Thursday, April 29, 2010

"Money of Right"

Or, at least, that's the closest English translation for an interesting Korean land use policy that I learned about today. 

While visiting with a member of the planning faculty here at Handong University, the topic of "money of right" came up.  It was not clear if the concept was actually codified or merely existed as some type of strong custom that was essentially codified in practice.

The policy works like this:  X owns Building ABC.  X then leases Building ABC to Y.  Y opens a restaurant in Building ABC.

Over time, the restaurant becomes very successful and famous.  Y ultimately decides to relocate his restaurant to another building.

X (the building owner) then rents Building ABC to Z. 

The concept of "money of right" begins at this point.  Once Z rents Building ABC he obviously must pay X the rent money.  However, because Y and his restaurant brought fame to Building ABC, Z must also pay Y "money of right"--what essentially amounts to payment for the goodwill that Y generated for the building while he operated his restaurant there.

And, here's the real kicker:  if Y's restaurant was extremely famous, the "money of right" that Z pays to Y could be more than the rent that he pays to X (though this is somewhat rare).

So, essentially what they have here is a system where a subsequent tenant pays the previous tenant a certain amount for generating goodwill for the building in prior years.  A very interesting concept in many ways.  I wonder how that would work in the United States?

--Chad Emerson, Faulkner U.

http://lawprofessors.typepad.com/land_use/2010/04/money-of-right.html

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