Covid-19 – Which Emergency Orders Do I Follow?
With the Coronavirus (Covid-19) pandemic, new rules and regulations concerning public health are being disseminated weekly by federal, state and local authorities. These new rules typically concern crowd size, masks mandates, restrictions on essential and non-essential employees, evictions and how businesses, such as a housing cooperative, are to maintain public spaces and working conditions for its employees and members. It can be confusing to determine which rules and regulations, federal, state or local, apply to your housing cooperative and what to do if there is a conflict between Covid-19 mandates
Hierarchy of Authority
When determining which rules and regulations apply to your cooperative, it is helpful to understand the hierarchy of laws. There is an established hierarchy of authority for laws, rules and regulations that cooperatives and other businesses and people must follow. This hierarchy is not just for Covid-19 and extends to all laws, rules and regulations. Laws from highest to lowest in authority are: 1) federal law, 2) state law and 3) local county or municipal laws. After these laws, a cooperative’s governing documents rank in authority from highest to lowest as follows: 1) articles of incorporation, 2) bylaws, 3) subscription agreement, 4) occupancy agreement and 5) any rules, regulations or resolutions of the cooperative’s board of directors.
Courts interpret the hierarchy of authority to mean that a federal law will control over any contradicting state law or local law. Similarly, a state law will control over any local law or cooperative governing document such as the bylaws or occupancy agreement and so on down the line of authority with each lower in authority rule or law, subservient to any higher in authority.
In practice this means that when the Centers for Disease Control (CDC), a federal agency, bans certain evictions, the CDC’s federal ban will control over any lower state or local laws or rules that may permit those banned evictions. However, when the CDC’s federal ban is lifted or expires, so long as there are no other state or local laws or regulations that ban evictions, the eviction can proceed.
For example, at the time this article was written (and this may be subject to change), Virginia has no state-level ban on evictions. As a result, when the CDC eviction ban is lifted or expires, Virginia cooperatives will be able to evict members.
In contrast, in my firm’s local jurisdiction of Washington, D.C., the D.C. Council banned evictions prior to the CDC’s federal order, and the council will likely keep its ban on evictions after the CDC’s federal order is lifted or expired. As a result, the removal of the CDC’s federal ban will not allow evictions in Washington, D.C., to proceed since the local law will then apply. Similarly, if your state’s governor has banned evictions, the lifting or expiration of the CDC’s federal order will not permit evictions to proceed until the governor’s ban is lifted or expires.
Which State Law Controls?
What if your cooperative is a Delaware corporation but is located in another state? Which governors’ orders control? A cooperative or other business incorporated in Delaware only becomes subject to Delaware’s rules as it relates to the corporate structure and governance of the corporate entity. Therefore, issues related to interpretation of the articles of incorporation and corporate reporting requirements will be governed by Delaware corporate law. Being incorporated in Delaware does not necessarily mean that other Delaware laws or regulations will apply.
If your cooperative is a Delaware corporation operating in another state, it is likely that your cooperative is registered as a foreign corporate entity doing business in the state of its physical location. This physical presence and registration as a foreign entity within the state will make your cooperative subject to the state and local laws of the state that it is located in. Thus, a Delaware cooperative doing business and located in Washington, D.C., will seek eviction in a Washington, D.C., court and be subject to the District of Columbia’s ban on evictions regardless if Delaware permits evictions at the time.
Using Your Cooperative’s Rules and Regulations
While low in the hierarchy, the cooperative’s rules, regulations and board resolutions can provide clarity and assist during these times. For example, your state or local government has issued rules stating that only essential businesses are permitted to be open and has included housing as an essential business. In response, the board can resolve that as a housing cooperative, its staff and other employees are essential and provide a copy of the resolution to its employees as proof that they are essential. The resolution can be used as proof to any challenge that the employee is permitted to conduct business on behalf of the cooperative including traveling to work.
If your state has banned the issuance of late fees for delinquent carrying charges, the cooperative’s board of directors can adopt a resolution to suspend the collection of late fees. Also, if within your state, gatherings or crowds of people are banned, the board of directors can resolve that community areas, gyms, playgrounds, club houses or any other place where residents congregate be closed. Before taking such actions, be certain to consult with your cooperative’s attorney. Some states may require that if you close certain community areas that the residents be reimbursed a portion of their carrying charges used to operate those facilities.
Just remember, when evaluating a rule or law, look towards the hierarchy – first federal, then state, followed by local regulations for any rule or law that may contradict. If so, the rule or law higher in authority will control.
This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.
Daniel Costello practices real estate law at Costello, P.C. in Washington, D.C., working with condominiums, cooperatives, and homeowner associations in Virginia, Maryland and the District of Columbia.