ARE THE WHEELS COMING OFF OF GOVERNMENT-MANDATED COVID “RELIEF”?

Howard Iten is a retired auto-mechanic and Marine Corps veteran who served in Vietnam. After nearly three decades of serving the Lawndale community with his auto-mechanic business, he likely never thought he’d be in a Federal legal battle at the forefront of government overreach. In Howard Iten v. County of Los Angeles, currently on the docket of the Central District of California Federal Court, Iten is fighting for property rights against the “emergency powers” that have befallen California during this pandemic. After retiring from the auto-mechanic business, he leased his auto-shop building to a franchisee in order to supplement his and his wife’s savings and Social Security income.

In March 2020, the City of Lawndale and Los Angeles County enacted moratoriums on commercial lease evictions, a circumstance that his leasee took full advantage of starting the next month. Despite being in full operation as an “essential business” the entire time, the leasee has fallen behind over $30,000 in rent. This rental income is a significant portion of Iten’s monthly income. Iten is also unable to collect any late fees or interest on this back-rent, so he has essentially been stuck providing a free loan to his tenant for the last year and will be forced to do so for the foreseeable future as well.

The Pacific Legal Foundation has taken up the case pro-bono and is assisting Iten against the encroachment of LA County on his right to freely contract and use his property how he wishes. The complaint was filed on January 19 this year and so far, the County has secured two extensions to delay proceedings. Within the complaint, Iten describes the eviction moratoriums that the County has had in place since March 2020:

“Although the County has amended the moratorium on a nearly monthly basis, since at least September 2020 the moratorium has contained certain key provisions relevant to this action:

(i) no commercial tenant evictions are allowed during the moratorium period;

(ii)  no interest or late fees may be charged for any rent or amounts that came due during the moratorium period;

(iii) commercial tenants with fewer than 10 employees have 12 months from the end of the moratorium period to pay rent that came due during the moratorium; and

(iv) landlords must accept a self-certification of the inability to pay rent for COVID-related reasons from commercial tenants with fewer than 10 employees.”  (Complaint at 6, Iten v. County of Los Angeles, 2021 WL 185088 (C.D.Cal 2021) (No. 2:21-cv-00486)).

Interestingly, the County moratorium is supposed to apply only where a city within the County does not already have a moratorium on evictions. The City of Lawndale, where Iten’s shop is located, has a moratorium. In fact, it is arguably less restrictive on Iten because it requires more than just a self-certification for the tenant to be protected.  

“Thus, a commercial tenant in the City of Lawndale who can self-certify but who cannot provide documentation of the inability to pay rent for COVID-19-related reasons is not protected by the Lawndale ordinance but is protected by the County’s,” Iten wrote in his complaint.

Iten and Pacific Legal Foundation are arguing that the County has made a law that impairs the obligations of an existing contract, thus infringing on time-honored rights of parties to freely contract. This impairment has cost Iten substantial commercial damages. The complaint does concede that “fighting the spread of COVID-19 is a legitimate and significant governmental interest.” It argues, however, that there is no reasonable relationship that connects the infringement of Iten’s commercial rights to the efforts to combat the pandemic.

The case has garnered some media attention in real estate news outlets. It is also being watched closely, as a ruling in this commercial case may be different than a similar ruling for LA County’s residential eviction moratorium. In November, Federal judge Dean Pregerson, who was recently assigned Iten’s case, ruled that the County’s residential eviction moratorium was to remain in place as he “found no evidence of irreparable harm being done to [apartment] landlords.” The Federal case would only be applicable to the parties at hand. However, a ruling for Iten here, if later challenged and affirmed at the 9th Circuit, could have widely applicable impacts on government overreach during the pandemic.  The 9th Circuit encompasses Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington.

Mr. Iten and his legal team at Pacific Legal Foundation are up for a fight. “I think it’s wrong that the burden is placed on property owners, while tenants can take advantage of the situation,” Iten said. “At least I owned my property free and clear. I sympathize with those landlords who hold a mortgage.”  

The case will be an interesting watch over the coming months for those interested in property rights in California. Fortunately, most of the reactionary overreach measures taken by state and local governments will be lifted soon, but unfortunately their effects on our citizens will long-after be suffered… and litigated. Best of luck to Iten and the PLF team!

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