U.S. Circuit Court Upholds the Requirement of Just Compensation to Landlords from COVID Eviction Moratoriums
On June 6, 2025, a U.S. federal appeals court ruled that the U.S. government may have to face property damage claims by landlords from a COVID-era eviction moratorium. In the case Darby Development Company Inc. et al. v. United States, No. 22-1929, residential property owners sued under the 5th Amendment’s Takings Clause which prevents the government from taking private property without providing just compensation.
On March 27, 2020, Congress enacted the CARES Act which imposed an eviction moratorium that prevented landlords from evicting tenants who were delinquent in paying rent. This initiative was extended by a September 2020 order by the Centers for Disease Control and Prevention (CDC) to prevent the spread of COVID-19 by keeping tenants housed. In August of 2021, the Supreme Court concluded that the CDC had exceeded its statutory authority through this moratorium in Alabama Association of Realtors v. Department of Health and Human Services, 594 U.S. (2021). However, the court did not decide whether the eviction moratoriums are takings requiring just compensation, leading to the key issue in Darby.
In Darby, Plaintiff argued that the eviction moratorium constituted a physical taking of their private property for public use as the government regulations prevented them from evicting non-rent paying tenants. The government responded that the moratorium did not constitute takings claims as it “merely regulated the landlord-tenant relationship” (Darby Development Inc. et al v. United States, US Court of Appeals, Fed Cir. No. 22-1929). The court disagreed, concluding that the eviction moratorium did constitute a physical taking requiring just compensation.
Plaintiff-Appellants relied on precedent set in Cedar Point Nursery v. Hassid, 594 U.S. (2021), where it was held that the right to exclude is an essential aspect of property ownership, and government actions that infringe on this right require just compensation. In this case, labor union organizations were given access to an employer’s property by a state regulation. The court reasoned that the state regulation infringed on the employer’s right to exclude access to their property, therefore just compensation was required. Because the eviction moratorium at issue in Darby infringed on landlords’ right to evict tenants who were not paying rent, the court concluded that the “occupation” was physical and therefore requires just compensation.
In Darby, the government relied on precedent set in Yee v. City of Escondido, 503 U.S. 519 (1992). In this case, owners of a mobile home park sued over rent-control ordinances that limited the bases upon which a park owner could terminate a mobile homeowner’s occupancy in the park. Notably, termination based on nonpayment of rent was permitted. The Supreme Court concluded that no physical taking occurred in Yee, as the government did not require the park owners to evict tenants and submit to the occupation of their property. Park owners were not required by the government to house tenants, providing the necessary distinction between Yee and Cedar Point Nursery that the appeals court relied on in Darby.
For property owners in New Jersey, the statute of limitations for “inverse condemnation” claims is typically 6 years from the date the taking or damage occurred. Because it has only been 5 years since the commencement of the eviction moratorium, the court’s recent decision may lead to more claims arising from New Jersey landlords. In Russo Farms, Inc. v. Vineland Board of Education, 144 N.J. 84 (1996), the Supreme Court of New Jersey held that the 6-year statute of limitations period can begin at each “event” that represents a taking. In the context of the COVID-19 eviction moratoriums, the event would likely be the commencement of the evictions freeze. A separate eviction moratorium was put into place at the state level in New Jersey, which lasted until January 1, 2022.
On March 5, 2025, we discussed the potential impacts of a Supreme Court decision regarding just compensation and the eviction moratorium, We discussed how New Jersey property law interacts with constitutional protections at the federal level, and the recent decision of the federal appeals court has the potential to significantly impact how eminent domain proceedings operate in the state.
Considering the recent decision of the federal appeals court, the United States government may ask the Supreme Court to intervene. Darby significantly impacts the scope of physical takings requiring just compensation and the emergency powers of the government to regulate private agreements, such as leases between landlords and tenants. Although just compensation for physical takings is a constitutional guarantee, requiring it for all COVID-19 eviction moratoriums has the potential to limit the emergency powers of the government and will have significant impacts on the scope of what is considered a physical taking in future cases.
The author acknowledges the assistance of Alexandra Schraufnagl, a summer intern at McKirdy, Riskin, Olson & DellaPelle, in preparing this article. Ms. Schraufnagl is a member of the Class of 2027 at Providence College.
