CAPITAL

THE GREATEST RACKET EVER TOLD

"Come into my parlor, and be sure to bring a large deposit"

       The following story is true.  Only the names have been changed to protect the writers.  It unfolds hundreds of times each year in Los Angeles.  Though the city was named after agents from up above, it is more often under siege by those from down below.
       It begins when the unsuspecting victim rents an apartment in the spider's web.  The law allows the predator to suck a security deposit from his prey up front.  The reason for this is to protect the arachnid from bad tenants.  It is a necessary evil, as there are many crooks who pose as renters.  But somehow it neglected to protect the law abiding citizen from the Bad Unscrupulous Landlord Imposter (aka BULI).
       Assume for the moment that the building comes under rent control.  The unit may or may not be ready to occupy, and any needed repairs may or may not have been done prior to the move-in date.  Either way, most necessary maintenance during the term of residency is neglected.  This is partly done in order for the millionaire miser to save the cost of repairs.  The other reason is to soften up the occupant for excrementing.
       This gives the perpetrator two major benefits.  Since he is not legally allowed to frequently jack up the rent to drive them out, the BULI must somehow get rid of the old lower paying tenants when the market rises in order to replace them with new higher paying ones.  In the case of pre-existing long-term residents who may be at a much lower rent level, he has been known to engage in what is called "constructive eviction" to try and coerce them to move.  These occupants will usually become a priority for termination because the predator considers them to be "costing him" even more profits than the others.
       The other benefit is that it also provides him with the opportunity to add another free deposit to his coffers.  Although the law "requires" the predator to return the old renter's deposit, and even allows for damages as a deterrent for stealing it (CC §1950.5), that is NOT what is going to happen!  While it may seem illogical and a poor business practice to cheat and intentionally eliminate good customers, a BULI is more interested in acquiring as much money as possible in the short term than he is in any long term effects.  That is because he is only pretending to be a landlord as he is just temporarily holding the property for the short term profits.  He just wants to suck what he can take from the property and the people, and when he is done he'll stick some real landlord with the results of his mess.
       Many of them seem to buy and sell the buildings back and forth to artificially inflate the price, and frequently reacquire the same real estate at the higher level.  Sometimes they even buy and sell the same property to themselves under another name!  By driving up the price, they not only profit from the inflated equity, but also from the higher rents that can be charged because of that, along with the increased deposit amounts they can steal.  Some of these back and forth transfers may not actually involve the full amount of funds being exchanged.  Tenants just get treated as though they were chaff incidentally caught in the wind of their wake, rather than like the very foundation of the rental industry.

