The California Supreme Court has accepted a takings case that threatens the viability of San Francisco's Hotel Conversion Ordinance. The court has decided to hear San Remo Hotel v. City and County of San Francisco, C.A. 1st Div. 5, No. A083530 (see CP&DR Legal Digest, September 2000, October 2000). In an opinion published in two portions, the First District Court of Appeal ruled that the "heightened scrutiny" test applied to the hotel conversion ordinance, meaning there must be a close relationship between the exaction and the project's impact. The court ruled that a lawsuit filed by owners of the San Remo Hotel should proceed in trial court. The hotel owners had argued that the city's ordinance violated state and federal constitutional provisions against taking private property without just compensation. The City's law bars the conversion of residential hotels to tourist use unless the hotel owner replaces the converted units with new affordable housing or pays a substantial mitigation fee. Both sides agreed that imposition of the Nollan/Dolan "heightened scrutiny" test could mean the end of the hotel conversion ordinance. The city would have to provide an "essential nexus" between the permit conditions and the impact of the proposed hotel conversion, as well as a "rough proportionality" between the exaction and the project's impact. Property rights advocates say such a standard is required to prohibit uncompensated takings; the city argues that land-use laws of general applicability need not meet the standard. The Fifth District also remanded to the trial court the factual issue of whether the San Remo was a nonconforming use. If the hotel were a legal nonconforming tourist hotel prior to passage of the hotel conversion ordinance, a $567,000 mitigation fee that the city has tried to impose would seemingly not apply. The Fifth District made clear it thought the San Remo was a tourist hotel at all times and there was no "conversion" involved. Five of seven state Supreme Court justices voted to hear the case. No date for oral arguments has been set.