The DHS / CDC “September Surprise” – The Order to Temporarily Halt Residential Evictions

Introduction:

Effective upon publication in the Federal Register on Friday, September 4, 2020, the Acting Chief of Staff of the Centers for Disease Control and Prevention, a division of the U.S. Department of Health and Human Services (HHS), announced an Order that purports to temporarily halt all residential evictions in the United States and US Territories. The Order includes tribal lands but excludes American Samoa. The stated purpose is to prevent the further spread of COVID-19.

The Gist:

Under this Order a residential landlord or other entity with a legal right to evict is prevented from evicting “any covered person from any residential property in any jurisdiction to which this Order applies.” The duration of the Order is through the end of 2020. This Order does not apply in any State, local, territorial, or tribal area with a moratorium on residential evictions that provides the same or greater level of public health protection than are provided in this Order.

Because Michigan’s eviction moratorium has expired as of July 15, 2020 (even though some district courts enforced it through August 15, 2020), this Order applies in Michigan. Some media outlets were reporting that some Michigan district courts are halting eviction procedures until the legality and enforceability of the Order is worked out.

This Order is intended to be temporary and it does not “relieve any individual of any obligation to pay rent, make a housing payment, or comply with any other obligation that the individual may have under a tenancy.” Landlords can still charge and collect of fees, penalties, and interest as a result of the failure to pay rent, assuming they are allowed for under the lease. Landlords can still evict for reasons other than non-payment caused by Covid-19, such as where a tenant is:

1. “engaging in criminal activity”;
2. “threatening the health or safety of other residents”;
3. “damaging or posing an immediate and significant risk” to property;
4. “violating any applicable building code, health ordinance, or similar regulation relating to health and safety”; or
5. “violating any other contractual obligation” other than payment of rent or associated fees.

The Tenant Declaration:

The Order attaches a sample declaration that a Tenant must sign, under penalty of perjury, in order to qualify for protection under the Order. “Each adult listed on the lease. . . should. . . provide a declaration.” The Declaration must state that the tenant:

1. Has used best efforts to obtain all available government assistance for rent or housing;
2. Earns less than $99,000 annually ($198,000 if filing a joint tax return), or was not required to report any income in 2019 to the IRS, or received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act;
3. Is unable to pay the full rent due to substantial loss of household income;
4. Is using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit; and that
5. Eviction would likely render the individual homeless or force them into a new congregate or shared living setting.

Under the terms of the Order, if a tenant cannot so attest, the protections are not available to the tenant.

The Stick:

The Order comes with stiff criminal penalties and fines for violators. A person violating this Order may be subject to a fine up to $100,000 if the violation does not result in a death, one year in jail, or both. If the violation results in death the fine can rise to $250,000 plus one year in jail. Institutional violators may be subject to a fine of no more than $200,000 per event if the violation does not result in a death or $500,000 per event if the violation results in a death. The U.S. Department of Justice is the only department or person that can initiate court proceedings seeking to impose these criminal penalties.

Federal Authority and What this Likely Means:

The authority for this Order is Section 361 of the Public Health Service Act, codified at 42 U.S.C. §264, along with a related regulation, being 42 CFR §70.2. This Order represents, at a minimum, creative use of the enabling authority. Others (including judges and attorneys for landlords)would argue that the statute and regulation cited as authority for this Order do not, on their face, grant the authority for its issuance. Until a federal court strikes the Order, however, landlords would be advised to heed it – particularly due to the severe penalties associated with a violation.

The underlying statute, 42 U.S.C. § 264, authorizes the Surgeon General, with approval of the DHHS Secretary, “to make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from . . . one State or possession into any other.” For that purpose the Surgeon General “may provide for. . . 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.” Id. (emphasis added). Editorially, this Order appears to rely completely on (or arguably stretch) the “other measures” language.

From there the statute authorizes actions such as apprehending and forcibly detaining infected people, foreign nationals and others entering the country, and conduct of that sort. Nothing remotely appears to provide authority to the CDC or jurisdiction to the CDC over people that are well and otherwise unaffected by the disease in question.

