As a landlord, you may find yourself in a situation where you need a tenant to vacate your property but don’t have the time, money, or concrete evidence needed to make an eviction stick in court. In situations like this one, your best course of action may be offering your tenant cash for keys.
What Is Cash for Keys?
Cash for keys is the term used to describe a landlord paying their tenant for the right to the property while the tenant is still under their lease or rental agreement. Though cash for keys requires some money upfront from the landlord to make the deal lucrative for the tenant, it often ends up being less expensive than the legal eviction process.
Cash for keys is legal as long as both parties agree to the outcome.
When Is This Method Used?
Though cash for keys is specifically used to remove tenants from a rental property, there are a few specific situations in which a landlord might choose to resort to this method.
Eviction of Problem Tenants
If you have a problem tenant who causes a nuisance to your other tenants or neighbors, but you don’t have the physical evidence or documentation necessary to evict in court, a cash for keys deal could be the best way to evict them.
Additionally, many landlords prefer to avoid legal proceedings, especially with problem tenants who might make the process particularly difficult.
Before a Rent Increase
Though rent control laws can be a great way for tenants to save money by staying in the same unit for the long term, such a situation can cause landlords to lose out on potential rent increases as market value goes up over time.
Landlords who want to increase income from a rent-controlled unit sometimes use cash for keys to encourage a tenant to move out. In this situation, the landlord typically has no issues with the tenant but simply wants to raise the rent of the property alongside a rising market value.
The payout may have to be significant in order for a tenant to agree to a cash for keys deal in this scenario, especially if rent control keeps the tenant paying far under market value for their home.
Common Cash for Keys Mistakes
As you’re trying to construct a cash for keys deal that works for you and your tenants, do your best to avoid these common mistakes.
Don’t Self-Evict or Harass Tenants
If your desire for a cash for keys agreement stems from significant problems you’re having with a tenant, you may feel compelled to force the issue by changing locks, refusing to repair property damage, shutting off utilities, or pestering them in some way. However, any one of these measures could give your tenant just cause to take you to court.
Don’t Forget Their Security Deposit
When you have a cash for keys deal with a tenant, the amount you offer them cannot include their security deposit, and a cash for keys agreement does not mean that their deposit is forfeited. You’ll still need to complete a formal inspection upon move-out and return their deposit, minus any deductions for damages, unpaid utility bills, or back rent.
Don’t Actually Pay in Cash
Although the word “cash” is in the phrase, cash for keys deals should always be paid by check so that you can keep a record. If you must pay in cash for some reason, make sure to draw up a document that both you and the tenant can sign and give them a copy.
By documenting the deal, you can prevent a former tenant from returning after the fact to claim that you forced them out of their rental agreement illegally.
Helpful Tips for Landlords Doing Cash for Keys
When trying to broker a cash for keys agreement, it’s important to explain to your tenant why you’re asking for the deal and how it differs from a formal eviction. Make sure they understand that while an eviction can stay on their record for years, a cash for keys deal won’t affect their ability to rent or lease in the future.
Once the tenant has agreed and moved out, treat the property as you would at the end of any lease period. Change the locks and repair any damage to prepare it for new tenants.