Legal Inconsiderations

       Naturally these deposit thefts leave the BULI open to potential law suits, but they have that covered, too.  For starters, the law only allows for "up to" triple the amount with the statutory damages imposed.  If that award was made every single time they went to court, and one out of every three victims sued them, it would not cost them a cent beyond minimal court expenses.  The fact is, for a number of reasons that will never even happen!
       Many of the temporary judicial officials who decide the vast majority of small claims cases are also landlords themselves, and virtually none of them are tenants.  As humans, most of them begin, consciously or not, with bias against the plaintiff, and do not even have the incentive of an oath of office to encourage them to overcome it.  Since the law does not require the penalty to be imposed, even when a case is decided in the tenant's favor, he still loses because it is rare that any damages or even interest are ever actually awarded.  That means that the crook not only skates without penalty, but even gets out of some of his obligation to the victim.  Yet most plaintiffs feel lucky to have recovered their original investment, despite having had to earn it back again!
       The predator has his song and dance all worked out in advance.  He claims that it was just an oversight, inadvertent, and probably his manager's fault, as if that relieves him of his responsibility.  He acts as if it is just a fluke, a one time occurrence, and his victim is trying to capitalize on a chance to rip-off the poor millionaire.
       Despite totally ignoring the tenants' repeated request for their refund, rudely hanging up on them if they ever catch him by phone, and even going so far as to dare "Why don't you sue me?", his big defense is "I didn't know."  As his victim is inexperienced and concentrating on trying to recover his stolen money, he would never think to research his antagonist's history.
       The bench is generally more interested in disposing of the case than seeing anything as “irrelevant" or "immaterial" as evidence.  Even though he may have been sued for this same thing dozens of times before, they only want to focus on this particular time exclusively.  Even if he appears before a real judge (one who has sworn to uphold the law) or a pro-tem or commissioner who actually tries to rule fairly based on the merits of the case, the chances of being recognized as a repeat offender are slim.  Since he goes to courthouses all over the county and there are so many different judges in each location, he hardly ever comes before the same one often enough to be remembered, and they invariably buy into his repetitious ploy.
       The bottom line is that he will almost never have to pay anything more than occasional court costs over giving back the original deposit.  That means he gets off practically free nearly every time he gets caught and taken to task for it, and is rewarded with the entire amount from victims who don't accomplish this formidable chore.
       The BULI has other distinctive advantages as well since he is quite experienced and gets plenty of practice to employ his strategies, which have been perfected by him and his cohorts for many years.  He is quite familiar with the process and knows he has almost nothing to lose.  He can schedule his time as needed and doesn't even have to bother with it at all until his opponent figures out and meets all the requirements of getting him into court.  He doesn't have to put up a cent unless he loses and can keep using his victim's money until then.
       Each time this takes place, he is going up against a different victim, and so whatever the last one learned from that experience will never be used against him by anyone else.  He only has to face one opponent at a time, so no matter how many of them come after him, he only has to answer for one single action in any given appearance, the same as if there never was any other.  Sometimes he even knows the judge from having appeared before him to evict other tenants.  He also knows he can lie with impunity in court while the naive former tenant will most likely tell "nothing but the truth".  Compromises tend to wind up somewhere between the claimed extremes regardless of whether they are factual or exaggerated.
       The renters have usually never had to go through the court process before, and have no idea what to do, how to do it without making costly mistakes, or how difficult and time consuming it will be.  They have to take time off from work, not just for the hearings, but every time they have to file a form or correct a mistake.  They often have to almost start over, and sometimes wind up finding that the cost to them is more than what they stand to gain by fighting back.  They usually don't allow for indirect expenses such as additional child care, transportation and lost time from work.  Sometimes their job is even jeopardized because of this.  They can't afford to lose, have to put up all the court costs in advance with no guarantee of recovering them, and have the responsibility to make sure everybody does everything right.  Usually they have just recently moved and had to put up another deposit along with overlapping rents and probably at a higher rate.  They may know the deck is stacked against them, but most likely have no idea just how high.
       There is also another distinct advantage for the perpetrator.  Since he has already shown that he has no compunctions about breaking laws, his adversaries will find that he has already done that from the start in order to prevent them from being able to sue.  The law (CC §1962) clearly states that landlords must tell tenants who the people are behind the company that owns the property and where to have them served for suits.  Not only has he violated this one in advance, but he has taken further steps to prevent renters from being able to obtain that information necessary to bring him to court.  Most of them use a fictitious name such as "F. U. Partnership" at a mail drop address with a cell phone number, all of which can be easily changed as needed.  This means that even if victims are willing to pursue him, they will hit another obstacle that often turns out to be too much to overcome.

Playing the percentages

? ? ? ? ? ? ? When you consider that most tenants do not bother to try to sue him in the first place, the profits from his thefts are enormous, especially if he holds control over a lot of buildings. ? Suppose an owner has 50 properties with an average of ten units in each one. ? Let's say he only collects as a deposit $500 per unit, less than one month's rent. ? That means he has amassed a quarter of a million dollars of other peoples?’ money to do with what he likes. ? While only occasional local laws even "require" a tiny interest amount to be repaid, the fact that he keeps practically all of the principle and pays absolutely no interest means that he is actually guilty of grand theft on a grandiose scale. ? ? ? ? ? ? ? While they say that only one in a hundred bother to file complaints, this number is significantly less when it comes to filing lawsuits. ? Although most predators may not have this many holdings, when they work together it can be considerably more. ? You can just increase or reduce these figures proportionately and they will still be approximately correct for the purpose of this example. ? Even if a whopping 10% of his victims sue, and all of them not only manage to get him into court but actually win and collect triple with damages plus maybe $50 in court costs, his rake is 70% of $250,000, less about $2500 expenses or $172,500!!! ? ? ? ? ? ? ? That total is clear undeclared profit from his victims' money with absolutely NO investment out of his own pocket. ? That is also with penalties imposed to the fullest extent of the law without even considering other factors that tend to increase that amount. ? Some of those other factors are: ? ? ? most rents and deposits are for significantly more than $500, and he can legally charge up to twice the monthly rent for a deposit; ? ? ? most court awards are only for the deposit without damages, or one third of the example amount; ? ? ? many apartment complexes have a lot more than ten units; ? ? ? the number of tenants that actually succeed at recovering their money is probably less than two percent rather than the ten percent illustrated above; ? ? ? and this does not take into account the additional money generated by attrition, both natural and coerced. Therefore the gains realized from these intentional violations are substantially higher than indicated in the above example. ? ? ? ? ? ? ? The authorities seem completely unconcerned about this perennial embezzlement taking place. ? There is no way a victim alone can bring charges against any of them for the purpose of prosecution. ? There is no agency that even wants to be bothered with taking a complaint, let alone following up with an investigation on one. ? As it stands now, the laws coupled with their lack of enforcement tend be more of an incentive to perpetuate and accelerate these patterns and practices than a deterrent to them. ? This will only continue and escalate until some kind of affirmative action is undertaken to bring it to an ultimate culmination.

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