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eviction signDrake Goodman and Patty Palmer lease a studio apartment to Carter Haynes. But Haynes has not paid rent since last May, when the shelter-in-place orders caused his fledging restaurant to go out of business. While sympathetic to Haynes’s plight, the loss of rental income has severely damaged Goodman and Palmer’s own finances, and they are growing increasingly desperate. Can they evict Hayes? Should they?

As more Americans get vaccinated and the infection rates continue to decline, there is increasing debate on whether the crisis has passed such that businesses can begin operating normally. One of the flashpoints is evictions for non-payment of rent. Last September, the Center for Disease Control (CDC) issued an Eviction Moratorium, concluding that a temporary halt on residential evictions was necessary to combat the coronavirus (COVID-19). After multiple extensions, it is currently scheduled to expire at the end of June.

But Texas and other states have stopped enforcing it. In March, the Texas Supreme Court let its guidelines for enforcing the Eviction Moratorium expire. And the Texas Justice Court Training Center has instructed judges of the justice courts (who preside over eviction cases) that they are no longer obligated to uphold the Moratorium. As a result, many judges are now letting eviction cases move forward.

If you lease property in Texas, you may be able to evict non-paying tenants. But should you? Before making that decision, here’s what you need to know about the Eviction Moratorium:

Who Are Landlords Prohibited from Evicting?

The Eviction Moratorium protects residential tenants, but it does not apply automatically. To receive protection under the Eviction Moratorium, the tenant must provide the landlord with a declaration, signed under penalty of perjury, affirming that he satisfies the following criteria:

  • the tenant has used best efforts to obtain governmental assistance to make rental payments;
  • the tenant expects to earn $99,000 or less in 2021 (or $198,000 or less if filing jointly), was not required to pay income taxes in 2020, or received a stimulus check under the CARES Act of 2020 or the American Rescue Plan Act of 2021;
  • the tenant is unable to pay the full 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”
  • the tenant has used best efforts to make timely partial rental payments; and
  • the tenant would likely be rendered homeless or forced to move into a shared residence if evicted

What Relief Does the Eviction Moratorium Provide Tenants?

The CDC’s Eviction Moratorium only prohibits landlords from evicting tenants for non-payment of rent. Nothing prohibits evictions if the tenant: (1) engages in criminal activity while on the premises; (2) threatens the health or safety of other tenants; (3) damages or poses a significant risk of damage to the property; (5) violates any building code, health ordinance, or similar health-and-safety regulation; or (6) violates any contractual obligation other than the timely payment of rent or the like (such as late fees, penalties, or interest).

Importantly, the CDC Eviction Moratorium does not relieve the tenant from his obligation to pay rent. Nor does it preclude the landlord from charging or collecting late fees, penalties, or interest as a result of the tenant’s failure to timely pay rent. The past-due rent, plus any penalties or interest, continue to accrue so long as the tenant inhabits the property. The landlord is just prohibited from evicting the tenant to regain possession of the property.

What Are the Consequences of Violating the Eviction Moratorium?

The consequences of violating the CDC’s Eviction Moratorium can be severe. Although it does not give the tenant a civil cause of action, the Eviction Moratorium imposes criminal penalties on landlords who violate it. Individuals face a maximum fine of $100,000, one year incarceration, or both; companies face a maximum fine of $200,000 per eviction. If the eviction results in a death, the maximum fine increases to $250,000 and $500,000, respectively.

The criminal penalties are no idle threat, especially for large companies. In March, the Consumer Financial Protection Bureau and the Federal Trade Commission jointly announced that they would be “investigating eviction practices, particularly by major multistate landlords, eviction management services, and private equity firms.”

Does the CDC Have the Authority to Halt Evictions?

The legality of the CDC’s Eviction Moratorium is doubtful and hotly debated. First, it’s questionable whether Congress delegated the authority to suspend residential evictions to the CDC. The governing statute, the Public Health Service Act of 1944, does not expressly give the CDC that authority. Instead it provides that the CDC, in carrying out its regulations, “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 [its] judgment may be necessary.” The CDC has argued that the Eviction Moratorium is one of those “other measures.”

Federal district courts in OhioTennessee, and the District of Columbia however, have disagreed. They have held that the “other measures” are limited to those similar to the ones that are expressly mentioned—fumigation, disinfection, sanitation, extermination, or destruction of animals and articles. In other words, Congress only authorized the CDC “to act on specific animals or articles which are themselves infected or a source of contagion that present a risk of transmission to other people.” Moreover, the CDC never used the statute to halt evictions before 2020 and rarely used it for disease-control purposes. Courts are understandably skeptical when an agency claims to discover in a longstanding statute an unheralded power to regulate a significant portion of the economy.

The CDC has appealed, and, in the Tennessee case, it sought to stay the district court’s ruling until the appeal was decided. The Sixth Circuit denied that request, largely agreeing with the district court’s reasoning.

But district courts in Louisiana and Georgia have held that the CDC does have the statutory authority to suspend residential evictions. They have explained that the statute “evinces a legislative determination to defer to the ‘judgment’ of public health authorities about what measures they deem ‘necessary’ to prevent contagion.” And those courts have stated that the list of specific measures the CDC may take to control infectious diseases are just examples.

Moreover, it is questionable whether Congress itself could suspend residential evictions and, hence, could have delegated that authority to the CDC. Although the Supreme Court has held that similar moratoriums imposed by the States are constitutional, Congress never suspended evictions nationwide before the COVID-19 pandemic. And a federal district court in Texas has held that it lacks the power to do so. Congress’s power to regulate interstate commerce extends to intrastate economic activities that “substantially affect” interstate commerce. But the Texas court held that the Eviction Moratorium does not regulate economic activity because it only restricts evictions. Since it does not suspect the requirement that the tenants continue to pay rent, the Moratorium does not have “any effect on the parties’ financial relationship.” The court also noted that the Eviction Moratorium primarily regulates real estate, which is “inherently local” and traditionally governed by state law.

The district court, however, did not enjoin the CDC from enforcing the Eviction Moratorium, so its decision does not extend beyond the parties to that case. Additionally, the CDC has appealed that ruling to the Fifth Circuit.

Tilting the Scales in Your Favor

Given the uncertainty about the Eviction Moratorium’s legality, refraining from evicting non-paying tenants is the best course of action, especially if your company is a large one that might be a tempting target for federal regulators and prosecutors.

That being said, remember that the Eviction Moratorium is not self-executing; tenants must submit a declaration that they satisfy the Moratorium’s requirements. Nothing in the Eviction Moratorium requires landlords to inform tenants about their rights or provide them with a copy of the declaration. Tenants must figure it out for themselves. Unless and until the tenant does so, the landlord can proceed with the eviction proceedings.

If the tenant does submit the declaration, landlords might have other alternatives. The Texas Supreme Court, the Office of Court Administration and the Department of Housing and Community Affairs have set up the Texas Eviction Diversion Program, which can provide up to fifteen months of rental and utility assistance for tenants who are behind on their rent due to the pandemic and have been sued for eviction. Courts postpone the eviction lawsuit so the tenant can apply for relief. If approved, lump sum payments are provided to landlords for past-due rent and late fees in exchange for allowing the tenants to stay in their homes. Since the CDC Eviction Moratorium does not relieve tenants of their obligation to pay rent, they have a strong incentive to participate in the program. And landlords can encourage them to do so.

Source: jdsupra.com

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