Los Angeles County sued over commercial eviction moratorium

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A small landlord suffering economic hardship is suing the county of Los Angeles over its pandemic-related moratorium preventing the eviction of commercial tenants for nonpayment of rent.

The lawsuit, Iten v. County of Los Angeles, which was filed Jan. 19 in U.S. District Court for the Central District of California, alleges the county is violating the contracts clause of the U.S. Constitution.

Former Marine and Vietnam veteran Howard Iten is a retired auto mechanic who depends on rental income from his sole commercial property, which is located in the City of Lawndale in Los Angeles County.

The problem is his current tenant is an auto repair franchisee who has refused to pay much of his rent during the current pandemic, even though his business has been fully open the entire time; the tenant is several thousand dollars in arrears.

“I think it’s wrong that the burden is placed on property owners, while tenants can take advantage of the situation,” Iten said in a statement provided by his lawyers at Pacific Legal Foundation, a public interest law firm headquartered in Sacramento.

“At least I owned my property free and clear. I sympathize with those landlords who hold a mortgage.”

Iten and his wife jointly own a one-half interest in an approximately 2,600-square-foot commercially zoned rental property. From the late 1970s to the mid-2000s, he operated a successful auto repair shop on the site. Following his retirement and his son’s running of the business for a few years, he decided to lease the property, and in August 2015, he entered into a five-year standard commercial lease agreement with an auto repair company.

In September 2016, that lessee entered into a sublease with another auto repair company, which does business as a franchisee of a nationally recognized auto repair firm. It has fewer than 10 employees.

In March 2020, the county issued a residential and commercial eviction moratorium on an emergency basis. The eviction moratorium, which took the form of an ordinance, has been extended and amended several times, including in September, October, and November, and most recently on Jan. 5 of this year. The current eviction ban runs through the end of February and is likely to be extended.

In its current form, the moratorium forbids the charging of interest or late fees on rents or amounts that come due during the moratorium period. It provides that commercial tenants that have fewer than 10 employees have 12 months from the end of the moratorium period to pay rent that came due during the moratorium.

This means Iten can’t even try to recover the overdue rent until 12 months after the moratorium’s expiration—currently, Feb. 28, 2022.

In April 2020, Iten’s tenant informed him that it was adversely affected by the pandemic and was unable to pay the rent. Iten wanted to terminate the tenancy but couldn’t because of the moratorium, so when the lease and sublease expired in the fall, he negotiated a new five-year lease with the tenant to increase the chances of someday recovering the past-due rent.

Damien M. Schiff, a senior attorney at PLF handling the lawsuit, expressed optimism about the case during an interview with The Epoch Times.

The moratorium itself is unfair to landlords, he said.

“There is no mechanism in the ordinance to assure any sort of partial income stream to landlords, meaning that if a tenant says ‘I can’t pay because of COVID, I don’t have to show documentation, I just simply say I can’t pay, then not only can you not evict me but also I don’t have to pay rent, and there is no way that you can force me to pay you anything during the moratorium period.’

“So for a lot of landlords who are small like Mr. Iten, being deprived absolutely of the right to an income stream is a huge impairment of the economic value of these lease contracts.”

Lawsuits against various moratoriums “have all been focused on residential moratoriums, and by and large, the reason why they’ve all lost so far is because the courts see a fairly close connection between fighting the pandemic by stay-at-home orders and eviction moratoriums to keep people in their homes.”

“No court has yet to address whether the connection between a commercial eviction moratorium and pandemic efforts is now too attenuated. Just because a commercial tenant is evicted does not mean that there is necessarily or even likely going to be a person on the streets or put into substandard housing.”

The Los Angeles County Counsel’s office didn’t immediately respond to a request by The Epoch Times for comment.

This article by Matthew Vadum appeared Jan. 27, 2021, in The Epoch Times.