Horizon Homes of Davenport v. Nunn

Decision Date21 July 2004
Docket NumberNo. 02-1420.,02-1420.
Citation684 N.W.2d 221
PartiesHORIZON HOMES OF DAVENPORT, Appellee, v. Sylvia NUNN, Appellant.
CourtIowa Supreme Court

Tommy Miller of H.E.L.P. Legal Assistance, Davenport, for appellant.

Steven J. Havercamp of Stanley, Lande & Hunter, Davenport, for appellee.

LAVORATO, Chief Justice.

In this discretionary review from a forcible entry and detainer action, we must decide whether good cause is necessary for the nonrenewal of a lease for an apartment in a federally subsidized housing project. In a small claims ruling, the magistrate concluded such good cause was necessary. On appeal to the district court, the district associate judge ruled otherwise. We disagree with the latter ruling, and for that reason reverse.

I. Background Facts and Proceedings.

The federal government has established various types of programs that provide through various mechanisms subsidized rental units for low income families. See U.S. Dep't of Hous. & Urban Dev., Programs of HUD (2003) (outlining programs). The statutory basis for the federal low-income housing program in this case is split between Section 8 of the United States Housing Act of 1937, amended by 42 U.S.C.A. § 1437f (West 2001) [hereinafter Section 8] and Section 236 of the National Housing Act, amended by 12 U.S.C.A. § 1715z-1 [hereinafter Section 1715z-1].

As described by one court, Section 8

is designed to provide safe and sanitary low-income housing to qualified recipients. The general philosophy of Section 8 is that appropriate housing can best be supplied through a combination of federal, local, and private efforts. The Secretary of Housing and Urban Development ("HUD") is the federal officer primarily responsible for implementing Section 8.
Section 8 operates in part through the existing housing assistance payments ("HAP") program. The HAP program is a rent subsidy program. It employs a system of contracts involving HUD, local public housing authorities ("PHA's"), private landlords and qualified tenants.

Gallman v. Pierce, 639 F.Supp. 472, 473 (N.D.Cal.1986) (citations omitted).

There are two types of assistance for renters under the federal housing programs: project-based assistance and tenant-based assistance. Project-based assistance is tied to a particular housing project. Truesdell v. Philadelphia Hous. Auth., 290 F.3d 159, 161 n. 2 (3d Cir.2002). Under project-based assistance, the Department of Housing and Urban Development (HUD) makes housing assistance payments to owners to make up the difference between what the tenant pays in rent and the total amount of rent for the housing unit. Participants in the program make rental payments based on their income and ability to pay. Id. at 161.

In contrast, under tenant-based assistance, HUD pays the participants vouchers entitling the participant to select a unit anywhere in the public housing authority's (PHA) jurisdiction. Id. at 161 n. 2.

Like Section 8, "Section 236 of the National Housing Act, as amended, (12 U.S.C.A. § 1715z-1) is a statutory scheme seeking to achieve improved housing at reduced rentals for low and middle income families." Green v. Copperstone Ltd. P'ship, 28 Md.App. 498, 346 A.2d 686, 690 (1975). Under Section 236, private owners of multi-family apartment complexes receive subsidies from HUD in the form of reduced interest on the mortgages covering the apartment complexes or housing payments for tenant-based assistance or project-based assistance. See 12 U.S.C.A. § 1715z-1 et seq.; 24 C.F.R. § 247.2 (2001) (defining a subsidized project as one receiving the benefit of subsidy in the form of below-market interest rates, interest reduction payments, or below market interest rate direct loans).

Sylvia Nunn entered into a lease agreement with Horizon Homes of Davenport (Horizon) in November 1997. According to the lease, Nunn was a qualified Section 8 recipient and received project-based assistance from HUD in the form of a reduced rent obligation to Horizon. As to this reduced rent obligation, the lease stated: "This lower rent is available either because the mortgage on this project is subsidized by the Department of Housing and Urban Development (HUD) and/or because HUD makes monthly payments to the Landlord on behalf of the Tenant." Accordingly, Horizon is bound by the provisions of Section 1715z-1 and the regulations implementing this statute. See 12 U.S.C.A. § 1715z-1; 24 C.F.R. § 247.2.

Paragraph two of the lease provided:

The initial term of this Agreement shall begin on 11/03/97 and end on 10/31/98. After the initial term ends, the Agreement will continue for successive terms of one month each unless automatically terminated as permitted by paragraph 23 of this Agreement.

(Handwritten in original.)

