What is the Purpose of a Cash for Keys Agreement?
A cash for keys agreement is a legal document used in real estate to facilitate the voluntary departure of a tenant from a rental property. It is often employed to expedite the process, avoiding the need for long eviction proceedings and resulting court costs. The "keys" in cash for keys represent the access, or possession, of the property that the tenant is relinquishing. Cash for keys agreements are most commonly used by landlords when faced with uncooperative or problem tenants.
With a cash for keys agreement, the landlord typically will agree to waive any unpaid rent or back payments, or at least reduce the amount owed, in exchange for the tenant’s prompt, cooperative departure from the property . This may also include a set date by which the tenant must move out and turn over the keys and title to the property to the landlord or property owner. Cash for keys agreements can serve as a good alternative to lengthy eviction proceedings, especially if the tenant is not currently paying rent and has generally become a disruptive or costly tenant to keep. While there are no hard and fast rules regarding what a cash for keys agreement must contain, it should clearly address the issues of late payments owed, the move-out date, the keys and title, and fair market value for the property.
The Basics of a Cash for Keys Agreement
A cash for keys agreement typically includes the following elements:
Amount of cash: State the amount of money you will pay to the tenant in exchange for them moving out by a certain date. For example, "I will give you $2,000 if you move out by July 15."
Time frame: State when the tenant must be out of the unit. "You must be out by July 15 or I will sue you for unlawful detainer."
Condition of rental unit: State the condition in which the tenant must leave the property for you to pay them. "Move outs must be professional and approved by the landlord. I reserve the right to determine if the move our was acceptable and/or diligent."
Condition: How the rental unit should be left upon move out. For example, "Unit must be professionally cleaned, carpets professionally cleaned, deodorized, smoke-free, all things removed from unit including black marks on walls, light fixtures, ceilings, etc."
Conditions upon payment: If you require the tenant to sign over possession of the unit to receive the payment, you can state this as well. "Payment will be made upon receipt of keys, garage door openers, window covering, mailbox keys, alarm codes and Tenant signing possession and right of entry to Landlord."
Offer timeline: You may also stipulate that this offer is good only for a limited amount of time. "This offer is valid for three days. If I do not hear from you by 4:00 PM on (date) I will no longer consider this offer."
Importance of a Cash for Keys Agreement
The primary benefit conceding to a cash for keys agreement rather than filing an unlawful detainer action is the cost savings. Obviously, there will be no costs related to the unlawful detainer, and there is a good chance that the tenant will vacate and avoid the filing. If the tenant does not immediately vacate following a cash for keys agreement, there is a great deal of leverage with regard to a timing demand for the move out and surrender of possession.
There is also great time savings associated with cash for keys. An unlawful detainer can take upwards of 45 days from the date of trial setting conference to obtain a judgment and writ of possession. Cash for keys can be negotiated within a day or two and require the tenant to be out in a week or two.
Another benefit is the reduction of conflict between the landlord and tenant. Cash for keys agreements are inherently civil and amicable as opposed to aggressive and adversarial. Particularly in California, where a cause of action for intentional infliction of emotional distress, "IIED.", can be founded on the filing of an unlawful detainer even if there is no other damage and a successful defense is rare. Pre-litigation negotiation can often result in a more amicable parting, and in many circumstances the landlord and tenant are able to agree on whether the tenant is responsible for any cleaning, pest exclusion, or repairs to be made at the property. This is particularly an asset to landlords who include utilities in their lease agreements and have tenants who can be considered "good" or "bad" based on the maintenance of the property utilities while possessing the property.
How to Write a Cash for Keys Agreement
If your tenant has made a reasonable amount of improvements to their unit, it may make sense to offer them cash for keys. The goal is to have the tenant vacate with all their belongings and to return the keys to the landlord.
1. Term
The landlord must set the start date and end date for cash for keys. In other words, how quickly do you need the tenant to make moving arrangements and comply with your agreement? If you are offering cash for keys, then you likely want them to move out with all their belongings so you can rent the property quickly or sell it.
