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DOWDALL LAW OFFICES
<br />A PROFESSIONAL CORPORATION
<br />ATTO R N EYS AT LAW
<br />City Council of the City of Santa Ana
<br />City of Santa Ana
<br />September 16, 2021
<br />Page 42
<br />money."" The practice is universally regarded as immoral and socially reprehensible. New York
<br />criminalizes extractions of "key money" as a third degree misdemeanor."
<br />The law, `designed to prevent the exploitation of those in desperate need of rental
<br />accommodations', People v. Greenwald, 299 N.Y. 271, 86 N.E.2d 745, 746, is
<br />aimed at the recipient of the bonus, not against the person who under stress yields
<br />to the exaction. The one who pays is a victim, not a participant in the crime.
<br />Gardner v. Miller, 2 Misc.2d 788, 788, 153 N.Y.S.2d 170, 171 (1956) (emphasis supplied).
<br />The "victim" is the next generation tenant, the newcomer who needs affordable housing
<br />but is locked out by high selling prices. `Monetizing' the rent -controlled lease at sale means that
<br />the home is sold for much more than real value because a premium lease is included it is naked
<br />key money. Yet "key money" is immoral, predatory and illegal.19 Even the Supreme Court has
<br />acknowledged the widespread condemnation of "key money."20 "Key money" capitalizes rent
<br />control benefits from the desperately needy.21 It exists to exploit a market which is already
<br />" Stephen Malpezzi, Welfare Analysis of Rent Control with Side Payments: a Natural
<br />Experiment in Cairo, Egypt, Regional Science and Urban Economics 28 (1998) 773-795.
<br />" Mckinney's Consolidated Laws o fNew YorkAnnotated Currentness Penal Law § 180.55
<br />("A person is guilty of rent gouging in the third degree when, in connection with the leasing, rental
<br />or use of real property, he solicits, accepts or agrees to acce t from a person some consideration of
<br />value, less than two hundred fifty dollars, in addition to lawful rental and other lawful charges, a on
<br />an agreement or understanding that the furnishing of such consideration will increase the possibility
<br />that any person may obtain or renew the lease, rental or use of such property, or that a failure to
<br />furnish it will decrease the possibility that any person may obtain or renew the same. ¶Rent gouging
<br />in the third degree is a class B misdemeanor").
<br />" People v. Greenwald, 299 N.Y. 271, 281, 86 N.E.2d 745 747 (1949) ("While the fact
<br />issue raised may in the abstract seem difficult, it is of a type with which the criminal courts are
<br />entirely familiar, of a sort with which they are constantly called upon to deal. A similar issue is met
<br />in the prosecution of a labor racketeer for extortion, when the defendant concedes receipt of the
<br />alleged extortionate payment but claims that it was accepted in return for some legitimate service
<br />to labor or management. Cf., e. People v. Parkinson, 297 N.Y. 749,77 N.E.2d 516; People v. Fay,
<br />296 N.Y. 510, 68 N.E.2d 453'.,
<br />20 "Most apartment tenants do not sell anything to their successors (and are often
<br />prohibited from charging "key money"), so a typical rent control statute will transfer wealth from
<br />the landlord to the incumbent tenant and all future tenants." Yee v. City of Escondido, 112 S.Ct.
<br />1522, 1530 (1992).
<br />21 "hi apartment rent control, `key money' is typically paid to the landlord or her agent,
<br />while in mobile home rent control the value of the regulated site rent is paid to the vacating tenant.
<br />Analytically this makes no difference." Mason, Carl, & Quigley, John M., supra at 191, n.4. And
<br />see, id. at 192 ("The tied sale of the coach together with the right to occupy a site is analytically
<br />equivalent to the transfer of rental rights together with a payment of "key money' ` in apartment rent
<br />control").
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