The Governor has issued an Executive Order that permits commandeering of hotels and other places of temporary residence for the state’s response to COVID-19.

By Winston P. Stromberg, Lucas I. Quass and Cody M. Kermanian

As part of California’s continued response to the COVID-19 outbreak, on March 12, 2020, Governor Gavin Newsom issued Executive Order N-25-20, which, among other measures, permits the state to commandeer real property, such as hotels, for the treatment and quarantine of COVID-19 patients. Specifically, the Executive Order provides as follows:

The California Health and Human Services Agency and the Office of Emergency Services shall identify, and shall otherwise be prepared to make available — including through the execution of any necessary contracts or other agreements and, if necessary, through the exercise of the State’s power to commandeer property — hotels and other places of temporary residence, medical facilities, and other facilities that are suitable for use as places of temporary residence or medical facilities as necessary for quarantining, isolating, or treating individuals who test positive for COVID-19 or who have had a high-risk exposure and are thought to be in the incubation period.

The Governor’s authority to commandeer private property in response to the COVID-19 outbreak is vested in California Government Code, Section 8572, pursuant to which “the Governor is authorized to commandeer or utilize any private property or personnel deemed by him necessary” in carrying out the Governor’s statutory responsibilities during a state of emergency. Under such circumstances, the state must “pay the reasonable value” of any property it commandeers

At this time, the state has not issued further guidance pertaining to this matter or clarified how it would calculate “reasonable value” for purposes of the Executive Order. In the related context of eminent domain, the government is required to pay “just compensation” in return for any real property taken, which is intended to place the owner in the same economic position had the property not been taken. Whether the state proposes to employ a similar methodology for properties commandeered pursuant to the Executive Order remains unclear.

At this time, the state has not issued further guidance pertaining to this matter or clarified how it would calculate “reasonable value” for purposes of the Executive Order. In the related context of eminent domain, the government is required to pay “just compensation” in return for any real property taken, which is intended to place the owner in the same economic position had the property not been taken. Whether the state proposes to employ a similar methodology for properties commandeered pursuant to the Executive Order remains unclear.

On March 17, the state legislature approved California Senate Bill 89, which authorizes US$500 million in emergency funds for the state’s COVID-19 response.

On March 18, the Governor announced that the state had executed two hotel leases, totaling 393 hotel rooms, in Oakland for the isolation of homeless individuals who have tested positive for COVID-19 or are symptomatic, or are otherwise at significant risk.

Also on March 18, the Governor made US$100 million of the state’s emergency funds directly available to local governments for shelter support and emergency housing to address COVID-19 among the homeless population. An additional US$50 million was made available to local governments to purchase travel trailers and lease rooms in hotels, motels, and other facilities to provide immediate isolation placements throughout the state for the homeless.

Latham & Watkins is available to help guide businesses that have been contacted by the state regarding the use of property to assist with the COVID-19 emergency response.  Visit Latham’s COVID-19 Resources page for additional insights and analysis to help navigate the legal and business issues arising from the global pandemic.