Court to hold hearing on SF’s new tenant payment requirement

On July 24, 2014, Pacific Legal Foundation (PLF) attorneys filed a complaint in federal court on behalf of Daniel and Maria Levin (Levins) and several other plaintiffs challenging San Francisco’s new Tenant Relocation Assistance Ordinance.  The Levins and other property owners want to stop being landlords so they can use their property for non-rental purposes.  The California legislature has guaranteed that property owners indeed have the right to go out of the rental business by passing the Ellis Act in the 1980’s.  But the City of San Francisco recently enacted a law that charges property owners who use the Ellis Act to take property of the rental market outrageous sums of money, sums which go to the owner’s tenants.

The new law specifically provides that before rental owners can take their property off the market, they must pay their displaced tenants the difference between the tenant’s annual rent-controlled rate and the amount it would cost the tenant to rent a comparable unit at open market rates, and then multiple that amount by two. The City has published a schedule which calculates the exact amounts owners must pay.  Under the schedule, the Levins must pay their single tenant over $117,000 before they can legally withdraw the lower half of their duplex from the rental market under the Ellis Act and use it for visits by family and friends.  A short video describing the Levins’ situation is here.

The City calls the Ellis Act payment requirement “tenant relocation assistance,” but the truth is that tenants are not bound to use the money for relocation or rent; they can use it for any personal purpose they want!   Moreover, the tenant’s “right” to the payment is not based on economic need.  Rich tenants on Nob Hill, as well as tenants of more modest means, are entitled to a large pay out from their landlords under the new San Francisco law. Ultimately, the law forces rental property owners like the Levins to choose between transferring their savings to their tenants or submitting to the continued, compelled occupancy of their property, and the corresponding duty to continue serving as landlords, with all the practical and legal obligations that entails.

With PLF’s help, the Levins and others sued the City in July, alleging that the tenant payment scheme is unconstitutional, in part because it unconstitutionally takes the property owners’ private property.   PLF attorneys have now filed a motion for a temporary restraining order and preliminary injunction to stop the enforcement of the new law against the Levins and other plaintiffs.   A hearing has been scheduled for this Friday, August 22, 2014, before Judge Charles Breyer, brother of Supreme Court Justice Stephen A. Breyer.  At the hearing, the judge is expected to rule on whether the S.F. law should be temporarily halted while the case is more fully litigated over the coming months.

Stay tuned.