What is a Cash for Keys Agreement?
A cash for keys agreement (CFK) is a deal between a landlord and a tenant to terminate a lease of a rental property without requiring the landlord to undertake eviction proceedings. This strategy is desirable to the landlord as it frequently saves time and money spent on the formal eviction process and still gives the landlord a legally binding order of possession for the rental property if the tenant refuses to vacate after the agreement has been executed. The landlord avoids having the seized property made un-rentable due to damage and missing fixtures.
This strategy is most frequently used when the tenants simply want to leave the premises or the tenants have fallen behind on their rent payments but wish to move out without incurring more fees for past due rent or forcing their landlord to evict them.
A cash for keys agreement can be made in an oral contract (although this is generally not advised) or a written agreement between the parties and is generally an informal understanding as to how much money is paid to the tenant to leave the premises. The rental property is then returned to the landlord. The arrangement can include the payment of any amount that was overpaid on the security deposit or other expenses incurred by the tenant under the lease. A cash for keys agreement functions almost identically to a written receipt for the payment of any monetary funds paid by the tenant to the landlord for the use of the premises and damages to the rental property.
The cash for keys agreement is considered a legally binding contract and contains several legal provisions:
Why Use a Cash for Keys Agreement Template?
A "Cash for Keys" agreement template is particularly useful in the case of a tenant that is in good standing and willing to vacate a rental unit in exchange for the "cash for keys" incentive. For landlords and property managers, we recommend having a simple cash for keys agreement template, as they can be a smart tool for a landlord planning to get a tenant out quickly and fairly. Being prepared with a cash for keys agreement template can save time, money and aggravation if and when a tenant last minute requests to "pay them to leave."
Some landlords prefer the cash for keys process, as it allows them to empty a rental unit in a fair manner, while also providing a way for a rental unit to be vacated without having to go through eviction proceedings. In general, cash for keys can be easier than the eviction process for both the landlord and the tenant.
Some landlords may use a cash for keys agreement when they are dealing with a tenant who is behind on their rent. Depending on the outcomes of eviction proceedings, a landlord may find themselves with a resident who owes quite a bit in back rent, making it difficult to find another tenant to fill the vacancy left behind. As a result, a landlord may be more likely to agree to a cash for keys incentive to seek security, while also doing so in a fair, reasonable and timely manner.
A cash for keys agreement template can create a great opportunity to expedite the process and find immediate results that work for both parties.
Elements of a Cash for Keys Agreement
Cash for Keys agreements should clearly define the rights and responsibilities of each party. The following are the key components of a Cash for Keys agreement:
- Amount of Cash – This is probably the most critical element, as the tenant will likely only agree to the vacancy if the cash is sufficient to allow them to move elsewhere. The amount needs to be reasonable and based on local markets, some of which, like San Francisco’s, are notoriously high. You can check out Zillow, Hotpads or Craigslist to look for reasonable rental prices in your area to help you decide on an amount. Any offer must be reasonable and not so high that it appears to buy the tenant’s silence or an abrogation of his or her duty to pay the rent.
- Timeline – The Cash for Keys is most effective when completed quickly. You should certainly request that the tenant agree to vacate within a week or ten days of signing the Cash for Keys agreement. In certain locations, a longer timeline may work to your advantage and you can allow for a month or even 90 days. Consider the location where the property is located and what you believe would be a fair period of time. Tenants will often appreciate any offer you make, as most prefer to have the ability to leave without a lengthy eviction process or risk of eviction.
- Condition of Property – Include all the details of the condition of the property. Describe any damage or disrepair to the property and any costs involved in repairs. Further, address issues related to general cleanliness and order in and around the property. If the property was professionally cleaned or if there was any trash removal, these should also be spelled out in the agreement to avoid disputes later on.
How to Write a Cash for Keys Agreement
To use a cash for keys agreement template, follow these steps:
- Download the template. Find a reputable law firm website that has a free download option for a cash for keys agreement. Download the PDF file to your device.
- Read the template. Open the template and read it carefully. Understand what each section is for. For example, the introduction of the document is important because it establishes the negotiation process. This section may also need to be customized or amended to avoid any confusion with your tenant.
- Add information. In each section, you’ll see areas for you and your tenant to fill in with specific information. It’ll typically have blanks to identify the names of everyone involved, the address of the rental property, the date of termination, the rental and security deposits, the location of property records such as invoices and receipts and the compensation being offered as part of the cash for keys agreement.
- Identify conditions. Each party will create drafting notes that will be added into the clauses to help guide changes. Condition clauses may include things like cleaning the premises, minor repairs, forwarding mail and notifying utility companies about a change of address by a certain date. There also may be stipulations about property records and maintenance invoices.