Paragraph 23 of the lease as it pertained to the tenant and landlord provided in relevant part:

23. Termination of Tenancy:
a. To terminate this Agreement, the Tenant must give the Landlord 30-days written notice before moving from the unit....
b. Any termination of this Agreement by the Landlord must be carried out in accordance with HUD regulations, State and local law, and the terms of this Agreement. The Landlord may terminate this Agreement only for:
(1) the Tenant's material noncompliance with the terms of this Agreement;
(2) the Tenant's material failure to carry out obligations under any State Landlord and Tenant Act; or
(3) criminal activity that threatens the health, safety, or right to peaceful enjoyment of the premises by other tenants or any drug-related criminal activity on or near such premises, engaged in by a tenant, any member of the tenant's household, or any guest or other person under the tenant's control; or
(4) expiration of the section 8 Housing Assistance Payments Contract between the Owner and HUD; or
(5) other good cause, which includes, but is not limited to, the Tenant's refusal to accept the Landlord's proposed change to this Agreement. Terminations for "other good cause" may only be effective as of the end of any initial or successive term.

Nunn satisfied the initial term of the lease and was living on the premises on a month-to-month basis. On October 9, 2001, Horizon notified Nunn in writing that it would not renew her month-to-month lease as of midnight on November 30, 2001. Horizon gave no reason for its refusal to renew Nunn's lease. Nunn did not vacate the premises, prompting Horizon to file a small claims action for forcible entry and detainer.

Following a hearing before Magistrate Cynthia Z. Taylor on January 8, 2002, the magistrate denied the action. Among the reasons for denying the action, the magistrate noted that the HUD handbook on termination provides that "Owners must not refuse to renew a lease solely because a lease term has expired." The magistrate also noted that HUD regulations for public housing, Section 8 project-based programs specifically prohibit eviction based solely on the expiration of a lease.

Horizon appealed the ruling. Following a hearing, District Associate Judge Mary E. Howe reversed the magistrate's ruling. The judge concluded that under Iowa law "a nonrenewal of the lease is allowed" and "[o]nce the initial lease term has expired [Horizon] can give the 30-day notice to [Nunn]." The judge also concluded that Nunn's position that "the lease cannot be nonrenewed when it goes to a month-by-month situation would be contrary to Iowa law" and there is "no federal law or federal statute that does not allow the nonrenewal of the lease once it is on a month-to-month basis."

We granted Nunn's application for discretionary review.

II. Issues.

Nunn raises the following issues:

(1) The federal statute implemented by federal regulations and the HUD handbook mandate that a month-to-month project-based lease can be terminated by the owner only for "good cause."
(2) Nunn's month-to-month project-based lease provides that the lease can be ended by the landlord only by a showing of "good cause."
(3) There is no Iowa law that prohibits a "good cause" requirement to terminate a lease.

In response, Horizon cites three arguments to support the district associate court's ruling. First, Nunn's interpretation runs contrary to other states' interpretation of the federal regulations. Second, the regulations clearly apply only to tenant evictions, not to natural expirations of leases. Last, Nunn's interpretation of the regulations would create a perpetual lease which Iowa cases strongly disfavor.

III. Scope of Review.

Because Iowa Code section 648.5 (2001) provides that forcible entry and detainer actions are to be tried as equitable actions, our scope of review is de novo. Iowa R.App. P. 6.4. The interpretation of statutes is reviewed for errors at law. State v. McCoy, 618 N.W.2d 324, 325 (Iowa 2000).

IV. Analysis.

A. Background. According to one writer, "[w]hen local public housing authorities ("PHAs") were created in response to the United States Housing Act of 1937 (to provide local administration for public housing programs), they were subject only to state landlord-tenant laws." Marc Jolin, Good Cause Eviction and the Low Income Housing Tax Credit, 67 U. Chi. L.Rev. 521, 530 (2000) (footnotes omitted) [hereinafter Jolin]. As a result, PHAs "enjoyed almost unchecked power to evict tenants." Id. This unchecked power ended with the Supreme Court's ruling in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), when the Court held "that terminating a recipient's welfare benefits without providing the recipient with a pre-termination eligibility hearing constituted a violation of that person's due process rights." Id. at 531.

Shortly after Goldberg, federal circuit courts extended the Goldberg reasoning to the public housing context, holding that the government could not deprive a tenant of such housing of a continued tenancy without affording the tenant adequate procedural safeguards. Id. (citing Escalera v. New York Hous. Auth., 425 F.2d 853, 861 (2d Cir.1970)). The Fourth Circuit in Joy v....

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