What is Cash For Keys for Rental Property?
Dealing with problematic tenants can be a nightmare for rental property owners. It not only causes stress but also puts a considerable dent in your finances. Property owners who face such situations may have to undergo numerous legal procedures, including filing for formal evictions, which can be time-consuming and expensive.
However, a more comfortable and effective alternative is offering incentives, known as “cash for keys," to tenants to leave the property voluntarily. This strategy has become increasingly popular in recent years and is a cost-effective way for landlords to evict difficult tenants.
In this article, we will discuss in detail what “cash for keys” is. We will also discuss how it works, and why it is a viable option for you as a property owner when facing eviction dilemmas.
What is Cash for Keys?
“Cash for keys” is a method landlords can use to recover possession of their rental property in exchange for a one-off monetary compensation provided to the tenant.
This approach can be advantageous for both the landlord and tenant, as it allows you to recover your property without involving the court system while providing the tenant with a financial incentive to relocate.
Is Cash For Keys Legal?
Yes, “cash for keys” agreements are legal in every state in the US, as long as the correct protocol is followed and all relevant state and local laws are taken into consideration.
It is important to note, however, that these contracts can be complex and should be approached carefully. It is also essential to ensure that all aspects of the agreement comply with applicable laws and regulations, including those related to fair housing and tenant rights.
Why Landlords Offer Cash for Keys
Landlords often resort to “cash for keys” to avoid the complications of evicting a tenant. However, there are also four legal reasons for tenant eviction where “cash for keys” can simplify the eviction process. These include:
- Unpaid rent
- Damage beyond normal wear and tear to the property
- Violation of lease terms and conditions
- The property's use for criminal activity
Typical Cash For Keys Amounts
The payment amount depends on multiple factors, with the location being a key consideration. Understanding local and state regulations that may impact this payment arrangement is also essential.
In general, the “cash for keys” payment amount can range from half of the monthly rent plus a security deposit to a full month’s rent. However, other factors can come into play, such as property size and the costs of living in a particular area.
Steps for Cash for Keys Process with Tips
Here are the steps involved in the “cash for keys” process, along with some tips to help you navigate this delicate process smoothly.
Step 1: Offer an initial proposal
The first step in the “cash for keys” process is to offer the tenant an initial proposal. This offer should include the amount of cash that you are willing to pay the tenant in exchange for vacating the property. It is crucial to ensure that the proposal is fair to both the tenant and yourself. A fair proposal ensures that the tenant leaves the home on good terms, while you successfully regain possession of the property.
Tip: Offer a fair proposal, it should be reasonable and fair to both parties.
Step 2: Negotiate terms
After the initial proposal, you and tenant must negotiate the terms of the agreement. This step is critical since both parties need to agree to terms that are beneficial for all parties involved. During the negotiation stage, you should set the expectations clearly upfront to avoid future conflicts.
Tip: Always negotiate in good faith. It makes the process smoother, and allows both parties to reach a workable agreement.
Step 3: Sign an agreement
Once both parties agree to the terms, it's time to put the agreement in writing and sign it. This agreement should be clear and concise, detailing all the agreed-upon terms. Signing the contract protects both parties in the event of any future disputes. Each party should receive a signed copy of the contract for future reference.
Tip: Ensure that the “cash for keys” agreement is legally binding by involving a local real estate attorney or using a cash for keys agreement from reputable organizations like the AAOA.
Step 4: Make the payment
As per the agreement, you must pay the agreed amount to the tenant after the tenant returns the keys and vacates the property. The payment might not be instant, but it should happen within a reasonable time frame, as per the agreement's terms. The payment should be made in the form agreed upon, whether it's cash, check, or money order.
Tip: Before making payment, ensure that all terms and conditions of the agreement are met.
Step 5: Inspection and handover
After the payment is made, it's time to inspect the property and ensure that the property is in the condition agreed upon. If the property is in an acceptable condition, you should then get the keys from the tenant, taking possession of the property.
Tip: To avoid any disputes over repairs, always conduct a move-in inspection report before tenants move in to compare with the move-out report.
By following these steps, you can navigate this process smoothly while minimizing conflict and legal issues.
Mistakes to Avoid for Cash for Keys Process
When it comes to the “cash for keys” process, there are a few mistakes that you should aim to avoid in order to ensure a smooth transition and prevent any legal issues. Here are some key mistakes to avoid:
While it may be tempting to offer a lower amount to save money, offering too little will only prolong the eviction process. It’s worthwhile to remember that the purpose of offering cash is to incentivize your tenant to leave voluntarily. An insufficient payment may not be enough to convince them to leave, and you’ll end up having to go through with the eviction process anyway.
Lack of written agreement
Another common mistake landlords make is failing to get a written agreement from the tenant. If you and your tenant agree on a “cash for keys” deal, it’s essential to have a written agreement that outlines the terms and conditions of the deal. This includes the amount of money offered, the date by which the tenant needs to vacate the property, and any other relevant details.
Not involving a lawyer
Eviction laws can be complex and vary by state, so it’s important to involve a lawyer in the “cash for keys” process. A lawyer can help you navigate the legal requirements for evictions in your state, including any specific rules about “cash for keys” deals. They can also draft a written agreement that protects your interests and ensures that the process is legally binding.
Failing to communicate effectively with the tenant
Effective communication is key when using the “cash for keys” process. By communicating clearly and empathetically with your tenant, you can reduce the likelihood of disputes or misunderstandings. Make sure to explain the terms of the deal clearly and answer any questions your tenant may have.
Not following through with the agreement
Once you’ve reached an agreement with your tenant, it’s essential to follow through with the terms of the deal. This includes making the cash payment on time and ensuring that the tenant vacates the property by the agreed-upon date. If you fail to follow through with the agreement, you may end up having to go through with the eviction process anyway.
In conclusion, “cash for keys” is a convenient option that helps you the landlord protect your investments and avoid legal battles while providing tenants with adequate financial resources to move out and start anew.
When using “cash for keys”, it is imperative to note that the terms of the agreement need to be carefully negotiated and documented to avoid any misunderstandings or disputes. And, in cases where tenants do not comply with the agreement, you will have to resort to eviction proceedings.
Despite these considerations, “cash for keys” remains a viable and practical option that can make the transition from one tenancy to another smoother and financially feasible.
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