Landlords Can Sue Government For Missed Rent During Pandemic, Appeals Court Finds

A panel of federal appellate judges said the government must face legal claims that it owes landlords impacted by missed rent payments during the pandemic-era eviction moratorium. 

In a 7-3 decision, the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., rejected the government’s request that it overturn a ruling that had allowed lawsuits to continue where landlords sought compensation for unpaid rent. 

Members of the panel of judges acknowledged that theirs was unlikely to be the final word on the case, which centers around the interpretation of the Constitution’s takings clause and will almost certainly be appealed by the federal government to the Supreme Court. 

“Even though I think the majority correctly decided this case, the dissent offers a reasonable interpretation of the Supreme Court’s decisions,” Judge Raymond Chen, appointed by President Barack Obama, wrote in a concurring opinion. “Only the Supreme Court can provide the needed clarity as to the meaning of ‘authorized’ in its takings jurisprudence.”

If it stands, the appellate court decision in the case, Darby Development Company Inc. et al v. United States, would make the government vulnerable to what are likely billions of dollars in claims from multifamily owners. 

The landlords in the case are suing over the 2020 nationwide order halting evictions that came from the Centers for Disease Control and Prevention after a 120-day moratorium from Congress had expired. 

The property owners argue that the moratorium violated the Fifth Amendment's takings clause, which prohibits the federal government from taking private property for public use without just compensation. By taking away their ability to evict tenants, the landlords argued that their property had been converted to public use. 

In court filings, the federal government argued that the decision to allow the cases to proceed “upends over a century of precedent” and would have “significant consequences in this case and others,” Reuters reported.

Judge Armando Bonilla, an appointee of President Joe Biden, agreed with the government’s position in a dissent, saying that the majority's decision wasn't consistent with historical interpretations of the takings clause while acknowledging that the case is “undoubtedly, of substantial importance.” 

The Supreme Court eventually ended the eviction moratorium in August 2021. The landlord group’s complaint was first filed in July 2021, court records indicate. A court initially dismissed the case in May 2022, citing the lack of a claim. That decision was appealed in June, and the landlord group had the decision reversed in August 2024. 

The appeal restored the landlords' claim and returned it to the lower court before the federal government again appealed that decision, which led to the ruling Friday.

More than three dozen limited liability corporations associated with specific apartment developments are part of the suit. Veritas Equity Management, which owns apartment developments around Houston, is among the plaintiffs. 

Veritas' John Boriack told Bisnow in 2020 that the eviction moratorium had weighed on his company's operations and said that some tenants were taking advantage of the policy.

The case is named after South Carolina-based Darby Development Co., which owns a portfolio of apartments, office and warehouse space. An entity associated with the Intracoastal Yacht Club apartments in Sunny Isles Beach, Florida, is also among the plaintiffs. 

Shannon McGahn, chief advocacy officer at the National Association of Realtors, which filed an amicus brief in the case, said in a statement that the latest appellate court decision marked “another important win for property rights.”

"By denying the government’s attempt to overturn the ruling, the court has reaffirmed that those affected by the now-invalidated CDC eviction moratorium can move forward with their Fifth Amendment takings claims," she said.

UPDATE JUNE 10, 2 P.M. ET: This story has been updated to fully reflect NAR's involvement in the legal case and fully attribute the statement from a its leadership.