Bill Barring ‘Key Money’ Fees by Landlords Is Sent to Davis

A bill aimed at quashing so-called key money payments in the Los Angeles garment district has passed both houses of the state Legislature and now is headed to the governor’s desk.

If Gov. Gray Davis signs it, AB 533 would prohibit landlords from forcing commercial tenants to pay money or fees that aren’t specifically stated in the written lease agreement.

Although the law would apply to all landlords renting commercial space in California, it is aimed at curbing the long-standing garment industry practice known as “key money,” in which tenants are required to pay large upfront fees to secure or renew a lease in a prime location.

Fashion district tenants say the fees can amount to tens of thousands of dollars, are mentioned rarely in lease documents and frequently are demanded in cash.

The murky practice gained prominence last year when two Korean clothing wholesalers filed suit against their landlords.

Those cases were settled out of court, but the tightknit Korean garment community rallied around the issue.

Assemblyman Gil Cedillo (D-Los Angeles) sponsored the legislation, which would subject landlords to treble damages and other civil penalties for trying to extract key money or other payments not specified in lease documents.