The city of San Francisco has lost its bid to reopen a case over a “confiscatory” law it adopted that essentially forced landlords to implement a massive transfer of wealth to tenants if they wanted to change the use of their property.

The 9th U.S. Circuit Court of Appeals this week rejected the city’s attempt to overturn the Pacific Legal Institute’s federal district court victory in 2014 over the city’s since-repealed Tenant Relocation Ordinance.

It was a  “confiscatory law that barred landlords from removing their units from the rental market unless they paid huge sums to their tenants,” Pacific Legal said.

PLF challenged the ordinance on behalf of, among others, Dan and Maria Levin, who live in the upstairs unit of their two-story home. The Levins were seeking to use the lower unit for friends and family, but they would have had to pay their tenant as much as $118,000 for the ability to do so.

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The case originally was decided in 2014 when U.S. District Court Judge Charles Breyer found the law was unconstitutional because landlords were ordered to pay for a social problem that they didn’t cause – a shortage of rental properties and high prices.

The city soon repealed the law, yet “persisted in seeking to have Judge Breyer’s ruling overturned,” PLF explained.

The appellate court, however, in an unpublished decision, said the law was gone and the case was over.

“The 9th Circuit was correct not to let the city draw it into a pointless decision on a law that is long gone,” said PLF Senior Attorney J. David Breemer. “Moreover, everyone who values property rights should be glad that Judge Breyer’s decision, with its powerful analysis and application of constitutional protections, was left undisturbed.”

Also involved in the case were the San Francisco Apartment Association, the Coalition for Better Housing and Parklane Associates, owner of an apartment building subject to the ordinance.

Bremmer explained: “The city is essentially forcing people to become permanent landlords, by making it wildly expensive to withdraw a unit from the rental market and take possession of their own property. … This law amounts to out-and-out confiscation. But the officials who passed it forgot about one thing: The U.S. Constitution. The Constitution protects property rights for everyone, including rental property owners. Government can’t pull a shakedown on anybody, not even folks who own rental property in San Francisco.”

The payment was calculated based on the difference between the tenant’s current rental payment for the full year – usually at a rent-controlled rate – and the cost of a comparable rental property on San Francisco’s open market.

The Levins already had gone through the city’s process for withdrawing the rental unit from the market, but the city then “slammed them with the new payment requirements that retroactively makes it prohibitively expensive to take their unit off the market,” PLF said.

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