Foreclosure and eviction moratorium legal opinion and update

Eviction & Foreclosure Moratorium – New Legal Guidelines

The CDC Says There Is a Total Eviction Moratorium — I Beg to Differ

I’m going to put on my constitutional law professor hat today. As you have probably heard, the director of the CDC (in his infinite well-meaning wisdom) issued a declaration that claims to stay residential evictions through December 31, 2020.

First, I am going to tell you why the CDC’s moratorium on evictions is unconstitutional and therefore has no authority to stay all evictions. Then I will explain which stays are lawfully in place, to what extent they are in place, and how they impact your rental properties.

States vs. the Federal Government: Statutes, Rules, and Declarations

Unlike the CARES Act and the corresponding extensions of residential evictions and residential mortgage foreclosures (which affect exclusively federally backed residential mortgages and federally supplemented rentals), the CDC declaration presumes an ability to govern all residential rental property in the country.

The United States is a federal constitutional representative republic. What I mean by that statement is the United States Constitution specifically lists the powers granted to the federal government. Under the 10th Amendment to the Constitution, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

If a statute, rule, or declaration made by Congress or a federal agency is not related to the constitutionally listed powers granted to the federal government, then it is a power reserved to the states or to the people. An attempt by the federal government to govern without that connection is unconstitutional.

This constitutional federalism is why the CARES Act only governs federally backed mortgages and federally supplemented rentals (such as Section 8 housing assistance). The US government can’t issue rules or declarations that do not pertain to non-federal matters.

This is why, ladies and gentlemen of the investor community, my professional opinion is that the CDC’s moratorium is an unconstitutional declaration infringing upon the powers exclusively delegated to the states and their citizens.

The CDC Does Not Have the Authority to Back Up Their Declaration

The CDC’s moratorium is based on Federal Statute 42 USC §264 and Federal Regulation 42

CFR 70.2. Neither of those grant the CDC the authority to take the action purported under the declaration issued on September 4, 2020.

42 USC §264 only grants the surgeon general the authority to create regulations 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. In simple terms, federal health agencies like the CDC can take action to prevent diseases at the ports or national border as well as the spread of diseases

between state lines.

42 CFR 70.2 only permits the CDC director to “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” if the director “determines that the measures taken by health authorities of any State or possession (including political subdivisions thereof) are insufficient to prevent the spread of any of the communicable diseases from such State or possession to any other State or possession.”

In other words, the CDC director can take measures to prevent the spread of diseases if the states’ actions aren’t enough to keep the disease from spreading over state lines.

A keen observer will pick up on the facts that (1) neither of the specified actions the CDC is permitted to take involves interfering in private contracts between property owners and tenants and (2) state measures must be insufficient to prevent the spread of diseases from a state to another state (or from a state to a US possession, such as Guam).

When a statute or regulation lists specific action that can be taken, the legal principle of inclusio unius est exclusio alterius applies when interpreting statutory authority. Since halting evictions is not “inspection, fumigation, disinfection, sanitation, pest extermination, and destruction of animals or articles believed to be sources of infection,” the CDC does not have authority to take that action. It could hardly be argued with a straight face that fumigation, extermination, and the like permit the CDC to prohibit landlords from evicting non-paying tenants.

The CDC allegedly supported its declaration on the basis that homelessness and the use of homeless shelters can increase COVID-19 infection rates. While this may be the case, the authority to regulate and implement local infection control lies exclusively in the states.

The CDC’s actions may have been well meaning but are completely unauthorized under the US Constitution. As such, they have no authority over tenancies having no connection to federal mortgages, federal housing assistance, or other federal programs.

Which Stays on Eviction Are Lawful?

There are three stays on residential evictions that are lawfully in place and active in the state of Florida. The CARES Act moratorium expired on August 31, 2020.

The Federal Housing Administration (FHA) extended its foreclosure and eviction moratorium through December 31, 2020, for property owners with FHA-insured single-family mortgages covered under the CARES Act. This stay only applies to occupied FHA-backed residential single- family properties.

Fannie Mae and Freddie Mac have similar stays on property that has mortgages backed by those federal programs. This second federal stay on evictions is more limited as it only applies to real estate owned by Fannie or Freddie that was acquired through foreclosure or deed in lieu of foreclosure. It is good through December 31, 2020.

The state of Florida has had moratoriums on residential evictions since April of 2020. While the moratoriums were initially broad and effectively stayed all new filings and writs on residential evictions, that all changed on July 29, 2020. On that date, Governor Ron DeSantis issued Executive Order 20-180, now extended through October 1, 2020 in Executive Order 20-211.

The Order provides a defense to residential eviction proceedings, preventing a final judgment of eviction “solely when the proceeding arises from non-payment of rent by a residential tenant adversely affected by the COVID-19 emergency.” The Executive Order defines adversely affected as “loss of employment, diminished wages or business income, or other monetary loss realized during the Florida State of Emergency directly impacting the ability of a residential tenant to make rent payments.”

There are three important takeaways from this executive order.

  1. There is no longer a statewide stay on filing actions for residential eviction.
  2. Residential evictions for things other than non-payment of rent are completely excluded from the Executive Order’s defense to eviction proceedings. If your tenants breached their lease for any other reason, such as having pets when none were authorized or subleasing without permission, you can file to remove them. The COVID-19 emergency is not a valid defense to possession in such cases.
  3. The basis for non-payment of rent must be a loss of income, a reduction in wages, or other monetary loss that directly impacts the ability to pay rent and relates directly to the pandemic. I cannot stress enough that judges have begun to ask tenants about their income, employment, wages, etc. and have granted a number of eviction judgments because tenants were not able to justify their delinquency.

Get Informed and Protect Your Property

Whether you are a seasoned real estate rental investor or just starting your rental property ventures, do not let your tenants or the CDC bully you into not taking action to protect your property. The stakes are just too high.

Natalia Ouellette, Esq.

Natalia Ouellette

Natalia has successfully completed nearly a thousand Tax Deed cases and has skillfully represented foreclosure bidders in hundreds of cases, assisting them in recovering deposits, confirming foreclosure sales, negotiating lien payoffs, and re-foreclosing omitted junior lienholders.

She has been practicing real estate, title insurance, business, and estate planning law for nearly a decade. She is fluent in Spanish and French, loves the business community, and enjoys traveling.

For legal help visit her website: LCO Law LLC

2 thoughts on “Eviction & Foreclosure Moratorium – New Legal Guidelines”

  1. user nameÉlise Hazzard says:

    Thank you for this accurate and concise summary. The argument that this moratorium was ‘necessary’ to prevent a collapse of housing for many is lost on me. An unconstitutional approach to any large problem does not eliminate it, rather, it only transfers the pain and inequity onto some other unfortunate being.
    I invite other property owners to join me in supporting the New Civil Liberties Alliance, (Washington, DC non-partisan, 501c3), who appear to be the first to fight the moratorium in court.
    É. Hazzard

  2. user nameEric Cruz says:

    This states what is legal from landlord to tenant, what about bank loans? Are banks on a foreclosure hold until December?

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