(Reuters) - A federal judge on Friday denied a motion for a temporary restraining order that would have frozen for the plaintiffs a controversial San Francisco city law that makes landlords pay a hefty fee when evicting tenants to take properties off the rental market.
The ordinance, which was passed last month, has caused rising tensions between renters and landlords in the expensive city, and prompted a lawsuit from a couple who say it violates homeowners' privacy and property rights.
Federal Judge Charles R. Breyer denied the motion for a temporary restraining order, which was filed by the Pacific Legal Foundation on behalf of the married couple, Daniel and Maria Levin, and a handful of other property owners.
Breyer said there was no rush that would require a restraining order, but he acknowledged the importance of resolving the issue and set an Oct. 6 date for a hearing to determine whether the ordinance is constitutional.
The Levins own a two-unit house in San Francisco, living in the upper unit and renting out the lower one. They would like to occupy the whole building, but under the new city law would have to pay the tenant $117,000 to evict her.
"We can't afford that fee," Maria Levin said. "We're not flippers, we're not speculators, we just want our home back ... We really feel like we have our hands tied."
Under California's Ellis Act, landlords in the state wanting to get out of the rental business can displace tenants, but the law leaves it to local municipalities to set further guidelines around notification and relocation payments.
The San Francisco ordinance raises the amount landlords must pay from around $5,200 to possibly hundreds of thousands of dollars, according to the groups suing.
David Breemer, an attorney with the Pacific Legal Foundation, said he is confident the law will not be upheld.
"The constitution forbids government from putting you in a position where you can only use your property if you pay a ransom," Breemer said.
Christine Van Aken, deputy city attorney, countered that property ownership is already heavily regulated, and that paying a fee to evict tenants is similar to enforcing rent control or requiring landlords to maintain their properties.
"There are many occurrences when (landlords) have to write checks, sometimes very big checks," she told the hearing. "That's a fact of life."
Amid claims from many residents that they are being priced out of San Francisco's rental market, supporters of the ordinance say it gives landlords an incentive not to sell out to developers who turn around and rent out the same units at higher rates.
(Reporting by Joaquin Palomino; Editing by Daniel Wallis)