2. Amount
The next step is to decide how much money you want to give the tenant for cash for keys. A common amount offered is $1,000 that is paid to the tenant as soon as they hand over the keys. Under the terms of the agreement , you may want to make the payment conditional on the tenant complying with all terms, including vacating with all their belongings and returning all keys, garage door openers and other controls that open locked doors or garages.
3. Other Terms
Some other terms you may want to consider in your cash for key agreement include: There’s no standard agreement when it comes to cash for keys. Landlords often put together a simple, one-page contract to detail the agreement. It’s a basic format that allows both parties to keep a copy of the contract that is signed in case something goes wrong later. If this is your first time writing a cash for keys agreement, you may want to use a template from an online legal site. You can also visit our Cash for Keys Agreement Template to borrow some elements of the agreement, then modify it as necessary.
Legal Aspects and Considerations
Before using a cash for keys agreement, landlords should be aware of the legal ramifications if the agreement is breached or if the action gets taken to court. Such a situation may arise if a landlord does not return the tenant’s security deposit as set forth in the cash for keys agreement, or if the tenant refuses to accept the amount agreed upon for the agreement. It is important to understand that while a cash for keys agreement allows for the termination of a tenancy for the landlord and tenant, it still must comply with the requirements of the applicable state’s landlord/tenant laws to be lawful. Any attempt by a landlord to circumvent these laws might be successfully challenged in court. Additionally, landlords who are involved in a foreclosure in which a deed is given to the lender, or assignment of rents and leases, to the lender should look into whether they are permitted to enter into a cash for keys agreement under the terms of the foreclosure or assignment agreement.
It is also important to note that acceptance of money from a landlord for a cash for keys agreement may create a new tenancy between the landlord and tenant. To avoid becoming embroiled in tenant litigation over unlawful entry or eviction without notice, landlords should ensure that they have obtained possession of the premises before entering into a cash for keys agreement with a tenant. Obtaining possession might involve taking the steps set forth in an eviction lawsuit. A tenant might be further motivated to vacate the premises by virtue of the fact that it becomes difficult and expensive for the tenant to find a similar property after initiating eviction proceedings or receiving an eviction notice.
A landlord considering a cash for keys agreement should strive to limit future liability arising on the part of the landlord. If a landlord is represented by counsel, he or she will counsel the landlord about the steps necessary to take to limit liability in order to ensure compliance with landlord/tenant law and to avoid taking on the liability of the vacating tenant. Should the tenant seek disputes through the court system, said counsel can also assist the landlord, should a cash for keys agreement become void and a "normal" eviction becomes necessary.
Cash for Keys Mistakes
Common Mistake 1: Unclear Terms and Conditions
One of the most frequent mistakes made in a cash for keys agreement is a lack of clarity in its terms and conditions. What seems like a simple payout over an otherwise regular lease term can quickly become a contentious issue if both parties are not in agreement on what is to be paid, when payment should be made, and what are the acceptable conditions for an amicable settlement. Since cash for keys payments are often relatively small payments for potentially devastating personal reasons, such as job loss or the loss of a loved one, any ambiguity about what the agreement is and what the future holds can result in further unnecessary harm for the tenant.
Common Mistake 2: Poorly Executed Agreement and Lack of Legal Protection
A verbal agreement may seem like enough in some situations, but since a cash for keys transaction is an effective ending to a very important contract, it is always best to draft some kind of written confirmation of the agreement, even if the document is very short . Not only does this help keep everything clear for the benefit of both the landlord and the tenant, but it also protects the parties from potential legal consequences if they cannot come to an agreement later. A badly executed cash for keys agreement makes the case much harder to defend in court if the agreement is ever challenged.
Common Mistake 3: Skipping Paperwork
A cash for keys process is not official until both the landlord and the tenant have signed an official document to that effect. While it is true that some people have normal documents entirely printed off from a template or created directly on a computer, it is still very beneficial to find an official template and customize the document accordingly. This ensures nothing is left out of the process and emphasizes to the tenant that the agreement should be taken quite seriously.