More than 1,500 landlords are in settlement discussions with the U.S. Department of Justice over a lawsuit filed to recoup losses during the pandemic.
Settlement Discussions Taking Place with U.S. Department of Justice
The lawsuit, Darby Development Company, Inc. v. United States, filed in the U.S. Court of Federal Claims, challenges the legality of the federal government’s COVID-19 eviction moratorium.
The dispute centers on whether the Centers for Disease Control and Prevention’s (CDC) nationwide halt on residential evictions constituted a compensable taking of landlords’ property under the Fifth Amendment
After initially losing in the Court of Federal Claims in 2022, a group of landlords won on appeal and are now hoping to recoup as much as $1.5 billion from the Justice Department over losses they suffered as a result of the federal eviction moratorium during the COVID-19 pandemic. They say the amount would be just a fraction of what the industry lost.
The federal eviction moratorium lasted from September 2020 through July 2021, and was among the pandemic’s most divisive policies. It ended after the Supreme Court ruled the CDC lacked authority to impose the ban without congressional authorization.
A survey by the National Rental Home Council, a trade association, published weeks after the federal moratorium ended, found that half of small landlords had tenants who missed rent and a third sold or planned to sell properties.
The moratorium and backlog of eviction cases cost owners $57 billion, according to the lawsuit, with more than 10 million delinquent renters in the ban’s first four months alone.
“Public health measures like this, they may be well-intentioned,” said Creighton Magid, a lawyer for the plaintiffs. “But when the government imposes this type of moratorium, the financial burden should be borne by the government, not individual property owners.”
While there was some rental assistance received by landlords, they say rental assistance never fully compensated them for their losses, contending programs were often mired in red tape and poorly run. States were slow to spend the money, struggled to set up programs and, in the case of Arkansas and Nebraska, didn’t accept all the federal funding.
Matthew Haines told the Associated Press that he, like landlords across the country, learned he was barred from evicting tenants who didn’t pay their rent under a federal eviction moratorium that lasted almost a year — costing him and his investors over $1 million.
Haines is among more than 1,500 property owners who filed a federal lawsuit arguing the moratorium enacted by the Centers for Disease Control and Prevention violated the Fifth Amendment by unlawfully denying them compensation. Plaintiffs range from those who lost thousands of dollars to one who lost over $14.5 million.
After initially losing in the Court of Federal Claims in 2022, the plaintiffs won on appeal and are now in settlement discussions with the Justice Department. Landlords are hoping to recoup as much as $1.5 billion — a fraction of what the industry lost.
“It’s important for us to stand up when a group like the CDC unilaterally, functionally, decides that they have a right to oversee our business,” said Haines, who owns three rental communities with 240 units in Arlington and Irving, Texas, told the AP.
Landlords say the bans devastated their businesses. Unable to collect rent, many were forced to take on debt, lay off staff, delay repairs and, in some cases, sell their property. They say the impact lingers, with longer delays for evictions, tighter screening for riskier tenants and growing numbers of owners getting out of the rental business altogether.
