In Law360, BB&K's Gene Tanaka and Emily Chaidez Evaluate if COVID-19 Orders are Temporary Takings
The COVID-19 pandemic is an unprecedented modern public health and economic crisis that has resulted in extraordinary governmental responses. Since March, numerous states, cities and counties throughout the nation have issued orders to protect the health and safety of everyone and to slow community spread of the virus. These orders are wide-ranging and broadly encompass many topics, industries and individuals.
Have public agencies' responses crossed the line into temporary takings requiring compensation by the government? Probably not. The high hurdles for temporary takings claims, coupled with the expanded police powers granted governments in public health emergencies, likely protect public agencies from most claims.
Local COVID-19 Regulations
Eviction and Foreclosure Moratoria
In California, Gov. Gavin Newsom issued Executive Order N-28-20 on March 16, which expands protections against residential eviction and reduces limits on local governments' ability to impose their own substantive limitations on residential or commercial evictions through May 31.
On March 27, Newsom issued Executive Order N-37-20, imposing a statewide moratorium on evictions, also through May 31.
On May 29, he signed Executive Order N-66-20 extending the protections and limits of Executive Order N-28-20 to July 28. No extension has been issued for Executive Order N-37-20. New York, Connecticut, Washington, Oregon, Michigan, North Carolina, Arizona and many other states issued similar orders.
Many cities imposed their own eviction moratoria that closely mirror the language used in Newsom's orders. Many of these local eviction moratoria were also extended beyond May 31. Some cities also instituted a freeze on annual rent increases, while others prepared procedures to resolve landlord/tenant disputes regarding nonpayment of rent because of the financial hardships from the COVID-19 pandemic.
Typically, these restrictions allow a landlord to recover any unpaid rent within a year of the end of the moratoria. The California Legislature is also in the process of considering numerous bills to codify eviction moratoria and other tenant and homeowner protections.1
Regulation of Nonessential Businesses
States, counties and cities also issued executive orders commonly referred to as the stay-at-home or shelter-in-place orders. Typically, these orders direct residents to stay home until further notice, except for workers in critical essential infrastructure sectors such as gas stations, pharmacies, grocery stores, banks, laundromats and take-out or delivery-only restaurants.
They often close nonessential businesses, including on-site dining for restaurants, indoor malls, shopping centers, flea markets and swap meets, childcare facilities and playgrounds, golf courses, beaches and beach access points, bowling alleys, movie theaters, gyms and fitness centers and more. Some cities also restricted the use or availability of short-term vacation rentals, whether commercial or through services such as Airbnb or VRBO.
Although nonessential businesses have now begun to open on a limited basis in some areas, some public parking lots remain closed, and social distancing orders are still in effect, which limit business.
Are the Local COVID-19 Regulations a Government Taking?
In these difficult times, landlords and certain businesses may claim that the orders constitute a taking of their property by the government without just compensation because they are or were deprived of economically viable use of their property. The following analysis may help cities and counties assess their exposure.
The Test for Temporary Takings
When the government adopts a temporary regulation denying all viable economic use of property, the takings consideration is decided by the factors enunciated in Penn Central Transportation Co. v. City of New York.2 There is no taking when a temporary restriction simply causes a diminution in value — as opposed to a denial of all viable economic use of the property — because the property will...
