Texas Multifamily Owners File Lawsuit Against CARES Act Eviction Moratorium

Two small multifamily owners in Texas have filed a lawsuit against the U.S. government, challenging the legality of a moratorium on certain eviction proceedings under the Coronavirus Aid, Relief and Economic Security Act.

The lawsuit, filed in the U.S. District Court, Northern District of Texas, Fort Worth Division on June 24, is seeking a declaratory judgment that Section 4024 of the CARES Act cannot be legally enforced.

Section 4024 places an eviction moratorium on any residential property that participates in a federal housing program or is financed by a federally backed mortgage. Under this provision, owners may not provide notice or begin any eviction proceeding against a tenant for failure to pay rent or fees under any circumstances.

There is no forbearance or other relief offered to the owner in exchange for the moratorium, and the owner is not able to end the moratorium, which will extend through July 25. It also requires a 30-day notice requirement, essentially extending the moratorium to Aug. 25.

In the filing, the plaintiffs argue they have been deprived of their rights to access Texas courts under the 10th Amendment and the Texas Constitution; of their rights under their contracts in violation of Article 1 of the U.S. Constitution; to equal protection under the 14th Amendment; and to due process under the Fifth Amendment.

The plaintiffs are Sappington Garden LLC, which owns a 16-unit apartment building in Fort Worth, Tarrant County, and Celtic Realty Acquisition LLC, the owner of the 52-unit Grove on Gladstell apartment building in Conroe, Montgomery County.

Foley & Lardner LLP’s Robert Johnson, Ed Burbach and Aaron Chibli are representing the plaintiffs in the proceedings.

"The CARES Act, while put in place by Congress with good intentions, is simply unfair and unconstitutional in this area, and does not even provide for necessary oversight and supervision," Burbach said in a statement.

"It gives a free pass to most apartment owners while denying many small apartment owners the ability to seek relief in Texas state 'Justice of the Peace' courts which is where these issues have always been addressed."

Burbach said the federal government is unilaterally denying only a minority group of owners’ basic due process and access to the state court system, making it particularly difficult for some Texas small business owners.

The suit has been assigned to U.S. District Judge Mark Pittman. A hearing date has not yet been set.