the appeal of the motion to vacate the stay that kept the CDC moratorium in place. In a 5-4 decision, with Justice Kavanaugh issuing a short opinion, Justice Kavanaugh noted that while he agreed that the nationwide moratorium issued by the CDC exceeded its statutory authority and would require clear and specific authorization by Congress through new legislation for the moratorium to be extended beyond July 31, Justice Kavanaugh nonetheless voted with 4 other justices to deny the application to vacate the stay because the moratorium was set to expire on its own terms only a month later. Alabama Ass’n of Realtors v. Dep’t of Health & Hum. Servs., 141 S. Ct. 2320, 2321 (2021).

On August 3, 2021, the CDC issued a new, more narrow nationwide moratorium on residential evictions through October 3, 2021, that prohibits residential evictions based on the nonpayment of rent in any county or U.S. territory while that county or territory is experiencing substantial or high levels of community transmission of SARS-CoV-2 citing the rise of the Delta variant and arguing that the new moratorium is intended to target specific parts of the country where cases are rapidly increasing by preventing mass evictions, which the CDC argues could exacerbate the increase in case transmission. The CDC’s decision has set the stage for another legal battle along similar lines as that detailed above. The U.S. Supreme Court’s decision in Alabama Ass’n of Realtors late last month gives insight as to the likelihood of the result when the challenge to this new moratorium reaches it, as Justice Kavanaugh expressed that his swing vote in the decision which allowed the moratorium to stay in place and expire on its own, was due to it only being active for one more month. This will potentially not be the factual situation when the challenge next reaches the Court, and the Court will likely consider such moratoriums with the perspective that such moratoriums are likely to be extended by the CDC.

Furthermore, while the extent of the coverage of the new moratorium (reduced in application from nationwide to counties or territories experiencing a certain level of surge in infections) is more limited, the reasoning of the D.C. District Court would appear to still apply to the new moratorium: that the broad “other such measures, as in his judgment may be necessary” is limited by the preceding “inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles” language, and the legal question of whether the “other such measures” language is limited by the language in the statute to “specific targets ‘found’ to be sources of infection.” Accordingly, the CDC’s authority to issue such a moratorium will likely be back in the courts. While the Supreme Court technically did not issue a specific ruling on that point, Justice Kavanaugh’s opinion suggests that a majority of the Supreme Court would find the moratorium to be outside the CDC’s authority.

Nonetheless, as the certain challenge to moratorium makes its way through the courts, there are some particulars to the current moratorium that residential landlords should be aware of, and a lot to unpack:

• The order states that “a landlord, owner of a residential property, or other person with a legal right to pursue eviction or possessory action shall not evict any covered person from any residential property in any county or U.S. territory while COVID-19 transmission is substantial or high and the relevant state, county, locality, or territory has provided a level of public-health protections below the requirements listed in this order.”
• What is a “covered person”? the Order defines a covered person as “any tenant, lessee, or resident of a residentially property who provides to their landlord, the owner, or other person with a legal right to pursue eviction a declaration under penalty of perjury indicating that (a) the individual has used best efforts to obtain all available governmental assistance for rent or housing, (b) (i) earned no more than $99,000 ($198,000 if filing jointly) in 2020 or expects to earn no more than $99,000 in 2021, (ii) was not required to report any income in 2020 to the IRS, or (iii) received an Economic Impact Payment (stimulus check), (3) states they are unable to pay the full rent or make full housing payment due to substantial loss of income, hours of work or wages, a layoff, or extraordinary out of pocket medical expenses, (4) is using best efforts to make timely partial rent payments as close to the full rent as their circumstances may permit taking into account other nondiscretionary expenses, (5) eviction would likely render the person homeless or force them to move into a congregate or shared living setting because they have no other housing options, and (6) the individual resides in a U.S. county experiencing substantial or high rates of community transmission levels.
• What is a “residential property”? Any property leased for residential purposes but does NOT include temporary guest or seasonal rentals such as hotels and motels.
• The Order does NOT apply to foreclosures on a home mortgage.
• The Order does NOT excuse tenant’s from paying rent and NOT prevent the charging of late fees, penalties, or interest resulting from the failure to timely pay rent.
• The Order does NOT prevent evictions for certain reasons that are different from nonpayment of rent such as (1) engaging in criminal behavior on the premises, (2) threatening the health or safety of other residents, (3) damaging or posing significant risk of damage to property, (4) violating building codes, health ordinances or other health and safety regulations, or (5) violating any other contractual obligation other than the timely payment of rent or similar housing-related payment.
• What is a “substantial or high rates of community transmission levels”?

For purposes of this Order, “Substantial” transmission levels = (1) 50 to 99 new cases in the county in the past 7 days divided by the county population multiplied by 100,000 and (2) 8.0 – 9.99% positive tests in the last 7 days (number of positive tests in the county in past 7 days divided by total number of tests performed in same time period);

For purposes of this Order, “High” transmission levels = (1) greater or equal to 100 new cases in the county in the past seven days divided by the population multiplied by 100,000 and (2) greater or equal to 10% positive tests in the past 7 days (number of positive tests in the county in past 7 days divided by total number of tests performed in same time period).

• What does the Order mean when it says “the relevant state, county, locality, or territory has provided a level of public-health protections below the requirements listed in this order”? The Order is unfortunately vague on this point. It does not describe any public health protections other than its limitations on evictions. Therefore it seems that this language means any state, county, locality, or territory that does not have a moratorium on residential evictions that gives at least the same amount of protection from evictions as this Order. If the state, county, locality, or territory has an eviction moratorium that gives the same or more protection against evictions than this Order, this Order does not apply there and the local one applies instead. For example, if the “state, county, locality, or territory” has issued a blanket moratorium on all evictions regardless of the infection rate, that local rule would apply rather than the CDC Order.

There is certainly no question that this new Order creates substantial difficulties in application for residential landlords and courts hearing evictions,  such as knowing what the rate of community spread is for any given county at any given time, and is that rate re-calculated on a day to day basis creating possible windows of eviction, or perhaps an eviction being permissible one day and precluded the next? The Order provides for some fairly significant criminal penalties, so would an in-process eviction, spanning from a time where they were permitted into a time where they were not, invoke those harsh penalties? The coming days will tell if this Order takes the same path through the judiciary system as its predecessor, and whether its short term will expire before a substantive decision at the highest court will be made. In the meantime, residential landlords should be aware of the Order and its particular prohibitions especially given the harsh penalties for violating the Order.