Edamerica, Inc. v. Superior Court

INTRODUCTION

In landlord-tenant transactions, “key money” is generally considered an up-front bonus payment made by the tenant in order to secure the tenancy. In January 2002, Civil Code section 1950.8, subdivision (b), made it unlawful for any person “to require, demand, or cause to make payable any payment of money, including, but not limited to, ‘key money,’ ... as a condition of initiating, continuing, or renewing a [commercial] lease or [nonresidential] rental agreement, unless the amount of payment is stated in the written lease or rental agreement.”

The issue presented in this case is whether a landlord may be liable for simply demanding “key money” as a condition of extending or renewing an existing lease or rental agreement, even when the tenant rejects the demand and the parties do not enter into the desired new agreement. Based upon the legislative intent behind section 1950.8, we hold it is not unlawful for a landlord to merely make a demand for “key money.” Rather, in order for liability to attach under the statute, a plaintiff must allege that the landlord (1) made a demand for “key money” as a condition of initiating, continuing or renewing a lease or…