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The owners of the restaurant Schmidt’s on 20th and Folsom streets are in a bit of a schnitzel.

The upstairs neighbor has posted a sign with an arrow pointing to Schmidt’s.  “Bad Neighbors,”  it announces to anyone walking by.  For their part, the owners of the Berlin-style restaurant, say  the neighbor causes noise disturbances almost daily.  The landlord has told the owners that he doesn’t want to be involved and the police say they can’t yet jump in.

“We don’t know what to do,” said co-owner of the restaurant David Pierce.

“It’s not good advertisement,” added the other owner, Christiane Schmidt, referring to the sign that went up last weekend during Carnaval.

The upstairs neighbor Patricia Kerman and property owner Kaushik Dattani could not be reached for comment.

Schmidt’s relationship with Kerman has been bad since Schmidt’s opened in May 2009. Back then Kerman complained about a kitchen fan that made too much noise – Schmidt said that while it took her three weeks to make repairs, she was able to muster the $2,000 to do it.

It did not stop there. Kerman called a restaurant inspector and staff members have allegedly seen her talk to customers before they come in and telling them she became ill from eating there, Schmidt said.

Kerman was described as a woman in her late 50s and has lived there for at least the 14 years that Dattani has owned the building.  Before Schmidt’s, the location was left vacant by El Farito market for more than a year.

Schmidt, originally from Germany, said she doesn’t know why Kerman thinks she’s a bad neighborhood. Schmidt also owns Walzwerk, on South Van Ness Avenue.

Ravick Ruiz, a neighbor who has lived next door for eight years, defended Schmidt’s.

“At first, I was a concerned that they were going to play loud music and have people outside making noise,” he said. “But they didn’t so I think they are good neighbors.”

Another neighbor, who knows Kerman and wanted to be anonymous for fear of retaliation, said Kerman’s assessment is unsubstantiated.

Because of the circumstances, restaurants in mixed-used buildings like Schmidt’s find themselves with no real options to solve their dispute unless it escalates to the point where more serious legal action is required.

“We don’t want to get to that point,” Pierce said. “And certainly it won’t escalate because of us.”

Pierce and Schmidt took the police’s advice to mediate the problem through the Community Boards, but to no avail.

Kay Suk, of the Community Boards  Program said there is nothing they can do if one of the parties refuses to go through mediation — which is so far the case with Kerman.

The community board process requires both parties to meet at a neutral location with three mediators to discuss the issues. The Community Boards have an 80-90 percent success rate, Suk said.

Schmidt said they had a meeting with their landlord, but his only suggestion was that they call police when there is noise.

The owners took his advice, but they can do very little with noise complaints and the “bad neighbor” sign is freedom of speech.

The sign is already having an impact, Schmidt said.

The staff has had to explain the problem to customers and at one point someone came inside and used sign language to say shame.

On Thursday afternoon, Schmidt’s called the police again for a noise complaint that was described by Schmidt as someone dropping a bowling ball.

Kerman did not open the door when they knocked and the officer said to keep calling to document the incidents. At some point the restaurant owners will be able to file a restraining order, the officer told them.

This is something Schmidt said she doesn’t want to do, but will. Moving is also not an option.

Pierce and Schmidt have spent some $100,000 on the restaurant, and Schmidt said she is in debt from opening Schmidt’s.

“I don’t want to go – I like this corner,” Schmidt said.