Cash for Keys Agreement – Complete Guide

We never know what is going to happen next. Our best decision is made on our best guesses and we hope for the best.

Landlords have a similar struggle–they have the added burden of finding tenants for vacant apartment units while going the extra mile to make sure each tenant is taken care of. But, of course, things don’t always work out. Sometimes tenants stop paying rent or end up damaging the property.

Rental leases offer some protection to tenants. This is where cash for keys agreements come into play for landlords. These agreements are gaining popularity in NYC where there is a ban on forced eviction.

1- What is a Cash for Keys Agreement
2- Deal Serve Interests of the Landlord
3- Benefit of Cash for Keys Agreement
4- Are these Agreements is Legal
5- FAQs

What is a Cash for Keys Agreement?

A cash for keys agreement is an understanding between the tenant and landlord that states the tenant has to vacate the property by a certain date in exchange for cash. It has gained popularity as banks started offering cash for keys during the recent housing crisis.

How does the Deal Serve the Interests of the Landlord?

In this rough period, some tenants are having a tough time paying rent. Some tenants are now several months behind. Landlords are already incurring a financial loss, and it’s hard to imagine how tenants will catch up with rampant unemployment and underemployment. The legal route is both exhaustive and expensive; it also takes time and energy to legally evict someone.

What is a more befitting solution here than cash for keys agreement? Just offer a certain amount of cash to the tenant in exchange for them leaving the property and finding somewhere else to live.

Besides, sometimes, a situation may arise when a landlord must ask a good tenant to leave the property. This may happen when the landlord wants to update the apartment and ask for higher rent. Or it may happen that the landlord wants to move in the property. In those situations, a cash for keys agreement is ideal.

It seems that it runs against the interest of the landlord as instead of taking money for the tenant, the landlord has to pay the tenant to leave. But the truth is, it is always better to get rid of tenants who can’t pay rent on time. It is not only good for financial reasons but also for peace of mind.

How do Tenants Benefit from the Cash for Keys Agreement?

Though it serves the interests of the landlord which seems quite apparent, the truth is, cash for keys agreements are equally beneficial for tenants. Not paying rent does not mean you get to live someplace for free. A tenant has to settle all outstanding rent at some point. Cash for key agreement is a great option that allows cash-strapped tenants to leave the property without a major penalty.

Advice for the Landlords

It’s possible that a tenant doesn’t vacate the property even after agreeing to the cash for key arrangement. Worse still is if the landlord has already paid the amount which was mutually agreed to in exchange for the tenant’s departure.

To avoid this situation, the landlord should add a clause in the agreement that addresses what will happen. It’s best to work with a real estate attorney when drafting these particular clauses, as they typically include waivers and legal consequences.

Are these Agreements Legal?

Bear it in mind that the local laws govern what’s permissible as far as real estate agreements go, especially as they relate to what happens between tenants and landlords.

As a general rule, landlords can’t coerce or harass tenants for opting into cash for key agreements. If someone does it under duress, you may have a lawsuit on your hands.

Consult with a Broker:

As previously discussed, local laws dictate whether or not you can offer cash for key agreements. To be on the right side of the law, it may be best to hire a real estate broker. Brokers can help determine the best course of action to take given the situation.

FAQs

Why Would a Landlord Offer a “Cash for Keys” Agreement?

A landlord may offer a “cash for keys” agreement to avoid the expense and hassle of an eviction process, to avoid potential property damage or legal disputes with the tenant, or to speed up the process of getting the property ready for new tenants.

Is a “Cash for Keys” Agreement a Good Idea?

A cash for keys agreement can be a good idea for both landlords and tenants, depending on the specific circumstances. The agreement allows the landlord to avoid the time and expense of the eviction process while offering the tenant financial assistance to vacate the property voluntarily.

What are the Benefits of a “Cash for Keys” Agreement for a Tenant?

A cash for keys agreement can provide a tenant with a lump sum of money that can help cover moving expenses or the cost of finding a new place to live. It can also help avoid the negative impact of an eviction on their rental history.

Can I Negotiate the Terms of a “Cash for Keys” Agreement?

Yes, the terms of a cash-for-keys agreement can be negotiated between the landlord and tenant. For example, the amount of money offered, the deadline for vacating the property, and any other conditions can be discussed and agreed upon.

Is a “Cash for Keys” Agreement Legally Binding?

Yes, a cash-for-keys agreement is a legally binding contract that both the landlord and tenant are required to honour. If either party fails to fulfill its obligations, the other party may pursue legal action.

What should I do if I’m Offered a “Cash for Keys” Agreement?

If you’re offered a cash-for-keys agreement, it’s important to carefully consider the terms and conditions, including the amount of money offered, the deadline for vacating the property, and any other requirements. You may want to consult with an attorney or other legal professional to ensure that the agreement is fair and in your best interests.

Parting Advice:

It is highly likely that if you utilize cash for key agreements then you are a landlord who is bothered by a tenant who hasn’t paid rent. Seek out professional advice before using this method to part ways with a tenant, as local laws may not allow such agreements or may require specific language to be included that protects both you and the tenant in case of legal action.