Similarly, “Nothing in this section or. . . the regulations promulgated under such sections, may be construed as superseding any provision under State law (including regulations and including provisions established by political subdivisions of States), except to the extent that such a provision conflicts with an exercise of Federal authority under this section.” 42 U.S.C. § 264(e). On the face of it, local ordinances can take precedence over this federal statute if they are not in conflict with what appear to be the enforcement powers under this statute. A court could find that the general common law of contracts and court eviction-governing statutes could be the exact laws that shall not be preempted by the federal scheme.

The Order also relies on 42 CFR § 70.2 for its authority. Under this regulation, which by title addresses “measures in the event of inadequate local control,” the CDC Director must determine that measures taken by state or local health authorities “are insufficient to prevent the spread of any of the communicable diseases from such State. . . to any other State.” Once local or state inadequacy is determined, the CDC Director “may take such measures to prevent such spread of the diseases as he/she deems reasonably necessary, including inspection, fumigation, disinfection, sanitation, pest extermination, and destruction of animals or articles believed to be sources of infection.” Under the regulation, there is no “other measures” language as appears in the statute. However, the powers “include” an express list of items and may well contain related implied powers. That said, an eviction moratorium seems to be quite a departure from fumigating and exterminating pests as listed in the express powers.

Because the Order arguably exceeds the authority of the CDC in this instance, there are reasons to believe that this Order, though enforceable on its face and applicable in Michigan under its terms, may not survive a rigorous judicial examination. That is not a reason to disregard it, however, unless and until a court of competent jurisdiction strikes it or enjoins the enforcement of it.

Ambiguity – Are Land Contracts and Possessory Writs Covered?

Under the definition of “evict” in the Order, the eviction prohibition “does not include foreclosure on a home mortgage.” Thus, unless there is a foreclosure moratorium in place covering the mortgagor-homeowner, it appears that this Order, at a minimum, does not halt the foreclosure process. To wit:

“Evict” and “Eviction” means any action by a landlord, owner of a residential property, or other person with a legal right to pursue eviction or a possessory action, to remove or cause the removal of a covered person from a residential property. This does not include foreclosure on a home mortgage.

This “other person with a legal right to pursue . . . a possessory action” language might, on its face, include a land contract vendor-seller or even a mortgagee-lender and prevent them from obtaining the final eviction order or “Writ of Restitution” which completes the foreclosure or land contract forfeiture process where the purchaser remains in possession of the property. Certainly the language excluding foreclosure from the Order would support a position that a foreclosing mortgagee-lender can obtain that final possessory writ (which is basically finalizing an eviction). But, land contract vendor-sellers are not expressly excluded. The answer for land contract vendor-sellers may lie in the definition of the “residential property” to which the eviction moratorium is intended to apply. That states that:

“Residential property” means any property leased for residential purposes, including any house, building, mobile home or land in a mobile home park, or similar dwelling leased for residential purposes, but shall not include any hotel, motel, or other guest house rented to a temporary guest or seasonal tenant as defined under the laws of the State, territorial, tribal, or local jurisdiction.

This “leased for residential purposes” language would appear on its face to exclude land contract sales. While mortgagor-borrowers and land contract vendee-purchasers might have arguments against eviction based on the “right to pursue possessory action” language, it appears that the bulk of the Order supports the argument that the Order does not impact the right to recapture possession after a failed sale, either land contract or mortgage. As of the time of writing, however, there does not appear to be any scholarship or judicial opinions on the matter.

If you have any questions, please contact your Fraser Trebilcock attorney.

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Jared Roberts is a shareholder at Fraser Trebilcock who works in real estate litigation and transactions, among other areas of the law. Jared also “walks the walk” as a landlord and owner of residential rental properties and apartments in Downtown Lansing. He may be reached at jroberts@fraserlawfirm.com and (517) 482-0887.