Arizona rental property owners and associations sue to overturn eviction moratorium

Arizona landlords are suing to stop the state’s eviction moratorium, saying it’s unconstitutional and violates apartment owners’ contracts with renters.

The Arizona Multihousing Association, the Manufactured Housing Communities of Arizona and several rental owners filed a special action with the Arizona Supreme Court late Wednesday. They're asking the court to invalidate the state’s eviction moratorium that Gov. Doug Ducey ordered on March 24.

In late July, Ducey extended the moratorium that protects renters who have been hurt by COVID-19 until Oct. 31 as long as tenants follow steps such as to apply for aid from Arizona’s eviction protection programs.

Housing advocates say Arizona’s moratorium extension will help thousands of renters stay in their home until they get the state aid. But they are concerned for property owners because the state money has been slow to get out.  

Property owners say they don’t want to evict their renters but need the rent help faster to survive the recession.

“Our members are in the housing business. No one wants to see anyone evicted, especially during a pandemic,” Courtney Gilstrap LeVinus, CEO of the Multihousing Association, said in a statement. “But after five months of the state doing almost nothing to help property owners, we are at a breaking point.”

MORE: Arizona renters hurt by COVID-19 must follow these 4 steps by Aug. 22 to avoid eviction

She said the eviction moratorium created “a rent holiday for thousands of renters, while property owners still have a mortgage, taxes and bills to pay — including utility bills for many residents who are paying no rent.”

The Governor's Office has not yet received the lawsuit, said Patrick Ptak, a spokesperson for the office. 

"We will review it once we do," he said. "We’re making reasonable and responsible decisions in the best interest of public health while working to provide relief to those impacted. We’re following the law and the constitution."

Arguing against the moratorium

The suit argues Arizona's eviction moratorium forces many of the state’s rental property owners to provide free housing for at least 221 days and that violates the separation of powers imposed by the Arizona Constitution.

The suit also argues the moratorium violates the Constitution’s contract clause on 920,000 rental agreements. 

The special action alleges the governor violated state law by usurping legislative authority and interfering in private contracts between landlords and renters.

Property owners claim in the suit that the governor created an illegal economic welfare program with the eviction moratorium instead of properly responding to a public health crisis.  

"In unilaterally prohibiting owners of private residential property from enforcing the terms of lawful lease agreements, Executive Order 2020-49 (the eviction moratorium) exceeds any valid statutory authorization conferred on the Governor because it embodies an indefinite economic welfare and redistribution program, rather than a public health measure to contain the COVID-19 contagion," according to the suit.

Help for renters and property owners

Several programs to help tenants and landlords are available in Arizona.

Last week, the state launched a program with $5 million in funding to help landlords. Rental property owners struggling because of the novel coronavirus can receive as much as $50,000 in assistance.

The state launched another $5 million fund in late March to help renters hurt by the pandemic. That program would benefit landlords, too, as the rental assistance is paid directly to them. 

Renters also can seek assistance from Maricopa County and the city of Phoenix, which set aside more than $50 million in rental aid from federal CARES Act funding.  

Several other programs are available for renters outside of metro Phoenix.

"I would have hoped the state's additional programs to help renters would have been enough to avoid this lawsuit," said Joan Serviss, executive director of the Arizona Housing Coalition. "It's been difficult to find a way to make both landlord and renters whole, but I don't think we need to argue about contract law in the middle of a pandemic when too many people are facing losing their homes."

But backers of the lawsuit say the aid programs aren't working fast enough to help renters or landlords.

Since April, Arizona has received more than 20,000 requests for nearly $11 million in assistance from the two state funds. But they say only 7% of those applications have been approved and $2 million in help delivered. 

Not first challenge to eviction moratorium

Landlords have sued to overturn eviction moratoriums in California, Massachusetts, Florida and here in Arizona. In late July, the Pennsylvania Supreme Court dismissed property owners' challenge to the governor’s statewide eviction moratorium.

Locally, a Maricopa County Superior Court judge rejected a challenge to Ducey's eviction moratorium last month. 

Phoenix rental owner Ann Gregory had sued the governor and a lower-court judge, claiming the moratorium unconstitutionally prevented her from evicting a family living in her Surprise rental home who owed nearly $4,000 in unpaid rent and fees.

The tenants said they had lost their jobs during the pandemic.

Gregory's attorney unsuccessfully argued that the governor exceeded his authority, violated the Arizona Constitution and failed to compensate landlords for losses during the eviction moratorium.

The Multihousing Association says its challenge to the moratorium is different because it is about the illegal taking of property and Arizona’s contract clause.

“This case is based on the premise that contracts and property rights are enforceable in Arizona, even now, during a pandemic,” said Kory Langhofer, lead attorney for the plaintiffs.

New study shows hit to landlords

The percentage of metro Phoenix renters not paying rent has increased less than 2% from a year ago, according to one survey.

But even a 1% bump creates a big economic ripple, according to Arizona economist Elliot Pollack.

In a new study, Pollack says if 1% of Arizona’s rental households don’t pay rent during the seven-month eviction moratorium, it will cost property owners $87 million in lost rent and eviction fees.

If 15% of renters do not pay rent during the eviction moratorium, property owners would lose $1.3 billion, according to Pollack.

 A survey from the National Multifamily Housing Council and data firm RealPage shows about 87% of Valley renters made full or partial rent payments at the beginning of August 2019, compared to 85.4% at the beginning of this month.

“Property owners statewide, from mom and pops to large rental communities, have done everything they can to work with residents,” Gilstrap LeVinus said. “This is about a serious crisis that needs to be fixed immediately, because providing free housing while receiving no relief for seven months is not sustainable and not fair.”

Reach our housing reporter at Catherine.Reagor@arizonarepublic.com or 602-444-8040. Follow her on Twitter @Catherinereagor.

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