A cash-for-keys agreement is used when a landlord offers a tenant a sum of money in exchange for the tenant vacating the property and leaving it in good condition. It can be an effective alternative to the formal eviction process.
A cash-for-keys agreement (or a tenant buyout agreement) is a deal a landlord offers a tenant. The landlord distributes a specific amount of money if the tenant agrees to leave the property. Most of these arrangements require the tenant to move out by a certain date and leave the property in good condition.
It incentivizes tenants who have violated the terms of their lease agreement. For example, tenants who don’t pay rent, engage in illegal activity, or repeatedly cause noise complaints may be difficult to remove through eviction, as it can be a drawn-out process. Instead, landlords can use cash-for-keys agreements to motivate tenants to leave.
Explore the differences between cash-for-keys and eviction in terms of several factors:
Here are some benefits of cash-for-keys:
Read about the steps in the cash-for-keys process so you can reap the benefits of this strategy for your rental business:
Issuing an eviction notice first can be advantageous. It may encourage the tenant to take the impending cash-for-keys offer seriously, as they’ll learn that you’ll pursue eviction if they don’t accept the offer.
However, an eviction notice may cause strained relations and heightened tension, making the tenant less willing to cooperate during the cash-for-keys negotiation process.
Evaluate the situation, your tenant’s temperament, and your long-term goals for your rental property to determine the best approach.
If you issue an eviction notice, decide if you want to offer cash-for-keys. Some rental property owners prefer eviction when dealing with an unruly tenant because they want to ensure the tenant’s violations end up on their record. Others prefer to remove disorderly or irresponsible tenants quickly and avoid court fees.
You can initiate a cash-for-keys arrangement without first issuing an eviction notice. Evaluate your situation and seek legal advice to make the most informed decision possible.
If you proceed with a cash-for-keys arrangement, clearly communicate your intentions to the tenant. Explain the reason for the situation, whether they have unpaid rent or have been disturbing other tenants.
Be transparent if the reason doesn’t relate to the tenant’s conduct. For example, you may want them to move out because you want to change the use of the property, perform significant renovations, move into it yourself, or sell the property.
Provide a starting amount that you’re willing to provide to the tenant. Let them negotiate, as they may need more to cover mover and relocation fees.
You may also allow them to leave some of their belongings behind. If they don’t want to take some items with them because they’re a hassle to move, letting a tenant keep some items on the property may encourage them to agree to the arrangement.
The amount you offer is highly situational, as it depends on factors like the tenant’s specific circumstances, the property’s condition, the current market conditions, and the property’s location. You may start with a higher amount to incentivize the tenant to move out quickly.
The typical amount can range from several hundred to several thousand dollars. It may match the cost of the tenant’s security deposit or one month’s rent.
Once you negotiate all applicable terms, draft a cash-for-keys form. Highlight all relevant terms, including the following:
Obtain both parties’ signatures when everyone agrees to the established terms.
Conduct an inspection on the move-out date. Ensure that the property is in the condition that the agreement outlined. If the tenant didn’t clean properly or left behind some of their belongings when the agreement stated otherwise, you may withhold part or all of the buyout amount.
Once the tenant moves out and you disburse their buyout amount, you can use the property how you wish. You can have a new tenant move in, ensuring to screen them with a thorough application. Once you find the right candidate, create a comprehensive lease agreement to ensure they understand all the terms.
Alternatively, you can move into the property, have a family member move in, put it up for sale, or fulfill any other desired plans.
A self-help eviction is when a property owner tries to prevent a tenant from living on the property or evict a tenant in a manner that breaks the state’s landlord-tenant laws. For example, it would involve the landlord removing a tenant’s items, turning off the utilities, or changing the locks. Check state and local laws for specific restraints.
If you attempt to conduct a self-help eviction, you could be subject to legal repercussions. You may also have to reimburse the tenant for wasted utilities, spoiled food, and other expenses that the self-help eviction incurred.
A tenant’s security deposit is separate from a cash-for-keys transaction. If a tenant leaves according to a cash-for-keys arrangement, you may still have to repay their security deposit, depending on the terms in the original lease agreement. A former tenant may pursue legal action against you if you forget or purposefully neglect to pay them their security deposit back.
If possible, issue the payment via a check so the tenant can’t claim that you didn’t pay them the agreed-upon sum. If you use cash, create a receipt and distribute a copy to the tenant.
While you can engage in some negotiations, ensure to establish a limit. Know how much you’re willing to pay before you begin negotiations, and don’t exceed this figure. Whatever you decide for your limits, you must ensure you don’t force the tenant into the agreement.
Comply with the Fair Housing Act to prevent accusations of discrimination. Ensure any reason you present to the tenant for offering a cash-for-keys agreement doesn’t relate to factors like the tenant’s sex, gender, sexual orientation, color, race, familial status, religion, national origin, and disability.
Please don’t harass the tenant or be persistent about them entering the agreement. Both the tenant and landlord should enter a consensual written agreement. If the tenant refuses, you can pursue the formal eviction process.
Download a cash-for-keys agreement form below in PDF or Word format.
