SAN FRANCISCO (CBS SF) — A state appeals court has struck down the city of San Francisco’s most recent law on how much relocation assistance landlords must pay to tenants evicted under the state’s Ellis Act.

A three-judge panel of the Court of Appeal in San Francisco on Tuesday unanimously ruled that the 2015 law, which allowed payments of up to $50,000, was pre-empted by the Ellis Act because it “placed a prohibitive price on a landlord’s right to exit the rental market.”

John Cote, a spokesman for City Attorney Dennis Herrera, said, “We’re disappointed. We’re reviewing the opinion and evaluating the options.”

Possible next steps by the city could include an appeal to the state Supreme Court.

California’s 1985 Ellis Act allows landlords to remove properties from the rental market and evict tenants who occupied them. It also allows cities to enact measures to alleviate the impact on tenants.

The 2015 law enacted by the San Francisco Board of Supervisors was the latest in a series of relocation assistance laws passed by the city since 1994 with the aim of easing the burden on evicted tenants facing a tight and expensive housing market.

The 2015 law scaled back on a more generous 2014 law that was struck down by a federal judge in San Francisco.

The 2014 ordinance required a payment equal to two years’ worth of the difference between the tenant’s current rent and the cost of comparable housing in the city. It had no limit on the total payment and no requirement for the payment to be used for housing.

U.S. District Judge Charles Breyer said in 2014 that measure amounted to an unconstitutional taking of property without just compensation.

The 2015 revision of the law set a limit of $50,000 per tenant and required that the money must be used for relocation purposes.

It was challenged in two San Francisco Superior Court lawsuits by several property owners.

The appeals court said that despite the scaling-down of the 2015 law, it still amounted to a prohibitive price for landlords.

“A property owner’s lawful decision to withdraw from the rental market may not be frustrated by burdensome monetary exactions from the owners to fund the city’s policy goals,” Justice Barbara Jones wrote for the panel.

Cote said the relocation assistance requirement will now revert to an earlier law passed by the Board of Supervisors in 2005, which limits payments to $6,286 per tenant or $18,858 per unit regardless of the number of tenants.

The 2015 law never went into effect because the city was appealing the federal court ruling striking down the 2014 law. Last week, the 9th U.S.  Circuit Court of Appeals dismissed that appeal, saying that it was moot in view of the passage of the 2015 law.

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