- Create a timeline. A cash for keys agreement does not work if one party is not able to move out of the property in the time required. Discuss the time frame for moving out to agree on a date that works for both parties. Setting deadlines from this point forward, for things like moving and cleaning to making payments and creating receipts for transactions, is crucial for having everything go smoothly to avoid further problems with your tenant.
- Choose a payment method. There will often be different payment options available for how to compensate your tenants. Cash is usually a popular option because it’s immediate and there aren’t any fees or processes to worry about. However, you may consider money transfers as a means to make an instant payment.
- Make copies. Cash for keys agreements should have multiple copies that are all signed. Keep one copy for yourself and give copies to everyone participating in this agreement. This helps keep everyone on the same page. Once a transaction is complete, any money paid should be reflected within the receipts and invoices as specified by both parties.
Legal Issues in Cash for Keys Agreements
It’s important to remember that there are legal considerations involved in cash for keys and with the use of a cash for keys agreement template. In this case, "cash for keys" is intended to mean money paid by The Landlord. In many locations, however, it refers to any money exchanged between the tenant and landlord. Depending on how your local law or judge’s rulings impacts the use of these agreements, you may or may not have a way around the payment of money.
In some locations and under some state laws, for example, if a tenant uses their security deposit as supplemental "rent , " named in the cash for keys agreement, it may be considered a risk. In addition, whether or not a cash for keys agreement would be legally enforceable is a question you should ask your landlord-tenant attorney in case the tenant reneges and leaves you to eviction. evict the tenant using an uncontested eviction process.
Always consult with your attorney before proceeding, but keep in mind that the worst the tenant has to lose is their court costs (while you’ll also have legal fees you can’t recoup). If you document everything they sign, you should be able to move them out in peace.
Tips on How to Negotiate a Successful Cash for Keys Agreement
Negotiating the terms of a cash for keys agreement involves balancing the interests of both the landlord and tenant, ensuring that the settlement is fair and reasonable for both parties. Here are some strategies and tips for effective negotiation: Offer Incentives to the Tenant The tenant may be more likely to engage in productive negotiations if they feel as though they have something to gain. Landlords can offer incentives such as a later move-out date or additional financial benefits.
Inform the Tenant of the Benefits of Cash for Keys As soon as it becomes clear that there is a likelihood of eviction, the landlord should inform the tenant of the benefits of cash for keys. Highlighting the advantages to the tenant of negotiating an agreement avoids prolonged discussions over who is right and who is wrong. It also reduces the risk of the tenant not getting any benefit of negotiation when bankruptcy ensues.
Offering More Than One Option to the Tenant Consideration of more than one agreement will allow for negotiation. Also, being flexible in the agreement may have the effect of fostering a winning attitude resulting in a successful settlement.
Maintain a Professional Approach But remember: offering too much from the peer of wanting a beneficial conclusion may make the landlord look desperate and lead to an unbalanced or unfair agreement. The best approach is to strike a balance that recognizes the needs of both parties, while still advancing the landlord’s ultimate goal of regaining possession of the property without incurring unnecessary costs or delays.
Cash for Keys Agreement Template
CASH FOR KEYS AGREEMENT
BETWEEN:
"Landlord"
AND
"Tenant"
FOR Premises:
KEYS GIVEN TO LANDLORD ON__________DATE
TENANT RECEIVES FROM LANDLORD THE SUM OF $___________
DATED AT_____________THE____DAY OF _________20__.
"In consideration of the payment of the sum of $__________________ ($____________) Canadian lawful money to be paid by Landlord to Tenant or such other sum as may be agreed upon by the parties hereto at the time of delivery of vacant possession of the Premises, Tenant covenants with the Landlord, his successors and assigns, that at or before 12:00 noon on 20__, or other date agreed to by the parties hereto, the Tenant will deliver to the Landlord or his such other person as he may name in writing to Tenant, vacant possession of the Premises. If the Tenant delivers possession to the Landlord, his successors or assigns on or before 12:00 noon on 20__ or other date agreed to by the parties, the Landlord or such other person as he may name in writing to Tenant, shall pay to the Tenant $______________ ($_______) Canadian lawful money .
In the event the Tenant fails to deliver to the Landlord vacant possession of the Premises on or before 12:00 noon on the ______day of ________20__, or other date agreed to by the parties, the Landlord, his successors or assigns, shall not be obliged to make any payment whatsoever to the Tenant.
Agreements in this Cash for Keys agreement are made between the Landlord and the Tenant without any threat of eviction or any other undue influence on the part of the Landlord, his servants and agents.
The Tenant covenants not to make any claims whatsoever against the Landlord for damage to the Tenant’s leased goods, chattels, furniture or other property of the Tenant, nor any claim whatsoever in respect of the Tenant’s tenancy as a result of the Landlord or his agents or servants recovering possession of the Premises.
This agreement is binding on the Landlord and Tenant and their respective successors and assigns.
