End of Chevron Doctrine Will Cause Problems for CRE

Companies that rely on a predictable regulatory future expose themselves to significant risk.

Last week, the Supreme Court, ruling in two cases—Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo—overturned Chevron’s deference. It sets up a likely wave of regulatory change.

Many in business may be excited because they see this as a reduction in administrative regulations. In some cases, it may be. However, it may open the door to bigger problems for corporations.

Chevron deference came in 1984 in Chevron USA, Inc. v. Natural Resources Defense Council, Inc. It was “one of the most important principles of administrative law for 40 years,” he said. According to the Legal Information Institute at Cornell Law School: Sometimes when Congress writes laws, there can be confusion about the structure of the language. The Supreme Court has established a test that when an agency has administrative authority in an area of regulation and interprets ambiguous language in a reasonable way, the court will show deference to the agency.

Where there is ambiguity in the statute, “the authority of an administrative agency to administer a program created by Congress necessarily requires the formulation of policy and the enactment of regulations to fill any gaps left, expressly or impliedly, by Congress,” as Justice John Paul Stevens wrote for the majority.

Later decisions have narrowed the scope of Chevron’s deference in various ways. But the central decision is no longer relevant. In the latter decision, Chief Justice John Roberts wrote in the court’s decision: “Perhaps most fundamentally, the Chevron presumption is flawed because agencies have no special authority to resolve statutory ambiguities. Courts do.”

This decision exposes many existing laws to legal challenge and potential change.

“Because federal agencies no longer have their thumbs on the scale, many predict the Loper Bright opinion will lead to fewer and less comprehensive federal regulations and an increase in legal challenges to regulations affecting the real estate industry, including challenges to regulations issued under the Fair Housing Act, the Clean Water Act and the Comprehensive Environmental Response, Compensation, and Liability Act, among others,” Wyatt Kendall, a partner at Morris, Manning & Martin, told GlobeSt.com.

“The impact on this industry will likely be less than others because CRE is primarily regulated by state and county laws, statutes and ordinances, not federal law,” Raul Gastesi, partner and co-founder of the law firm Gastesi Lopez & Mestre, told GlobeSt.com. “Federal environmental laws could be violated, allowing CRE to continue to expand in undeveloped areas. Without Chevron, it will have an impact on regulation and oversight by limiting the reach of federal agencies in regulating commercial industries, which could allow CRE to continue to expand. In most cases, those in the CRE industry should wait and see what happens in other sectors/industries related to real estate, such as labor, environmental, construction, etc.”

However, as Kendall noted, “while some in the real estate industry may applaud these results, the real estate industry itself should also remain cautious about courts taking a greater role in interpreting statutes without deference to agencies, as a less predictable regulatory environment may ensue in the future.”

Courts in different jurisdictions could theoretically issue different rulings on the interpretation, making it difficult to reach a final decision through appeals.