An Enormous Bill is Coming Due in Virginia

by James C. Sherlock

We had a long discussion in this space earlier about whether the Virginia Supreme Court Order of March 16, 2020, that suspended writs of eviction and residential unlawful detainers was constitutional.

The June 8 extension of the original order was especially troubling because by that order the courts were open for business to all plaintiffs except residential landlords.

Regardless of individual views of constitutionality, that order constituted unmistakably a taking of private property.

For purposes of this discussion assume:

  1. the taking of the property of the landlords in order to stem the effects of COVID was for public purposes and thus constituted a taking for public use; and
  2. the method of the taking was not impeded by any barrier of constitution or law.

Under Article I Bill of Rights, Section 11 of the Constitution of Virginia Due process of law; obligation of contracts; taking or damaging of private property; reads in part:

“That no person shall be deprived of his life, liberty, or property without due process of law; that the General Assembly shall not pass any law impairing the obligation of contracts; ….

That the General Assembly shall pass no law whereby private property, the right to which is fundamental, shall be damaged or taken except for public use. No private property shall be damaged or taken for public use without just compensation to the owner thereof.”

Under that provision, those businesses and individual citizens who are lessors of rental property rightly will present to the Comptroller bills for just compensation for loss of rent attributable to the order between March 16 and the date the Order is rescinded or allowed to expire.

The Commonwealth will have no choice but to pay.

According to the Census Bureau, in 2017 there were 960 firms doing business as lessors of residential buildings and dwellings in Virginia. Census bureau figures from 2019 show 3,562,123 housing units in Virginia, 66.2% of which were owner-occupied. Something over one million were rented. The median gross rent 2014 – 2018 was $1,202. Assume $1,300 in 2020. So, estimate $1.3 billion per month in rent payments by Virginians.

I yesterday interviewed an apartment owner in the Richmond area. One of his tenants has not paid rent since December. He obtained a writ of eviction in March.

The sheriff in his county was poised to execute it when on March 16, the Chief Justice, “having received a request from the Governor”, entered an Order declaring a judicial emergency “recognizing the need to protect the health and safety of court employees, litigants, attorneys, judges, and the general public.” The sheriffs stopped serving writs of eviction.

It gets better. The tenant was arrested for assaulting two police officers. He was confined to his apartment pending a trial. He now hasn’t paid rent for six months. So far he owes the owner $9,922.43 and counting.

Under Virginia law, the tenant is eligible for an Emergency Order of Possession as a threat to health, life and safety of other tenants, but that action, too, is suspended.

The sheriff was poised again to evict him June 10. The June 7 letter from the Governor and the Order of the court on June 8 restricted writs of eviction and residential unlawful detainer actions. The courts and services of writs were open for all other plaintiffs.

I asked the owner if the word had gotten around to his tenants that they could stay in his apartments without paying rent under the Court orders. His answer: “It has indeed”.

So, pick your own percentage of rental bills not paid under the judicial order. We’ll go with 3% for example purposes only. Three percent of $1.3 billion is $39 million per month for four months. Round it down to $150 million and counting.

None of us can estimate the actual total cost to Virginia of the claims that will be presented, but it will be enormous.

As a matter of equity as well as of law, I support reimbursing the landlords who have been forced to absorb the cost of public policy in response to COVID 19.  So I hope will we all

It is a public debt. The amount is increasing daily.

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27 responses to “An Enormous Bill is Coming Due in Virginia

  1. That rent is still accumulating and will be due. I understand the unfortunate situation that these property owners are in. However, using your logic, wouldn’t restaurants and other stores that had to close also have a claim to compensation for lost business? After all, weren’t they deprived of their property?

    I don’t think the case is as clear as you would have it. The constitutional language says no person shall be deprived of property “without due process of law.” There was a law that authorized the Governor and the Supreme Court to declare emergencies and suspend court processes. There is also the prohibition of damaging property or taking it for public use without just compensation. Property has not been taken or damaged. I hope the property owners you have talked to are not counting too heavily on public compensation.

  2. You may be right, but we will find out.

    The restaurants weren’t ordered to feed the homeless, the stores not ordered to pass out free goods, just shut down.

    Residential lessors were ordered in March to shelter Virginians at their cost. Then, on June 8, they were singled out for unique treatment by the Court. In the event that I wrote of, that apartment building is being used as a city jail. That is property taken.

    I have a problem with this process root and branch. My widowed sister-in-law funds her retirement with rental properties accumulated over a lifetime.

    The cozy relationship between the Governor and the Chief Justice for three months without calling the General Assembly into session threatens all of our rights and liberties.

  3. To the extent that this moratorium continues, the Commonwealth is taking property without compensation and due process of law. Landlords continue to incur costs, including mortgage payments, real estate taxes, maintenance costs, utilities, etc. It’s one thing to impose a short period of time where evictions stop, but as time goes on, the inability to collect rent and evict a non-paying tenant becomes confiscation. Moreover, the landlord is prevented from renting the premises to someone who can pay rent.

    And what is the justification for barring one class of Virginians from the courts?

  4. It’s a good time to be a lawyer! 😉

    • I did have the chance to do some pro bono work for a regular client, a rural Virginia school division. Other things, a bit slow. Glad I’m an old guy.

