Partner, Seyfarth Shaw LLP
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Los Angeles, CA 90017-5793
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The ongoing coronavirus pandemic has impacted nearly every aspect of Americans’ lives since mid-March, and the virus’s disruption to the world of real estate has been especially large and widespread. Governmental authorities at all levels and in all areas of the country began taking swift and decisive measures to respond to the emergency at hand, often requiring citizens to shelter at home and ordering non-essential businesses of all types to close their doors or otherwise substantially scale back their operations. In order to protect the interests of people who had lost their jobs and the businesses who could not operate at full capacity, many jurisdictions also imposed temporary eviction and foreclosure moratoria to stay in effect during the pandemic. The effects of these actions on the basic functioning of the real estate market has been dramatic. Many businesses and people could not meet their rent and mortgage obligations. Landlords could no longer, for the most part, evict their tenants for nonpayment of rent. Ongoing real estate purchase and financing transactions were put on hold indefinitely. The ability to hold foreclosure sales was made much more difficult. Real estate attorneys very quickly needed to become experts on the doctrine of force majeure.
As with any disruptive force, the COVID-19 pandemic soon resulted in a wave of lawsuits by individuals, companies and organizations who were negatively impacted by it. This article will take an in-depth look at several of the prominent lawsuits that have thus far been fought and decided in the wake of the pandemic, to see how courts from all around the nation have tried to find the right balance between the interests of various parties who have been affected by these unprecedented events.
Part I – State and Local Challenges
As authorities at each of the federal, state, county and local levels enacted a broad range of measures to combat the spread of COVID-19 in their communities and to mitigate the negative effects of lockdowns and business closures on their citizens, many of these governmental regulations specifically targeted the rights and obligations of owners and renters of real property. Not surprisingly, several parties who were especially harmed by these emergency regulations and who felt that their rights were being violated sought help from the courts to protect their interests, challenging the constitutionality of these laws, ordinances and orders. Part I of this article will examine several significant decisions handed down in lawsuits challenging state and local COVID-19 regulations.
Elmsford Apartment Associates, LLC v. Cuomo
In Elmsford Apartment Associates, LLC v. Cuomo, three residential landlords brought suit in the United States District Court in New York seeking an injunction against Executive Order No. 202.28 on the grounds that the Executive Order violated their rights under the Takings Clause, Contracts Clause, Due Process Clause and Petition Clause of the United States Constitution.
On March 2, 2020, in response to the first reported cases of COVID-19 in New York state, the legislature passed Senate Bill S7919, giving Governor Andrew Cuomo the power to suspend statues or regulations and issue accompanying directives “necessary to cope with the disaster,” provided that such measures are “in the interest of the health or welfare of the public,” “reasonably necessary to aid the disaster effort,” and “provide for minimum deviation” from existing laws. On March 20, 2020, Governor Cuomo issued Executive Order 202.8, the first of several orders issued to temporarily prohibit evictions and foreclosures of residential and commercial tenants. One such subsequent order, Executive Order 202.28 (“EO 202.28”), was issued on May 7, 2020, allowing any tenant to use its security deposit (and any interest accrued on the deposit) as payment for rent under such tenant’s lease, and also suspending landlords’ ability to commence eviction proceedings for nonpayment of rent. The plaintiffs in Elmsford