Cash for keys is a lesser talked about topic when it comes to running a rental business and is also unknown to many renters. It can be a tricky subject and landlords must be careful to follow local and federal laws when offering a cash for keys agreement. While the concept might be unfamiliar to you, it is 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 is exactly what it sounds like – you offer a sum of cash for your current tenant 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 key agreements. Some types of situations where a cash for key agreement might be a smart option are if a tenant is damaging property, if the tenant can’t consistently pay rent, or if the landlords wants to sell the specific rental property. 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 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, plus, it only requires a few short steps:
- 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 of your location – also, be sure to check certain laws locally or statewide. 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.
- 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 agreement will make sure both you and your tenant are on the same page and have communicated properly. It will also provide a legal and binding record that you both agreed to. Here is where you can find a cash for keys agreement form as well as other helpful documents for landlords.
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.
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.