  5. Lots of unconstitutional actions occur during an emergency. Legal remedies after the fact may or may not be anywhere near adequate to undo the damage. Politically, however, people forgive the trespass if it was done in the heat of the emergency and the emergency was handled well overall. Look at the times habeas corpus has been suspended in the United States (or evaded by such transparent and unholy workarounds as the prison in Guantanamo)! In every case without political repercussions, that I can recall.

  6. Not political repercussions. Just a bill for services rendered.

  7. Take
    1. an aggregate of people living together in a more or less ordered community,
    Add
    2. the wealth and resources of a community, especially in terms of the production and consumption of goods and services, and/or the management thereof.
    Under the notion that
    3. You cannot win, you cannot break even, and you cannot leave the game.
    Then again, occasionally things may go awry.

    • I had a piece on this topic pending at the Roanoke Times, and it ran this morning. Later today I’ll post it here, since the paywall will prevent most of you from reading it (should any care to….)

      It touches on the issue of the utility disconnection moratorium, too. One way or the other these bills will be paid, and the landlords and business groups will do their best to make sure somebody else pays, as is the way of our current world….Just nationalize the utilities, confiscate the real estate and let the government manage it….wait, I know that economic pattern….

      • We may be seeing the proverbial tip of the iceberg if the Federal aid to workers, businesses and mortgage ends at the end of July.

        We’re in for a long bad run…economically – that’s what the Fed says.

        One thing developed countries do that 3rd world and developing don’t is try to provide a basic standard of living to the poor – food, housing, health care…. and yes.. we all pay for it.

        We don’t have slums on the outer fringes of our cities where the poor survive and I suspect that very few people would vote that way if it was up for a vote.

        How we go about it – is an area of endless debate and angst. Some of us just refuse to be happy when paying!

      • I just read it. Great piece.

  8. The landlords can go straight to federal court because of the ruling in Knick v. Township of Scott, Pa., in 2019. Before Knick, property owners had to exhaust their claims in state courts before filing in federal court.
    The Court held that a Takings violation occurs as soon as the government takes property. A plaintiff does not have to exhaust a post-deprivation procedure under state law for the taking to be complete.
    There is thus absolutely no incentive to file in state court. Expect Virginia landlords to consolidate their claims and file in federal court for Takings relief.
    Doesn’t mean they will win, but it will cause the constitutional issue of takings under emergency powers laws to be fully explored. I hope they do it.

  9. Looks like to me that the Federal Govt is providing some aid and relief to landlords… Now landlords wouldn’t be getting help from the Govt and still try to evict, would they?

    😉

  10. Was this just another order from “Governor” Northam, or was their any due process involved? Fiscal irresponsibility. Landlords all have expenses and costs as well.

  11. “So, pick your own percentage of rental bills not paid under the judicial order. We’ll go with 3% for example purposes only. Three percent of $1.3 billion is $39 million per month for four months. Round it down to $150 million and counting.”

    Got your conversion calculator handy? Convert those dollars to people. How many people then would $39M in overdue rent evict? Where would you have them go? Shelters? In a pandemic? Geez man, and complain about the COV2 dead in nursing homes!

    Brilliant. Yes, big bill coming. But who would you rather pay? Landlords? Or funeral directors and hospital administrators?

    • well.. that’s not the property owners problem! It’s the government’s problem! But again, beyond the obvious problem of where the evicted would go, what good does that do for the property owners if there is no market for the vacant apartments?

      It seems like almost everyone and their dog got some sort of relief from the govt. Did the property owners now get their rightful share?

      My suspects are that this is what this is really about, i.e. the govt coming up with more money for rents…direct to the renters…

      I’m not at all unsympathetic to the renters dilemma – they do have continuing expenses – maintenance, operation, taxes, etc, but even if the government helps, it still will mean that their investments are not producing their anticipated return on investment and that’s not going to get remediated … lots and lots of folks invested money is not going to generate the anticipated returns… it is, in fact, a financial disaster.

  12. Nancy, I do not recommend the resumption of eviction orders, except for what is called an Emergency Order of Possession due to an identified threat to the health, life and safety of other tenants. That seems a good idea, don’t you think?

    I rather make the case that the citizens of Virginia in common must refund the money lost by the landlords when their property was taken for public use. Another good idea, and a feature of the United States Constitution, wouldn’t you agree?

    It must be hard work to continue to rewrite essays in your imagination in order to then reject as outrageous the changes you insert in the original text.

    Have a nice day.

    • Jim – you write your essays such that any response other than what you want is said to be non-responsive, a strawman, etc….

      The entire point of a blog is to discuss the issues not to write blog posts in such a way that you really just want to lay down your own views and not have differing views.

      The purpose of any investment is to generate a return on that investment after paying expenses.

      In the current econ mic environment, many investors are not going to get a return on their investments and others will be lucky to be able to pay their expenses and keep their investments if they, in turn, owe money to their creditors.

      I doubt seriously that all investors are going to receive “every penny they are owed”.

      Is that wrong? yep. is it reality? yep.

      Should the govt “help” property owners that still have tenants that are not paying? Yes, in as much as the govt is providing similar assistance to other businesses.

      The problem with any stimulus/relief that is going to businesses is that it is indeed picking winners and losers. For instance, a poorly run property probably ought to go broke instead of being helped. Ditto, some restaurants and other businesses that were never viable to begin with.

    • Thank you cap’n Obvi…. Sherlock.

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