Cash for keys sounds daunting for the unintiated – why would you ever pay a renter to leave your property?
This article will answer that question along with:
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While the concept might be unfamiliar to you, it’s a great alternative to the eviction process, which can be expensive and time-consuming. Knowing all your options when it comes to removing or changing tenants will help you seamlessly run your rental business.
What is a Cash for Keys Agreement?
A cash for keys agreement occurs when you pay your tenant a sum of cash to vacate the property. You might be wondering if that type of agreement is legal in the first place. It is, as long as you follow the right procedure and have checked your local and state laws regarding cash for keys agreements.
A cash for keys agreement might be a smart option:
- if a tenant is damaging property
- if the tenant can’t consistently pay rent
- if the landlord wants to sell the specific rental property (referred to as a Buyout Agreement)
- if the landlord wishes to increase the rent to the market rate
More often than not, tenants are open and motivated to accept a cash for keys agreement. If they can’t afford rent, the idea of getting cash to vacate can be a win-win situation for both parties. It’s also a great alternative to the eviction process as evictions can take months and be quite costly (the average cost of an eviction lies between $4,000 and $7,000) for both landlords and tenants. Evictions require specific steps and legal procedures that are different in every state – typically, landlords have to give notice, then file an eviction with the courthouse, and participate in the eviction hearings. It’s important to know your options as a landlord and consider what’s best for you and your property long term.
Cash for Keys Process
The process for cash for keys is simple, fast, and efficient:
- Communicate with your tenants – having an honest conversation with your tenants and explaining to them what cash for keys is will be the first step you need to take. Also, explain to them how an eviction would be pricey for them, long-winded, and could potentially stay on their records.
- Give them the cash for keys agreement form – getting a written agreement with both parties’ signature is essential and necessary for your records.
- Transaction Records – make sure you have a proof of the transaction via a receipt or written if it was paid with cash – give the tenant a copy of the receipt as well.
Cash for Keys Amounts
The amount for the cash for keys agreement will obviously depend on where you live and the cost of living in your location – again, be sure to check your state and local laws. Generally, the amount is usually half a month’s rent plus security deposit, or a full month’s rent. Another option is to offer how much court fees would’ve been if an eviction notice was filed – typically, it can range from $1,000-$3,000.
Things to Avoid When it Comes to Cash for Keys
While the process can be fairly simple, there are some things you should probably avoid:
- Fair Housing Violations – remember to always follow fair housing laws and to make sure you are not discriminating against tenants purposefully. Want to learn more about the Fair Housing Act to avoid catching a discrimination charge? Enroll in the Fair Housing for Landlords course today!
- Self-help Evictions – a self-help eviction is any type of action landlords take to evict a tenant that is not in the legal state and local laws. This includes things like changing the locks, turning off the heat or water, or removing a tenant’s belongings.
- Negotiating – it’s best not to negotiate the price with the tenants. You could make an adjustment after speaking with them if they have valid reasoning, but it’s best to know exactly how much you can offer and to have solid reasoning and explanation for the amount.
- Foregoing Security Deposits – while you might have signed a cash for keys agreement, you should still treat the tenants’ security deposits like you would for any tenant moving out. This means doing an inspection and deducting for damages as you normally do with a written notice and explanation sent to the tenant with their remaining deposit.
Cash for Keys Form
Having the proper cash for keys agreement form proves that you and your tenant are on the same page about this agreement. It acts a legal and binding record that you both agreed to. Here is where you can find a cash for keys agreement form along with other essential landlord documents.
Overall, cash for keys agreements can be the perfect solution for not only landlords, but also tenants who need cash and who don’t want to go through the complicated and expensive eviction process. Make sure you follow the correct protocol and are always checking your local and state laws regarding your actions. Remember that proper tenant screening will help you avoid situations like cash for keys or evictions from the start.
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Cash For Keys FAQs
What is a cash for keys agreement?
Simply put, a cash for keys agreement is where the landlord offers their tenant a lump sum of money for them to vacate the property.
Is a cash for keys agreement legal?
Cash for keys agreements are legal in all 50 states, with the stipulation that you follow the right procedure and have checked your local and state laws regarding cash for keys agreements.
Is a cash for keys agreement a good idea?
A cash for keys agreement is an excellent alternative to an eviction, which is a costly, time consuming, and stressful legal process for both the landlord and tenant. Additionally, many tenants will welcome a cash for keys agreement if they are unable to afford rent payments.
How much should I offer for cash for keys?
The amount of money you offer varies depending on where you live, the cost of living in your location, and local/state laws. Generally, the amount is usually a half month’s rent plus the security deposit or a full month’s rent.
TurboTenant, Inc does not provide legal advice. This material has been prepared for informational purposes only. All users are advised to check all applicable local, state and federal laws and consult legal counsel should questions arise.